TAIWAN Law and Practice Contributed by: Derrick Yang, Judy Lo and Yu-Ting Su, Lee and Li Attorneys-at-Law
6. Sectoral and Other Regulatory Approvals 6.1 Regulated Sectors Requiring Approval In Taiwan, certain regulated sectors require specific change-of-control or ownership approvals in connec - tion with M&A. These requirements are primarily set forth in sector-specific legislation and are overseen by the relevant competent authority. For example, in the financial sector, the Financial Holding Company Act mandates that financial hold - ing companies obtain approval from the competent authority for mergers and business transfers. The Banking Act and Insurance Act require individuals or related parties acquiring a certain percentage of a bank or insurance company’s voting shares to obtain prior approval from the competent authority. Similar - ly, under the Telecommunications Management Act, transfers, acquisitions or investments in telecommu - nications enterprises exceeding certain thresholds, or resulting in a market share of 25% or more, require approval from the NCC. In the electricity sector, merg - ing enterprises must submit a detailed merger plan to the Bureau of Energy for prior approval. 6.2 Approval Process and Timelines In regulated sectors, the process of obtaining sector- specific approvals often begins well before signing, typically starting with informal consultations with the relevant competent authority. Following signing, transactions usually enter a regu - latory filing phase, which may involve FDI applica - tions, merger control filings and other sector-specific approval processes. These procedures often run con - currently and can take three to six months or longer, depending on factors such as administrative capacity, deal structure and complexity, the industry involved and the parties’ business scale. In practice, merger clearance and FDI approval are usually secured before the sector-specific authority issues its approval. 6.3 Substantive Standards and Discretion In Taiwan, sector-specific regulators apply distinct substantive standards when reviewing M&A transac - tions, which are tailored to the unique characteristics and policy objectives of each industry.
Outright rejection of an application is rare unless the investment relates to prohibited businesses. In prac - tice, during the review process, the DIR may raise concerns with the applicant, who can then amend the investment plan or take other mitigation measures to address those concerns. This communication helps to ensure compliance while balancing regulatory require - ments with business objectives. 5.8 Enforcement and Sanctions If a foreign investor fails to comply with the DIR’s fil - ing requirements or conditions, the DIR may cancel the investor’s right to remit profits or interest derived from the investment for a specified period, or order the investor to withdraw the investment and revoke the investor’s shareholder rights. A PRC investor may face more serious repercussions if it fails to comply with the filing requirements or condi - tions. In such cases, the investor may incur an admin - istrative fine ranging from TWD120,000 to TWD25 million (approximately USD4,000 to USD833,333). Additionally, the authorities may order the violator to cease or withdraw the investment, or to rectify the violation within a specified timeframe. The violator’s shareholder rights may also be suspended as neces - sary. The DIR may independently review closed transac - tions at its discretion. Since compliance with post- closing conditions is an ongoing obligation, the DIR may monitor the investor’s business activities by requesting periodical or ad hoc reports to ensure con - tinued compliance. 5.9 Transparency, Confidentiality and Judicial Review The FDI review process is generally conducted on a confidential basis. However, the DIR may disclose the outcome of an application if it deems such dis - closure necessary (such as a significant case in its news release). If an investment application is rejected, investors may file a petition with the Executive Yuan to challenge the DIR’s decision. Should the petition be denied, investors may still seek judicial review by filing an administrative lawsuit in court.
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