Title:Taiwan Stock Exchange Corporation Directions Governing the Particulars to be Recorded in the Securities Underwriter's Assessment Report(2022.10.24)
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Primary Market > Review


Chapter I General Provisions

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    These Guidelines are established according to Article 6 of the Taiwan Stock Exchange Corporation Procedures for Review of Securities Listings.
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    The assessment report of the securities underwriter shall be prepared in accordance with these Guidelines. The same applies in the event of an application by Taiwan Innovation Board listed companies or a Taiwan Innovation Board primary listed companies for relisting as a TWSE listed or TWSE primary listed company. The securities underwriter may make the necessary adjustments to in the particulars of the assessment report based on the actual needs of a particular application.
    The underwriter shall make an accurate record of actions taken according to these Guidelines and include such record in the working paper together with relevant information and data it has obtained. The working paper should be prepared and kept according to the following principles:
  1. The working paper should be as complete as possible and include proper details and organized in a systematic way by adding a table of contents and index;
  2. The working paper should specify the assessment procedure being implemented and the conclusion reached during the process;
  3. The assessors and supervisors responsible for double checking shall sign their names on the working paper to identify their responsibilities;
  4. The working paper should be kept for at least five years for reference.
    For purposes of these Guidelines, financial reports are consolidated financial reports prepared in accordance with the Regulations Governing the Preparation of Financial Reports as published by the competent authority. Where the issuing company has no subsidiary, individual financial reports will be acceptable.
    When assessing a foreign issuing company's application for primary listing, the securities underwriter base its assessment on the issuer's consolidated financial information.

Chapter II Particulars of the assessment report

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    The securities underwriter shall include its assessment of the sector of industry, operational and other major risks disclosed by the applicant company in its prospectus on the pages before the table of contents of its assessment report. The information should be in a distinctive typeface and in a language easy to understand.
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    General evaluation of the assessment report
  1. Description of the total number of shares to be underwritten
  2. Offer price
    1. the method, principle or calculation for determination of the offer price, and its comparison against the applicable internationally accepted market approach, costing method and income approach;
    2. comparison of the issuing company with other companies in the same trade that are TWSE listed and TPEx listed, in terms of financial position, profitability and price earning ratio;
    3. if the offer price is determined by referring to a financial expert's opinion or value appraisal report by an appraiser, there should be an explanation of the contents and conclusions in the expert's opinion or appraisal report;
    4. information about the average stock price and trading volumes of the shares of the issuing company listed on the emerging OTC market in the past month;
    5. assessment opinion on fairness of the offer price jointly determined by the securities underwriter and the issuing company.
  3. Underwriting risk factors:
  4. List and describe the risks associated with this underwriting (e.g., excessive changes in stock prices, price stabilization strategies, relevant costs of this underwriting and fee rate of underwriting services, dilution of profits due to capital-based growth caused by underwriting of new shares).
  5. Conclusion:
    1. Based on its own assessment results and expert opinion (on which the underwriter shall make its own assessment as to whether or not they may be used as the basis for assessment of the overall risks of the issuing company ; further assessment shall be made if necessary), the underwriter shall in the conclusion of its assessment describe the operational risks, financial risks and potential risks, among others, as investment risk disclosure for investors;
    2. When describing the risks associated with a foreign issuer's application for primary listing of shares in the conclusion of its assessment, the underwriter shall list, by way of example, the macro economy, changes in the political and economic environments, foreign exchange controls, taxes and relevant legal requirements, and whether or not a final and conclusive civil judgment issued by a R. O. C. court will be recognized, in the jurisdiction where the issuer was incorporated and countries where it has its main operation activities, and other risks, and describe the adequacy of the response measures adopted by the foreign issuers;
    3. Whether or not listing of shares of the issuing company should be recommended shall be based on the outcome of the underwriter's overall assessment of the issuing company.
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    Industrial circumstances and operational risks:
  1. Operational risks of the sector in which the issuing company runs its business:
    The underwriter shall list by way of example, taking into consideration the macro economy, the operational risks of the sector in which the issuing company runs its business (e.g. economic cycles, changes in the upstream/downstream of the industry, future development of the business, and product substitution).
  2. Operational risks of the issuing company:
    The underwriter shall list by way of example the operational risks such as to the issuing company's business operation, technical capabilities, R&D, patents, human resources, finance (including costs and exchange rate fluctuations).
