TAIWAN Law and Practice Contributed by: Eddie Chan, Derrick Yang, Winnie Lin and Yuan-Yuan Lo, Lee and Li Attorneys-at-Law
acquisition. Any change in the shareholder’s holding of 1% or more of the total issued shares of the public company should also be reported. Directors, supervisors, managerial officers and shareholders holding more than 10% of the total issued shares of the public company are also subject to regular reporting obligations. On the other hand, there is no requirement for the buyer to make a proposal that it will not be making a proposal within a specified period of time. 6.2 Mandatory Offer A mandatory tender offer would be required 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, agreement, or other form of agreements for a joint purpose. 6.3 Transaction Structures Privatisation through a two-step transaction – ie, a tender offer followed by a share exchange using cash as the consideration (cash squeeze- out), is a commonly adopted transaction struc- ture in Taiwan’s M&A market. Additionally, M&A transactions between Taiwan companies and Cayman Islands companies are often structured through a reverse triangular merger, which also results in the public companies being the surviv- ing companies and wholly owned by the acquirer after the merger. 6.4 Consideration and Minimum Price In general, cash is more commonly used as con- sideration in public M&A transactions in Taiwan. In a tender offer, if the consideration is in cash, the offer documents must include a performance guarantee from a financial institution or a written confirmation 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 domestic securities traded on the Taiwan Stock Exchange or the Taipei Exchange, or foreign securities pre- scribed by the FSC. Typically, the tender offer price would be set higher than the market price to incentivise public shareholders to tender their shares. In public M&A transactions, an inde- pendent expert’s fairness opinion is required to validate the fairness of the transaction price. The directors of the companies involved in the trans- action must fulfill their fiduciary duties by care- fully reviewing and negotiating reasonable terms and conditions. In cases where there are dis- crepancies between the parties in transactions with high valuation uncertainty, post-closing earn-out payments may be structured as a con- tingent transaction price in M&A transactions. 6.5 Common Conditions for a Takeover Offer/Tender Offer Common conditions of a tender offer are (i) the threshold for the tender offer and (ii) required regulatory approvals. A tender offer conditioned on the bidder obtain- ing financing is not permissible. A bidder should disclose in the offer details of its funding source for the consideration, substantiated by relevant documents. Moreover, a bidder cannot with- draw or cease a tender offer once it has been launched, except with the FSC’s approval in one of the following circumstances: • the bidder has proven a material change in the financial or business conditions of the target company; • the bidder is subject to bankruptcy or reor- ganisation, death, or declaration of incompe- tency; or • other reasons specified by the FSC.
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