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Sample Template for XXX Co., Ltd. Rules Governing Financial and Business Matters Between this Corporation and its Related Parties  CH

Amended Date： 2022.12.23 
Categories： Corporate Governance
Article Content Content Search Article No. Search Legal Basis Amended Article Legislative History Chinese

Title： Sample Template for XXX Co., Ltd. Rules Governing Financial and Business Matters Between this Corporation and its Affiliated Enterprises(2010.11.10)
Date：
Article 8     Any loans or endorsements/guarantees between this Corporation and an affiliated enterprise shall be carefully assessed and carried out in compliance with the provisions of the Regulations Governing Loaning of Funds and Making of Endorsements/Guarantees by Public Companies and with the procedures prescribed by this Corporation regarding loans to others and provision of endorsements/guarantees.
    With respect to the provision of loans, endorsements, or guarantees between this Corporation and an affiliated enterprise, the matters set out below shall be closely reviewed, and results of the assessment submitted to the board of directors. Any loan of funds shall be made only by a resolution of the board of directors, and no other party may be authorized to decide on the matter. The board of directors, in accordance with the preceding paragraph, may authorize the chairperson to provide an endorsement or guarantee within a specific limit, provided it is subsequently submitted to and ratified by the next board meeting:
  1. The necessity and the reasonableness of the loan or the endorsement or guarantee. When funds are loaned because of business dealings, an assessment shall be made of whether the loan amount is commensurate with the total amount of the business involved. When short-term financing is needed, the reasons for and the circumstances surrounding the loan shall be set out.
  2. A credit check and a risk assessment of the counterparty requesting the loan or the endorsement or guarantee.
  3. The effects on this Corporation's operational risk and financial position and the rights and interests of its shareholders.
  4. Whether collateral must be obtained, and an appraisal of its value.
    Any endorsement or guarantee provided pursuant to Article 5, paragraph 2 of the Regulations Governing Loaning of Funds and Making of Endorsements/Guarantees by Public Companies between any subsidiaries in which this Corporation directly or indirectly holds 90 percent or more of the voting shares shall first be submitted for a resolution by the board of directors of this Corporation, except when an endorsement or guarantee is provided between companies in which this Corporation directly or indirectly holds 100 percent of the voting shares.
    Any proposed loan between this Corporation and its parent or a subsidiary, or between its subsidiaries, shall be submitted for a resolution by the board of directors. The chairperson may also be authorized, with respect to a specific borrowing counterparty, and within a limit resolved by the board of directors and a period not to exceed 1 year, to provide an accreting loan or to make available a revolving line of credit.
    If this Corporation has established independent director positions, the board of directors shall give full consideration to each independent director's opinion with respect to loans, endorsements, or guarantees between this Corporation and any of its affiliated enterprises. Specific opinions by independent directors expressing assent or dissent, and the reasons for dissent, shall be included in the minutes of board meetings.
    When a loan of funds for short-term financing is necessary between any two foreign companies in which this Corporation directly or indirectly holds 100 percent of the voting shares, the loan amount is not subject to the restriction of 40 percent of the net worth of the company making the loan. The amount of an endorsement or guarantee between two companies in which this Corporation directly or indirectly holds 90 percent or more of the voting shares may not exceed 10 percent of this Corporation's net worth, except for endorsements or guarantees between two companies in which this Corporation directly or indirectly holds 100 percent of the voting shares.
    This Corporation shall properly implement subsequent control measures with respect to loans or endorsements or guarantees. When there is a likelihood of overdue claims or the occurrence of loss, this Corporation shall adopt appropriate conservatory measures to safeguard its rights and interests.
Article 10     Any asset transaction, derivative trading, merger, demerger, acquisition, or share transfer between this Corporation and an affiliated enterprise shall be conducted in accordance with the Regulations Governing the Acquisition and Disposal of Assets by Public Companies and the procedures for acquisition and disposal of assets prescribed by this Corporation.
    When this Corporation makes an acquisition of securities from or a disposition of securities to an affiliated enterprise, or an acquisition from an unaffiliated enterprise of securities whose underlying is the stock of an affiliated enterprise, it shall first obtain the financial statements of the issuing company for the most recent period, audited and attested or reviewed by a certified public accountant (CPA), for reference in appraising the transaction price. If the amount of the transaction is 20 percent or more of this Corporation's paid-in capital or NT$300 million or more, it shall also request a CPA to provide an opinion on the reasonableness of the transaction price, except for securities quoted on an active market or that meet any of the following requirements:
  1. Securities acquired through cash contribution in an incorporation by promotion or by public offering.
  2. Securities issued at face value by an issuing company carrying out a cash capital increase in accordance with relevant laws and regulations, with this Corporation as a sponsor of the issue.
  3. Securities issued by an investee company wholly invested by this Corporation that is carrying out a cash capital increase, with this Corporation as a sponsor of the issue.
  4. Securities listed and traded on the Taiwan Stock Exchange (TWSE) or on the GreTai Securities Market (GTSM) and emerging stocks.
  5. Government bonds or bonds in repurchase or reverse purchase agreements.
  6. Domestic funds or overseas funds.
  7. TWSE or GTSM listed securities acquired or disposed of in accordance with the TWSE or GTSM rules governing the purchase of listed securities by reverse auction or rules governing the auction of listed securities.
  8. Securities acquired through this Corporation’s sponsorship of a cash capital increase by a public company, when the securities acquired are not privately placed.
