TAIWAN Law and Practice Contributed by: Lihuei Mao (Grace), Derrick Yang, Yu-Ting Su and Rose Huang, Lee and Li Attorneys-at-Law
7.2 Material Shareholding Thresholds and Disclosure in Tender Offers Shareholding Disclosure Thresholds Any person who, either individually or jointly, acquires more than 5% of the total issued shares of a public company must report this to the FSC. Any change in the shareholder’s shareholding of 1% or more of the public company’s total issued shares should also be reported. Directors, supervisors, managerial officers and shareholders holding more than 10% of the pub - lic company’s total issued shares are also subject to regular reporting obligations. Tender Offer Disclosures A bidder should first submit the tender to the FSC and make a public announcement of the tender offer, including the following information: • basic information on the bidder; • terms and conditions of the tender offer; • type and funding source of the purchase price for the tender offer; • risks of participation and non-participation in the tender offer; • status of the bidder’s shareholding in the target company; • any agreement concerning the tender offer signed by (i) the bidder, and (ii) the target company, its management team, or shareholders within two years before the filing of the tender offer (if any); • the bidder’s business plan for the target company; • the bidder’s board resolution; and • fairness opinion on the purchase price. The bidder should report to the FSC and announce publicly the results of the tender offer within two days after the expiry of the tender offer period. The above disclosure obligations apply to all bidders of a tender offer, regardless of whether they are private equity-backed. 7.3 Mandatory Offer Thresholds A mandatory tender offer is triggered if anyone, alone or in concert with others, plans to acquire 20% or more of the issued shares of a public company within 50 days unless any exceptions apply. An acquisition will be deemed in concert with others if the acquirers
acquire such shares by means of a contract, agree - ment or other form of agreement for a joint purpose. 7.4 Consideration In general, cash is more commonly used as consider - ation in M&A transactions in Taiwan. In a tender offer, if the consideration is in cash, a performance guaran - tee from a financial institution or a written confirma - tion from a qualified financial adviser or CPA must be included in the offer documents as proof of funding. If the consideration is in the form of shares, such shares must be (i) domestic securities traded on the Taiwan Stock Exchange or the Taipei Exchange or (ii) foreign securities prescribed by the FSC. In practice, the tender offer price is usually above the market price to incentivise the shareholders to tender their shares. An independent expert’s fairness opinion is generally required, and the directors of the compa - nies participating in the transaction must fulfil their fiduciary duties by negotiating reasonable terms and conditions. 7.5 Conditions in Takeovers In practice, common conditions of a tender offer are (i) the threshold for the tender offer and (ii) the required regulatory approvals. A tender offer conditioned on the bidder obtaining financing is generally not permissible. A bidder should disclose details of its funding source for the consid - eration, substantiated by relevant supporting docu - ments, in the tender offer. Moreover, a bidder cannot withdraw or cease a tender offer once it is launched unless approved by the FSC due to any of the follow - ing events: • the bidder has proven a material change to the financial or business conditions of the target com - pany; • the bidder is subject to bankruptcy or reorganisa - tion, death or being declared incompetent; or • other reasons specified by the FSC. In practice, a bidder often seeks the principal share - holders’ commitments to vote for the deal at the share - holders’ meeting and to tender the shares. Whether to request further deal security provisions (such as
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