    Where the listing application is filed in accordance with Article 4, paragraph 2 or 3, or Article 28-1, paragraph 5 or 6 of the Taiwan Stock Exchange Corporation Rules Governing Review of Securities Listings (“Review Rules”), the information about operation model and its risks, and the future development plan shall be described and explained.
    For a technology-based enterprise, cultural and creative enterprise or information software enterprise, the underwriter shall also describe the following:
    1. assessment of the probability of accomplishment of projected production time schedules and costs, market positioning, needs and estimates on future revenue benefits, and the internal control and security measures for research and development based on the level, sources, protection and advancement of technologies employed for its product production and development, and competitive edge, life cycles, sustainability, and R&D programs for new products; and
    2. information about the background (work experiences, academic background, job positions and seniority) of the company's directors participating in the operation and decision making, shareholders holding 5% or more of the total number of outstanding shares of the issuing company, shareholders contributing capital with patents or expertise, and officers controlling manufacturing technologies and technical developments, their shareholding ratios, share transfers by them within the past three fiscal years and the year of application, and how much time these technical shareholders and officers spend on and how they are actually involved in operation, and assessment of the impact on the finance and business of the issuing company and its action plans if these people discontinue their participation in the operation.
        For an applicant for listing of stocks on the Taiwan Innovation Board, the underwriter shall also describe the following:
    1. assessment, based on the features of innovation and operational models, of the possible risks to arise out of any changes to the material technologies, products, policies, and operational models, together with the countermeasures taken;
    2. assessment of the probability of accomplishment of projected production time schedules and costs, market positioning, needs and estimates on future revenue benefits, and the internal control and security measures for research and development shall be assessed based on the level, sources, protection and advancement of technologies employed for its product production and development, and competitive edge, life cycles, sustainability, and R&D programs for new products;
    3. background (work experiences, academic background, job positions and seniority) of the company's directors participating in the operation and decision making, shareholders holding 5% or more of the total number of outstanding shares of the issuing company, shareholders contributing capital with patents or expertise, and officers controlling manufacturing technologies and technical developments, their shareholding ratios, share transfers by them within the past two fiscal years and the year of application, and how much time these technical shareholders and officers spend on and how they are actually involved in operation, and assessment of the impact on the finance and business of the issuing company and its action plans if these people discontinue their participation in the operation; and
    4. for an enterprise in the biotechnology and medicine industry, assessment of the clinical trial progress of its core products.
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    Business circumstances:
  1. Summary of business (in the event of an applicant for listing of stocks on the Taiwan Innovation Board, the assessment shall cover the current period and last two fiscal years) -- to specify:
    1. analysis of changes in the major buyers and suppliers (top 10 buyers and suppliers of the year or those whose business amount accounts for 5% or more of the annual net operating revenue or net purchase amount) in the last period and the last three fiscal years -- to specify the names of the major buyers, amounts, and percentage such amounts account for of the annual operating revenue, in the last period and last three fiscal years, reasons of the changes in major buyers, and analysis of whether the changes are reasonable, any risks in concentration of sales activities, and a summary description of the sales policy of the issuing company; the names of the major suppliers, ratio of their net purchase amount to their net purchase amount of the current year, and the purchase amounts, in the last period and last three fiscal years, and analysis of changes in the major suppliers in the last period and last three fiscal years;
    2. assessment of fairness of changes in accounts receivable in the consolidated and individual financial reports and adequacy of provision of allowance for and possibility of recovery of losses of the issuing company for the last period and the last three fiscal years, and comparison with peer companies in the same sector of business.
  2. Summary of inventory (in the event of an applicant for listing of stocks on the Taiwan Innovation Board, the assessment shall cover the last period and last two fiscal years):
    Analysis of fairness of changes in net balance of inventory in the consolidated and parent company only financial reports and adequacy of provision of loss for market price decline and for obsolete and slow-moving inventories of the issuing company for the last period and the last three fiscal years, and comparison with peer companies in the same sector of business.
  3. Summary of business performance in the last period and last three fiscal years (in the event of an applicant for listing of stocks on the Taiwan Innovation Board, the assessment shall cover the last period and last two fiscal years) --
    1. list and describe how the operating revenue, gross operating profits, and operating profits of the issuing company in the last period and the last three fiscal years compare with those of peer companies in the same sector of business;
    2. list and describe if the changes in operating revenue, operating cost and gross operation profit by "department" or "major product line" in the last period and the last three fiscal years are reasonable;
    3. where business revenue or gross profit changes by 20% or more in the last period and the last three fiscal years, cost-volume-profit analysis should be performed to analyze reasons of the changes, and describe if these changes are reasonable.
