TAIWAN Law and Practice Contributed by: Eddie Chan, Derrick Yang, Winnie Lin and Yuan-Yuan Lo, Lee and Li Attorneys-at-Law
2.3 Early-Stage Financing Early-stage financing in Taiwan is typically sup- ported by local investors and government-spon- sored funds, but the authors have also noticed an increasing trend of foreign venture capital investors getting involved in funding start-ups at an early stage to assist them in bringing their ideas to market. Share subscription agreements, a shareholders’ agreement, and the articles of incorporation of the target company are typically used to document the investment. 2.4 Venture Capital Typical sources of venture capital in Taiwan include large corporations, government-spon- sored funds and institutional investors. To be specific, Taiwan has been actively promoting its start-up ecosystem through various government initiatives and endeavours. The government has established incubators, accelerators, and innovation centres to support and nurture early- stage companies. Additionally, Taiwan has been attracting foreign venture capital firms to invest in its start-up ecosystem. These firms bring in not only capital but also expertise, global net- works, and market access to Taiwanese start- ups, helping them to expand internationally. Overall, the venture capital landscape in Taiwan is diverse and dynamic, with a range of funding sources and support programmes available to help start-ups thrive and succeed. 2.5 Venture Capital Documentation The typical documents for a venture capi- tal transaction consist of a share subscription agreement, a shareholders’ agreement, and the articles of incorporation of the target company. While the Cayman Islands and British Virgin Islands model forms are commonly used in Tai- wan, they must be adapted and tailored to com- ply with Taiwanese law.
2.6 Change of Corporate Form or Migration Venture capital investment is primarily directed towards companies limited by shares and close- ly held companies (limited by shares). However, if a closely held company has drawn funds from more than 50 shareholders, it must transfer its form to a company limited by shares due to the cap on the number of shareholders. Addition- ally, start-ups that have international investors may be asked to consider relocating their juris- diction to the Cayman Islands or the British Vir- gin Islands in order to align with the corporate governance schemes that are more familiar to international investors. 3. Initial Public Offering (IPO) as a Liquidity Event 3.1 IPO v Sale When investors in a start-up in Taiwan are con- sidering a liquidity event, they may be more likely to expect to take the company public, in light of the potential for greater visibility, access to capital, and enhancement in the valuation that can follow with an IPO. However, the current trend in Taiwan is leaning towards a dual-track process, where investors explore all the possibilities at the outset, and choose the path that best aligns with their inter- est, ultimately depending on various factors such as the company’s growth stage, industry dynamics, or market conditions. 3.2 Choice of Listing In most cases, when a Taiwanese company decides to do a listing, it is more likely to consid- er listing on a local exchange including the Tai- wan Stock Exchange and the Taipei Exchange. The reasons are the familiarity with local environ-
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