TAIWAN Trends and Developments Contributed by: Eddie Chan, Derrick Yang, Winnie Lin and Yuan-Yuan Lo, Lee and Li Attorneys-at-Law
poses of acquiring key resources or market channels, integrating the supply chain, or as a strategic goal for global expansion. Additionally, topics such as genera- tive AI, internet of vehicles (IoV) and energy transi- tion have also been leading global investment trends in recent years, and Taiwan’s technology industry is expected to benefit from the growing demand. Taiwan’s M&A Legal Regime Acquisitions of Taiwan companies are commonly structured as an acquisition of shares in the company (including mergers, share swaps or tender offers) or an acquisition of assets/business in the company (which can be implemented by way of asset sale or spin-off). Cash and shares or a combination of both are com- monly used as considerations in M&A transactions. A fairness opinion from an independent expert such as a certified public accountant (CPA) is required on the reasonableness of price terms. The main legislation governing M&A activities in Tai- wan is the Business Mergers and Acquisitions Act. Other statutes may also apply, including the following: • Securities and Exchange Act; • Company Act; • Labour Standards Act; and • Fair Trade Act. Further, if the target company is in a regulated industry, such as banking, securities, insurance and telecom- munications, then the laws governing that industry will be relevant. Besides, there are some restrictions on foreign investments and People’s Republic of China (PRC) investments in Taiwan. Additionally, on 5 December 2023, the Executive Yuan announced the “National Critical Technologies List” in accordance with amendments made to the National Security Act in 2022. This comprehensive list includes 22 crucial items in defence technology, space technology, agriculture, semiconductors and information security, all deemed to possess signifi- cant advantages. The law prohibits the unauthorised transfer of these crucial technologies abroad, in order to protect national security and industrial competitive
advantage, while still permitting legitimate business operations and technology exchanges. Foreign investments and PRC investments Under the Statute for Investment by Foreign Nation- als, foreign investors may be subject to prohibitions or restrictions on owning certain industries. For a foreign investor seeking to invest in a Taiwanese company, such foreign investor shall first apply with the Depart- ment of Investment Review (DIR) of the Ministry of Economic Affairs for a foreign investment approval. The Negative List promulgated by the DIR sets forth the sectors in which foreign investment is either restricted or prohibited. Those sectors that are not listed in the Negative List are generally open to foreign investment. On the other hand, investments by investors from mainland China (People’s Republic of China – PRC) are subject to a separate regulatory regime, which is more stringent. PRC investors may only invest in the businesses permitted on the Positive List. A PRC investor refers to: • an individual, juristic person, organisation or any other institution of the PRC (the “PRC National”); and • any company located in any “third area” (ie, an area other than the PRC or Taiwan) and invested in by any PRC National whereby – (a) the capital contributed or shares held directly or indirectly by the PRC National(s) in aggre- gate exceed 30% of the total number of shares or total amount of capital contribution of the third-area company, or (b) the PRC National has “control” over the third- area company. With respect to the “30%” above, it should be exam- ined and determined based on each upper-level shareholder individually. Business Mergers and Acquisitions Act (the “M&A Act”) The M&A Act is the main piece of legislation that pro- vides the legal framework for M&A activities including: • mergers;
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