  4. In case of a merger of another company for less than a full fiscal year, assessment of factors such as purpose, effects and fairness of the merger.
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    Financial circumstances:
  1. Explain in tabular form the analysis of the financial ratio and comparison with the financial ratios of listed companies and unlisted companies in the same sector of business for the last period and the last three fiscal years (in the event of an applicant for listing of stocks on the Taiwan Innovation Board, the assessment shall cover the last period and last two fiscal years), including financial structure, solvency, operational capability and profitability.
    If the listing application is filed in accordance with Article 4, paragraph 2 or 3, or Article 28-1, paragraph 5 or 6 of the Review Rules or if the applicant for listing of shares is a technology-based enterprise, cultural and creative enterprise or information software enterprise, the equity belonging to the owner of the parent company for the last financial year and the last period as in the financial statement shall be specified. The underwriter shall also evaluate the possibility that the equity belonging to the owner of the parent company in the year of application and the following year continues to exceed two-thirds of its paid-in capital. For issuers of shares with no par value or a par value per share that is not NT$ 10, the underwriter shall evaluate the possibility that the equity belonging to the owner of the parent company in the following year drops below two-thirds of the sum of stock capital and capital reserve - share premium.
    In the event of an applicant for listing of stocks on the Taiwan Innovation Board, a forecast of cash receipts and disbursements for the month of such application and each of the 12 months after the scheduled listing shall be provided, and whether the applicant complies with Article 29, paragraph 1, subparagraph 3 of the Review Rules shall also be assessed.
  2. Description of endorsements and guarantees, major undertakings and lendings to others, trading of derivatives and major assets transactions of the issuing company and all its subsidiaries (including transactions between parent company and subsidiaries) for the last period and the last three fiscal years (in the event of an applicant for listing of stocks on the Taiwan Innovation Board, the assessment shall cover the last period and last two fiscal years), and assessment of their impact on the financial position of the issuing company.
  3. List the plant expansion plans as of the last period of the application year and the funding sources, progress of work, and expected benefits, and evaluate the feasibility.
  4. Reinvested enterprise of the issuing company and all its subsidiaries (including transactions between parent company and subsidiaries):
    1. Provide an outline as of the latest financial report of the application year and assess the operation and profitability of the major reinvested enterprises (holding 20% or more shares or whose book value or original investment amount is at least NT$ 50 million) for the last period and the last fiscal year, and the share of profits and losses and distribution of share dividends (for offshore reinvested enterprises, the amount of profits remitted back should also be specified) of the subsidiaries, affiliates and joint ventures recognized by the equity method for the last period and the last three fiscal years (in the event of an applicant for listing of stocks on the Taiwan Innovation Board, the assessment shall cover the last period and last two fiscal years). In case of use of the resources and technologies of the issuing company, the fairness of consideration and technology compensation should also be assessed. If the reinvested enterprise experiences difficulties in operation or funding, the impact on the issuing company should also be evaluated.
    2. For applicants already investing or planning to invest in the Mainland Area, the underwriter shall describe their investments, and the share of profits and losses and amount of profits remitted back of the subsidiaries, affiliates and joint ventures recognized by equity method for the last period and the last three fiscal years (in the event of an applicant for listing of stocks on the Taiwan Innovation Board, the assessment shall cover the last period and last two fiscal years), and evaluate the impact on the financial position of the issuer.
    3. For ongoing investment projects as of the latest financial report of the application year with the projected total investment amount accounting for at least 20% of the paid-in capital for the last fiscal year or exceeding NT$ 500 million, assessment and description of the following are required: in case of issuers of shares with no par value or a par value per share that is not NT$ 10, the above 20% of the paid-in capital shall be replaced with 10% of the equity belonging to the owner of the parent company:
      1. purpose, starting time and expected completion date of the investment;
      2. funding sources of the investment: in case of loans, the underwriter shall evaluate the impact on the future operation of the issuing company; in case of own funds, the underwriter shall calculate the lost interest income or returns on reinvestment;
      3. benefits of investment: including projected market supplies and demands after completion of investment, annual returns on investment, and expected period for recovery of costs;
      4. current business and financial positions of the invested enterprise or project; and
      5. business experts' or technology experts' assessment and opinions on the investment project.
  5. If the underwriter is counseling the major subsidiaries of the issuing company in accordance with Article 6 of the TWSE "Assessment and Auditing Procedures for Securities Underwriters Handling Initial Listing", the underwriter shall provide the assessment and opinions stating whether there are any major operational risks or other significant irregularities.
