TAIWAN Law and Practice Contributed by: Derrick Yang, Judy Lo and Yu-Ting Su, Lee and Li Attorneys-at-Law
legality of the decision to cash out minority sharehold - ers in a merger or the fairness of the compensation they received. 8.2 Challenges to Deal Process, Governance and Disclosure M&A-related litigation in Taiwan remains limited in volume. However, among the disputes that do arise, claims most commonly focus on alleged procedural defects, governance failures and breaches of fiduci - ary duties (such as conflicts of interest and disclosure obligations). For example, in a notable 2022 merger involving tel - ecommunications companies, a minority shareholder sought annulment of a party’s shareholders’ resolution approving the transaction. The shareholder alleged that a director concurrently served as a director and senior executive of both parties to the merger, there - by creating conflicting duties of loyalty; such director failed to disclose these interests to the board, which then proceeded to convene the shareholders’ meet - ing. The court of first instance upheld the claim and annulled the resolution on procedural grounds. Similarly, in a 2025 case concerning a food company’s TWD3.6 billion investment in a payment platform, the court invalidated the transaction after finding that the board resolution was adopted through an unlawful process, including lack of quorum at the audit com - mittee meeting, inadequate notice to directors, and insufficient disclosure caused by last-minute agenda changes. The court of first instance therefore held that the resolution of the board of directors was unlawful and that the transaction was invalid. This case is cur - rently under appeal. 8.3 “Broken Deal”, MAC/MAE and Conditions Litigation Generally speaking, when a court or tribunal interprets contract clauses in M&A transactions (including mate - rial adverse change/effect clauses, termination rights, and disputes regarding the satisfaction of closing con - ditions), it places primary emphasis on the express provisions of the contract and upholds the definitions and criteria mutually agreed upon by the parties.
Accordingly, the parties must draft the contract with special care, ideally incorporating clear, objec - tive standards of assessment. This may include, for example, specifying both qualitative and quantitative criteria for a material adverse change/effect (such as a defined percentage threshold of EBITDA or transac - tion value), ensuring closing conditions are precisely articulated, clearly defining force majeure events, annexing agreed-upon forms to the transaction docu - ments and avoiding the conferral of excessive inter - pretative discretion. In circumstances where no objective standard exists and a dispute escalates to arbitration or litigation, it is common practice to seek expert determination, whereby an independent third-party expert is engaged to provide an impartial opinion. 8.4 Disputes Over Regulatory Efforts and Remedies In practice, disputes regarding the parties’ obliga - tions to obtain regulatory approvals, offer remedies or challenge adverse decisions are typically managed through tiered contractual mechanisms. These mech - anisms generally require the principals of both parties to engage in good-faith negotiations as an initial step. If negotiations fail, the dispute may then proceed to mediation. Only when these consensual efforts prove unsuccessful will the matter escalate to formal dis - pute resolution, which is more commonly conducted through arbitration rather than litigation. This prefer - ence reflects the parties’ desire to maintain confiden - tiality and preserve their commercial relationships. On a side note, in Taiwan, litigation challenging adverse regulatory decisions (such as merger clear - ance determinations) remains relatively uncommon. Nonetheless, a limited number of cases have arisen. For instance, in 2019, a proposed merger between two prominent karaoke businesses was repeatedly blocked by the FTC on competition grounds. The par - ties pursued administrative remedies, with the case ultimately reaching the Supreme Administrative Court, but they eventually withdrew the appeal. In practice, the parties and the regulatory authorities may also resolve such disputes through negotiated settlements.
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