TAIWAN Law and Practice Contributed by: Sarah Wu, Lee & Li Attorneys-at-Law
2. Documentation 2.1 Governing Law
age of the financing transaction involves any real estate mortgage or chattel mortgage in Taiwan, in which case the real estate mortgage agree- ment and the chattel mortgage agreement must be in Chinese. By and large, where the lenders are local banks and the acquisition involves only Taiwanese elements, the facility agreement would usually be in Chinese. Likewise, where lenders include international banks and/or the acquisition involves foreign jurisdictions, English is mostly preferred as the dominant language in the documentation. 2.4 Opinions Legal opinions are generally required to be pro- vided by legal counsels for transactions, and this is one of the conditions that must be met prior to the financing, as well as: • the capacity and authority of the obligors entering into the finance documents; • the validity and enforceability of the finance documents; and • if necessary, the completion or fulfilment of the conditions precedent to the acquisition. Where a post-closing covenant includes the bor- rower or the relevant obligor providing security in favour of the lenders or the security agent, legal opinions are also required to be provided by the legal counsels after the initial drawdown, to ascertain that the security provided by the borrower or the relevant obligor is valid and enforceable in accordance with the laws of the location of the security.
The parties to corporate loan/acquisition financ- ing/LBO transactions may freely choose a gov- erning law as agreed upon and are not manda- torily required to choose Taiwanese law, except for certain security documents such as real estate and chattel mortgage agreements (see 5.1 Types of Security Commonly Used ). In prac- tice, local banks and state-owned banks prefer to choose the laws of Taiwan as the governing law, while international banks would opt for the laws of England, New York, Singapore or Hong Kong on the grounds of familiarity and ease in further distribution in the global secondary mar- ket. However, for certain security (eg, real estate mortgages and chattel mortgages), the govern- ing law should be the laws of the jurisdiction where such security is located. 2.2 Use of Loan Market Association (LMA) Agreements or Other Standard Loans There is no official standard form for facil- ity agreements in Taiwan’s local market; most lenders in the syndicated loan market generally use the standard forms published by the Asia- Pacific Loan Market Association (APLMA). For bilateral loans, the bank forms of the lenders are commonly used, but templates based on APL- MA documentation would mostly be preferred and adopted by the participants. On the other hand, where a syndicated facility is arranged by European banks, the template would generally be prepared based on the documentation pub- lished by the Loan Market Association. 2.3 Language There is no statutory requirement regarding the language used in the documentation of a financing transaction, unless the security pack-
3. Structures 3.1 Senior Loans
In practice, senior loans are typically used to finance all or a major part of the consideration of
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