TAIWAN Law and Practice Contributed by: Derrick Yang, Judy Lo and Yu-Ting Su, Lee and Li Attorneys-at-Law
2. Regulatory Architecture 2.1 Main Sources of Law and Policy
ing), the Company Act (fiduciary duties) and the Civil Code (torts, breaches of contract, or damages). 2.2 Competent Authorities In Taiwan, the FTC is responsible for merger control, including reviewing merger filings, investigating viola - tions and imposing sanctions. The FTC also issues rulings and promulgates relevant regulations, as authorised under the FTA. FDI and national security reviews are primarily con - ducted by the DIR. They oversee both inbound and outbound investments, with an aim to safeguard pub - lic interest and national security. During these reviews, the DIR may consult other competent authorities through intra-governmental processes. For example, in cases involving PRC investors, they may consult with the National Security Bureau and the Mainland Affairs Council. Sector-specific approvals are managed by the relevant sector-specific authority, such as the FSC for financial institutions, the National Communications Commis - sion (NCC) for telecommunication businesses, and the Energy Administration for the energy sector. Merger, FDI and sector-specific reviews are typically conduct - ed in parallel. Failure to obtain necessary regulatory approval from the relevant competent authority may prevent the parties from proceeding with the closing. 2.3 Scope and Extraterritorial Reach Previously, the FTC’s Guidelines on Handling Extrater - ritorial Mergers governed the determination of wheth - er a foreign-to-foreign transaction conducted outside Taiwan falls under the FTC’s purview. Following the abolition of these guidelines on 30 June 2023, foreign- to-foreign mergers are now subject to the same filing thresholds and procedures as domestic transactions, except that joint ventures established or operated by foreign businesses outside Taiwan, with no economic activities within Taiwan, are exempt from merger filing. Additionally, if a foreign-to-foreign merger is subject to Taiwan’s merger control and the transaction value is below TWD2.5 billion, a simplified filing procedure may apply, unless the case involves significant public interest, high entry barriers, or other specified factors that require the standard filing process.
In Taiwan, merger control is primarily governed by the Fair Trade Act (FTA) and its Enforcement Rules, supplemented by regulations and guidelines issued by the Fair Trade Commission (FTC). Together, these establish a comprehensive framework with clear rules on merger filing thresholds, turnover calculations, exempted merger types, relevant market definitions, pre-notification consultations, and the review and handling of merger filings. Additionally, special merg - er review regimes may apply to regulated industries. For example, the Regulations for the Examination of Financial Holding Company Merger Cases specifically govern mergers within the financial sector. FDI and national security screening are governed by a layered statutory framework, including the Act for Investment by Foreign Nationals, the Act Governing Relations with the Mainland Area, the Hong Kong and Macau Relations Act, and their sub-laws. Addition - ally, the Department of Investment Review (DIR) has issued a “negative list” that, on an exceptional basis, identifies industries where foreign investments are prohibited or restricted, as well as a “positive list” that explicitly outlines the sectors open to PRC investors. Legislation aimed at protecting Taiwan’s core national critical technologies, such as the Industrial Innovation Statute and other national security laws, also plays a key role. Beyond merger control and FDI considerations, sector-specific approvals may also be triggered by investments in regulated industries such as financial services, telecommunications or energy. M&A-related disputes are typically resolved through settlement, arbitration or other alternative dispute res - olution mechanisms as stipulated in the transaction agreements. When litigation is pursued, the applicable procedural rules and substantive laws vary depend - ing on the nature of the claim. Procedural frame - works may include the Administrative Litigation Act, the Commercial Case Adjudication Act or the Code of Civil Procedure. Substantive laws that could apply include the Securities and Exchange Act (insider trad -
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