  9. Subscription to fund shares before the establishment of a fund in accordance with Article 11, paragraph 1 of the Securities Investment Trust and Consulting Act and the Financial Supervisory Commission's 1 November 2004 Order No. Financial-Supervisory-Securities-IV-0930005249.
  10. Subscription or redemption of domestic private placement funds, provided that the trust agreement for the fund specifies an investment strategy in which, aside from securities margin transactions and open positions held in securities-related products, the investment scope of the remaining portion is the same as that of a publicly offered fund.
    When this Corporation engages in the acquisition of memberships or intangible assets from or their disposition to any of its affiliated enterprises, if the amount of the transaction is 20 percent or more of this Corporation's paid-in capital or NT$300 million or more, it shall request a CPA to provide an opinion on the reasonableness of the transaction price.
Article 13     This Corporation, in compliance with the requirements of laws and regulations regarding matters that must be publicly disclosed or filed and the deadlines for so doing, shall make timely arrangements for the provision by each subsidiary of required financial and business information, or to retain CPAs to audit or review the financial reports of each subsidiary.
    Within 4 months after the end of each business year, this Corporation shall make a public disclosure and filing of its affiliated enterprises' operational overviews and organizational charts and of consolidated financial statements covering affiliated enterprises. Information on any increase, decrease, or other change in affiliated enterprises shall be filed with the TWSE or GTSM within 2 days of the change.
    Information on any material transaction between this Corporation and an affiliated enterprise shall be fully disclosed in the annual report, financial statements, the three reporting forms for affiliated enterprises, and prospectuses.
    If an affiliated enterprise experiences financial difficulties, this Corporation shall obtain its financial statements and related materials in order to assess the resulting effect on the finances, business, or operations of this Corporation, and when necessary, appropriate conservatory measures shall be adopted to safeguard this Corporation's rights as a creditor. Under the above circumstances, in addition to specifying the resulting effect on this Corporation's financial position in its annual report and prospectus, this Corporation shall also make a timely announcement of material information on the Market Observation Post System (MOPS).
    By the 10th day of each month, this Corporation shall disclose on the MOPS the information on each major subsidiary's business volume, its balances of endorsements, guarantees, and loans of funds, statistical summaries of operating revenues for all goods and business in the preceding month, and the respective monetary amounts and ratios of sales between it and this Corporation.
    The term "major subsidiary" as used in the preceding paragraph means any subsidiary of this Corporation, as defined in generally accepted accounting principles, to which any of the following circumstances has applied in each of the most recent 2 fiscal years (based on CPA audited and attested annual financial reports):
  1. Thirty percent or more of this Corporation's operating revenue is derived from the single subsidiary.
  2. Fifty percent or more of this Corporation's principal materials or commodities, in terms of quantity or dollar value purchased, is derived from the single subsidiary.
  3. Fifty percent or more of this Corporation's total output value (including self-made, contracted, and outsourced) is derived from the single subsidiary.
  4. The dollar amount of this Corporation's original investment in the single subsidiary is 40 percent or more of paid-in capital and is also NT$300 million or more (or, if this Corporation is a GTSM listed company, the dollar amount of original investment in the single subsidiary is 40 percent of paid-in capital and is also NT$100 million or more).
  5. The aggregate dollar amount of this Corporation's monetary loans and guarantees/endorsements to the single subsidiary is 40 percent or more of net worth and is also NT$300 million or more (or, if this Corporation is a GTSM listed company, the aggregate dollar amount of monetary loans and guarantees/endorsements to the single subsidiary is 40 percent or more of net worth and is also NT$100 million or more).
  6. The single subsidiary's pre-tax profit/loss accounts for 50 percent of pre-tax profit/loss in the consolidated financial statement of this Corporation and is also NT$300 million or more, or, if this Corporation is a GTSM listed company, the single subsidiary's pre-tax profit/loss accounts for 50 percent of pre-tax profit/loss in the consolidated financial statement of this Corporation and is also NT$100 million or more.
Article 14     When any of the following circumstances applies to an affiliated enterprise, this Corporation shall make a public disclosure and regulatory filing on its behalf:
  1. For a subsidiary whose shares have not been publicly issued domestically, the dollar amount of the subsidiary’s acquisition or disposal of assets, endorsements or guarantees for others, and loans of funds to others meets the criteria for public disclosure and regulatory filing.
  2. The subsidiary makes investments in the mainland area.
  3. The parent or the subsidiary undergoes bankruptcy or reorganization proceedings pursuant to applicable laws and regulations.
  4. A major policy is adopted by resolution of the affiliated enterprise’s board of directors that has a material effect on the rights and interests of the shareholders or the securities prices of this Corporation.
  5. Any matter regarding the unlisted parent of this Corporation constitutes material information under the provisions of the Taiwan Stock Exchange Corporation Procedures for Verification and Disclosure of Material Information of Companies with Listed Securities and of the GreTai Securities Market Procedures for Verification and Disclosure of Material Information of Companies with GTSM Listed Securities.
    If the parent of this Corporation is a foreign company, this Corporation shall make a filing of the following information on its behalf before the opening of trading hours on the first business day following the day on which this Corporation becomes aware of the information or on which there is media reporting of the information:
  1. A material change in shareholder equity.
  2. A material change in business policy.
  3. A material disaster resulting in serious reduction or complete cessation of production.
  4. A material effect on the rights and interests of shareholders or the parent's operations resulting from a change in the laws, regulations, or rules of the parent’s home country.
  5. Mass media reporting about the parent sufficient to affect the securities prices of this Corporation.
  6. The occurrence of any other material event that, pursuant to the laws or regulations of the foreign company's home country, must be filed immediately.