  6. Based on the offer price and the average listed price of the issuing company on the Emerging Stock Market for the last month, the underwriter shall calculate, using the intrinsic value, the possible impact of the issued employee subscription warrants, for which the last day of stock-based payment transaction has not arrived, on the financial statement after listing of shares of the issuing company.
  7. If a state-owned enterprise applies for listing of shares and the financial reports it submits have not been certified by a CPA, the underwriter shall contact and ask the CPA to comment on the difference between certification according to the generally accepted accounting principles and certification by an auditing agency, and its impact on the financial report.
  8. If a financial enterprise applies for listing of shares, the underwriter shall clearly describe its provision of allowance and assess if the amount is adequate.
  9. The underwriter shall evaluate the fairness of the regulations governing issue of employee subscription warrants and equity securities established by the issuing company that is a foreign company as required according to the law of the jurisdiction where it was incorporated, and the impact on the shareholders' equity.
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    The underwriter may, depending on the nature of business activities engaged in by the issuing company, appoint experts with professional knowledge and profound experience in technology, business and finance to conduct comparison and analysis of the current operating situation and future development, and issue independent and impartial review opinions, to facilitate the underwriter's assessment.
    When assessing the risks in the application for primary stock listing of a foreign issuer, the underwriter may appoint experts to issue independent and impartial review opinions on the macro economy, political and economic changes, foreign exchange control, taxes, applicable laws and whether the validity of a final civil judgment issued by the R.O.C. court may be recognized in the jurisdiction where the foreign issuer was incorporated and the countries where the issuer has its main operation activities.
    When experts are asked to issue review opinions, the underwriter shall assess the experts' professional qualifications, their technological capabilities and whether they may be relied on and their impartiality. When expert review opinions are used as basis of assessment, the underwriter shall ascertain the sources of information used by the experts and if the assumptions or methods adopted are appropriate and consistent.
    Expert review opinions shall be used by the underwriter for reference only when issuing assessment reports, and shall not be referred to in the assessment reports. The underwriter shall perform a comprehensive assessment and issue a concrete conclusion with reference to the expert review opinion and other adequate and proper supporting documents and shall be ultimately responsible for the assessment.
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    As to legal compliance and impact on the operation of the domestic issuer, the underwriter shall request lawyers to comment on the following with regard to the local issuer, incumbent directors, general manager, shareholders holding at least 10% of the total number of outstanding shares of the issuing company and actual responsible persons in the last three years, and the underwriter shall assess the impact on the operation and action plans of the local issuer based on the lawyers' opinion and describe factors influencing the underwriting:
  1. If the issuing company violates applicable laws and regulations:
    1. the law and regulations of the central competent authority for the sector of industry the issuing company belongs to, and major laws and regulations affecting the sector of industry;
    2. assess if the issuing company has acted pursuant to the laws governing disclosure of information about listed companies when disclosing the information; and
    3. other laws and regulations;
  2. if any of the directors, general manager, shareholders holding at least 10% of the total number of outstanding shares of the issuing company, actual responsible person and other relevant persons violates applicable laws and regulations and therefore breaches the principle of good faith or compromises performance of duties;
  3. if any copyrights, patents, trademark rights or any other intellectual property rights is infringed;
  4. major litigation, non-litigation or administrative disputes pending in court; and
  5. major labor disputes or environmental pollution events.
    When assessing the primary stock listing of a foreign issuer, the underwriter shall request lawyers to issue their legal opinion on the following with regard to the foreign issuer, incumbent directors, general manager, shareholders holding at least 10% of the total number of outstanding shares of the foreign issuer and actual responsible persons in the last three years, and the underwriter shall assess the impact on the operation and action plans of the foreign issuer based on the lawyers' opinion:
  1. Whether the foreign issuer violates applicable laws and regulations:
    1. seriously violating the applicable labor safety and health laws of the jurisdiction where it was incorporated or of the countries where its has its main operation activities to the extent that it is ordered to suspend part or all of its operation;
    2. seriously violating the pollution control and prevention regulations of the jurisdiction where it was incorporated or of the countries where it has its main operation activities;
    3. major labor disputes; and
    4. other laws and regulations.
