TAIWAN Law and Practice Contributed by: Lihuei Mao, Dennis Yu and David Tien, Lee and Li Attorneys-at-Law
disadvantages to the Taiwan market caused by the proposed transaction. Consequences of Non-Compliance With Notification Rules Implementation of a transaction must be suspended until clearance is obtained. Failure to notify a com - bination that meets a filing threshold (or to fulfil the conditions attached to a clearance or to implement a combination prohibited by the TFTC) may cause the TFTC to impose penalties, including the prohibition of the combination, divestiture, transfer of the business acquired and/or removal of personnel designated by the enterprises. The TFTC is also authorised to impose an administrative fine of between NTD200,000 and NTD50 million. Penalties imposed on parties for violation of merger control rules will be published by the TFTC. 7. Foreign Investment/National Security 7.1 Applicable Regulator and Process Overview Taiwan has two tracks for FDI review: one for foreign investors and the other for PRC investors. Foreign Investors According to the SIFN, the form of foreign investment (by a foreign investor) may include: • the acquisition of stock or contribution of capital to a Taiwanese company; • the establishment of a branch office, proprietary business, or partnership in Taiwan; and • the extension of loans for terms of one year or more to the above-mentioned Taiwanese entities. Furthermore, a foreign investment may be made with a variety of assets, including: • cash; • machinery and/or supplies required for own use; • patent rights, trade mark rights, copyrights, know- how and/or other IP rights; and/or • other assets approved by the competent authori - ties.
Prior to making any investments in Taiwan (except for the establishment of a branch office or representa - tive office), a foreign investor must obtain an FIA from the DIR, which generally takes six to eight weeks, depending on the scale, industry and complexity of the investment structure. A longer review period may be required for major M&A transactions or invest - ments in sensitive industries. In practice, one of the main factors that the DIR takes into account is whether a foreign investor meets the definition of a PRC investor (as discussed in 7.2 Cri- teria for National Security Review ). It takes longer and is more difficult for a PRC investor to obtain PRC investment approval (see “PRC Investors” for more details). Once an FIA is granted, the foreign investor must remit the capital into Taiwan and complete the investment within one year, and thereafter apply for the DIR’s capital verification within two months after the full equity investment amount is received. PRC Investors PRC investors are subject to specific regulations, and any investment made by them is subject to obtain - ing prior PRC investment approval from the DIR. According to the Regulations Governing Investments by Nationals in the Mainland Area (the “PRC Invest - ment Regulations”), as with foreign investments, PRC investments may also be made with a variety of types of assets. The forms of PRC investments include: • acquiring stock or capital contribution of a Taiwan - ese company, sole proprietorship, partnership, or limited partnership (except for a single or accu - mulated investment that is less than 10% of the shares issued by a company listed on the TWSE or the TPEX, which is subject to the Regulations Gov - erning Securities Investment and Futures Trading in Taiwan by Mainland Area Investors instead of the PRC Investment Regulations); • establishing a Taiwanese branch, sole proprietor - ship, partnership, or limited partnership; • extending loans for terms of one year or more to the above-mentioned invested entities; • having controlling power – via contract or other methods – over a Taiwanese sole proprietorship, partnership, limited partnership or company not listed on the TWSE or the TPEX; and
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