TAIWAN Trends and Developments Contributed by: Eddie Chan, Derrick Yang, Winnie Lin and Yuan-Yuan Lo, Lee and Li Attorneys-at-Law
Standards Act, and the Fair Trade Act, etc, may also apply. Further, if the target company is in a regulated industry, such as banking, securi- ties, insurance, and telecommunications, then the laws governing that industry will be relevant. Besides, there are some restrictions on foreign investments and PRC investments in Taiwan. Additionally, on 5 December 2023, the Execu- tive Yuan announced the “National Critical Tech- nologies List” in accordance with the recently amended National Security Act in 2022. This comprehensive list includes 22 crucial items in defence technology, space technology, agricul- ture, semiconductors, and information security, all deemed to possess significant advantages. The law prohibits the unauthorised transfer of these crucial technologies abroad in order to protect national security and industrial competi- tive advantage, while still permitting legitimate business operations and technology exchanges. Foreign investments and PRC investments Under the Statute for Investment by Foreign Nationals, 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 Department of Investment Review (DIR) of the Ministry of Eco- nomic 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 Chi- na – 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 (i) an individual, juristic person, organisation or any other institution of the PRC (“PRC National”); and (ii) 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 aggregate 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 “con- trol” over the third-area company. With respect to the “30%” above, it should be examined and determined based on each upper-level share- holder individually. Business Mergers and Acquisitions Act (the “M&A Act”) The M&A Act is the main piece of legislation that provides the legal framework for M&A activities including mergers, spin-offs, share swaps, and acquisitions between enterprises. The primary goal of this law is to facilitate the legality and efficiency of M&A activities while ensuring the protection of the rights and interests of stake- holders, including shareholders, employees, and creditors. The shareholders have the right to information disclosure and protection mecha- nisms to ensure fair treatment during the M&A process. If the terms of the M&A transaction are unfavourable to the shareholders, the dissenting shareholders have the right to demand the com- pany to repurchase their shares at a fair price. The law also requires the acquiring company to properly handle employees’ rights, including retention or severance arrangements. Further- more, if certain conditions under the M&A Act are met, tax exemptions and benefits may apply. The M&A Act was last amended in December 2022 seeking to enhance the flexibility of M&A transactions and safeguard shareholders’ rights.
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