  2. Protection of shareholders' equity:
    1. whether the legal restrictions on where a shareholders' meeting is convened, the voting system or exercise of other shareholders' rights imposed by the law of the jurisdiction where the issuer was incorporated may influence the exercise of the shareholders' equity of the foreign issuer. If yes, describe the measures for protection of the exercise of shareholders' rights within the R.O.C.; and
    2. whether the articles of incorporation or the memorandum of association includes specific provisions on protection of the exercise of shareholders' equity;
  3. if the issuer has entered into any contract that imposes major restrictions on its operation or that is apparently unreasonable; and
  4. Same as paragraphs (B) to (D) of the preceding article.
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    Provide the assessment opinion describing if the local issuer is involved any of the circumstances where listing of shares is advised against as described under Article 9, paragraph 1 of the Review Rules, or if the foreign issuer or a subordinate company thereof is involved any of the circumstances where listing of shares is advised against as described under Article 20-8 of the rules; or if an issuer applying for listing of stocks on the Taiwan Innovation Board is involved in any of the circumstances where listing of shares is advised against as described under Article 31, paragraph of said rules. Assess if the circumstance in Article 9, paragraph 1, subparagraph 11, item 2, Article 28-8, subparagraph 7, item 2, or Article 31, paragraph 1, subparagraph 10, item 2 of the same Rules applies. Also list and describe the following:
  1. In regard to each of the reductions of shareholding in the issuing company by the TWSE/TPEx-listed company over the last three years, whether the cause, ratio, stock assignees or specific persons negotiated with, price and impact on the equity of the shareholders of the TWSE/TPEx-listed company have been reviewed by the audit committee of the TWSE/TPEx-listed company, resolved on by its board of directors and reported at its shareholders’ meeting and, in the absence of an audit committee, have been consented to by two-thirds or more of the directors.
  2. Where over the last three years the TWSE/TPEx-listed company has reduced its shareholding in the issuing company on account of a forfeiture of its subscription rights to shares issued by the issuing company for cash capital increase, in regard to the pricing basis and standards for identifying specific persons to negotiate with in each cash capital increase undertaken by the issuing company, whether an assessment opinion by an independent expert on the fairness of the price of the new shares issued for cash capital increase has been obtained, whether such basis and standards have been reviewed by the audit committee or special committee and resolved on by the board of directors of the issuing company, and whether the relevant stock release procedures have been adhered to; and whether the composition, qualification, method of review, and other matters pertaining to the special committee are governed mutatis mutandis by the Regulations Governing the Establishment and Related Matters of Special Committees of Public Companies for Merger/Consolidation and Acquisition and, in the absence of an audit committee or special committee, whether consent of two-thirds or more of the directors has been procured.
    Provide the assessment opinion describing if the professional qualifications of and exercise of duties by the independent directors and members of the remuneration committee established by the issuing company and relevant matters are consistent with what is prescribed under the securities laws and regulations of the R.O.C.
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    Assess if the issuer satisfies the listing requirements applicable to the specific sector of business or form of organization.
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    Assess if the issuer adequately reflects in its prospectus its implementation of the sustainable development agenda in accordance with the TWSE Rules Governing the Particulars to be Recorded in Prospectuses for Initial Securities Listing Applications.
    Assess if the self-assessment report on review of corporate governance created by the issuing company adequately reflects the governance and operation of the company.
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    The underwriter shall provide updated descriptions and assessments whenever necessary on subsequent events with regard to the above issues from the date of completion of its assessment report until the day before the effective date of the share listing contract. If there is any major subsequent event before the date of publication of the prospectus used for share listing, the underwriter shall also provide updated descriptions and assessments.

Chapter III Supplementary Provisions

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    If the applicant for listing of shares is an investment holding company or financial holding company, the underwriter shall perform assessment of the nature of the business activities engaged in by companies controlled by the holding company or its subsidiaries according to Articles 4, 5, 6, 8, 9, 11 and 12 and issue review opinions on individual controlled companies or subsidiaries before compiling a consolidated general opinion based on these separate opinions.
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    If the applicant for primary stock listing is an overseas subsidiary of a local TWSE/TPEx-listed company, the underwriter shall assess the legality of the policy-making procedure of the local TWSE/TPEx-listed company, whether the listing of shares may have a major adverse impact on its operation and financial position, and the proposed action plans.
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    The assessment report shall be jointly reviewed, produced and signed by the lead securities underwriter and joint underwriter(s).
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    These Guidelines shall take effect after having been submitted to and approved by the competent authority and publicly announced. Subsequent amendments thereto shall be effected in the same manner. The attachments to these Guidelines shall take effect after having been submitted to and approved by the president. Subsequent amendments thereto shall be effected in the same manner.
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