TAIWAN Law and Practice Contributed by: Eddie Chan, Derrick Yang, Winnie Lin and Yuan-Yuan Lo, Lee and Li Attorneys-at-Law
and enforce the listing rules and regulations for public companies. 7.3 Restrictions on Foreign Investments Foreign (Non-PRC) Investment Foreign investors (as distinguished from inves- tors from Mainland China) who wish to purchase or invest in shares of Taiwanese companies (oth- er than portfolio investment in exchange traded securities) are required to obtain foreign invest- ment approval from the Department of Invest- ment Review, Ministry of Economic Affairs of Taiwan (DIR) under the Statute for Investment by Foreign Nationals in advance. In general, for- eign investors can invest in most business sec- tors in Taiwan. The “negative list” promulgated by Taiwan regulators specifies prohibited and restricted investment areas for foreign nation- als. No foreign investment can be made in the “prohibited industries”. For those classified as “restricted industries”, special permits or licenc- es from relevant authorities must be obtained before investment, and additional restrictions may apply. PRC Investment A PRC investor, under the Regulations Gov- erning Investment from the People’s Republic of China (PRC), refers to any individual, juris- tic person, organisation, or any other institution from Mainland China (a “Mainland Person”) that invests in Taiwan. A PRC investor also includes any company located in any third area (an area other than the PRC or Taiwan) and invested in by Mainland Person(s) whereby (i) the shares held or capital contributed directly or indirectly by Mainland Person(s) in aggregate exceed 30% of the total number of shares or the total amount of capital contribution of the third-area company, or (ii) any Mainland Person has control over the third-area company. A PRC investor is only per- mitted to invest in a Taiwanese company if prior
approval from the DIR is obtained, and only if the investment is consistent with the business scope restrictions and limitations on Taiwan’s “positive list” for investment from Mainland Chi- na as promulgated by Taiwan regulators from time to time. 7.4 National Security Review/Export Control National Security Review An investor is prohibited from investing in busi- nesses in Taiwan that could harm national secu- rity, public order, good customs and practices, or public health, as well as such activities that are prohibited by law. Certain industries and companies will undergo special scrutiny due to national security concerns. In these cases, the DIR will forward the foreign investment appli- cation to other government agencies for their comments and approval before making a final decision. Industries and companies that may fall under the intra-governmental consultation pro- cess include: • financial holding companies, banking, insur- ance, securities firms, securities investment trusts or consulting firms; • telecommunications; • media and broadcasting; • agriculture; • transportation; and • energy. Export Control An export of items falls under the scope of stra- tegic high-tech commodities (SHTC) and the provision to a foreign party of the relevant tech- nologies to develop, manufacture, or use the product requires proper permits. The criteria to determine the strategic high-tech commodities include:
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