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Criteria Governing the Offering and Issuance of Securities by Securities Issuers(2004.02.02) |
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Article 8
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Where the issuer has filed an application under Paragraph 2 of Article 6, the SFC may reject or disapprove its application upon the occurrence of any one of the following events:
1. Fifty percent of the original directors have changed in the registration/application year and the previous two years. In addition, its shareholders are in violation of Paragraph 1 of Article 43 of the Act with regard to the acquisitions of their shares. However, this provision shall not apply where corrections have been made prior to the reporting (application) date, and where there is conformance to any one of the following events:
(1) Where, before the public offering of the company's stocks, ten percent or more of the total number of shares issued by the public company have been obtained individually or collectively by the shareholders. After the public offering of the shares, in accordance with Article 25 of the Act, the [issuer] has effected announcement and reporting of the directors and supervisors, and the shareholders having a shareholding of ten percent or more, and any extraordinary changes thereto.
(2) Where, when ten percent or more of the total number of shares have been obtained individually or collectively by the shareholders and, in accordance with Article 43-1 of the Act, the [issuer] has effected announcement and reporting thereof. However, subsequently, an increase or decrease has not been announced or reported in accordance with regulations, and the amount of the change has not reached ten percent of the total number of shares offered by the public company, and in accordance with Article 25 of the Act, the [issuer] has effected announcement and reporting of the directors and supervisors, and the shareholders with a shareholding of ten percent or more, and any extraordinary changes thereto.
(3) A company in the given application for the raising of funds which can provide concrete evidence in support of the following items, and where the securities underwriter produces a definite appraisal and opinion, and where the SFC imposes restrictions on listed companies or companies whose shares are traded in the business places of securities firms.
(i) The company faces operational difficulties such that there is a definite need for the raising of funds, the company has submitted a comprehensive operating plan, and the appraisal is reasonable and feasible.
(ii) During the period when the shareholders obtain the shareholding, there are no extraordinary changes in the share prices, or upon the provision of evidence, the company's shareholders do not seek to influence the share prices through the obtaining of the shares.
2. The listed or OTC listed company has any one of the events prescribed under Paragraph 1 of Article 156 of the Act, but this restriction shall not apply to those companies which have been prohibited from publicly offering their securities under Paragraph 2 of Article 139 of the Act.
3. The offering and issuing plan in question is not feasible, unnecessary, and unreasonable.
4. Any one of the following events has occurred in the process of implementing the plan of cash capital increase or of issuing corporate bonds and the situation has not been improved:
(1) The process of implementation is seriously delayed without due reasons and the implementation has not been completed yet.
(2) The plan has undergone substantial change without due reasons and such change has not been completed. However, this provision shall not apply where more than three years have passed between the reporting (application) date and the actual completion date of the plan.
(3) The plan has undergone substantial change but yet to report to the shareholders' meeting for approval.
(4) The company has failed to observe the regulations prescribed under Subparagraphs 4 through 7 of Paragraph 1 of Article 9.
(5) No reasonable benefit derived and no due reason is provided. However, in the event more than three years have passed since the completion date of the plan till the registration/application date, such restriction shall not apply.
5. Any one of the following events has occurred in the plan of the latest cash capital increase or corporate bond issuance:
(1) The important contents of the said plan (such as sources of funds, project items, scheduled progress and the benefits expected to be derived) are not put into the agenda to be discussed by either the board of directors or the shareholders meetings and not adopted as a resolution in accordance with the Company Act and the company's articles of incorporation.
(2) The said plan was not put into or disclosed in the first publicized financial forecast in the year when registration (application) is submitted. However, such restriction shall not apply to cases where, in the quarter prior to the registration (application) date, timely update (adjustment) of financial forecast has been made and information relevant to the said plan disclosed.
6. When the issuing company merged another company to issue new shares, and the event prescribed under Subparagraph 1 of the preceding article has been found in the latest financial report of the merged company, or the event prescribed under Subparagraph 2 of the same Article has occurred and the accountant certifying its balance sheet does not issue a without-reservation opinion.
7. A large sum of fund has been loaned to others and such lending does not arise out of inter-company or inter-firm business needs. The aforementioned situation has not been improved and the company now intends to conduct a cash capital increase or issue corporate bonds.
8. Material abnormal transactions are found and have not been improved.
9.Holds the assets listed below in an amount equivalent to 40% of shareholders' equity as reported in the most recent financial report either audited and attested, or reviewed, by a certified public accountant, or in an amount equivalent to 60% of total funds raised through the latest cash capital increase or issuance of corporate bonds that the issuer has registered (or applied for approval), and is carrying out a cash capital increase or is issuing corporate bonds; provided, however, that this shall not apply where the funds thus raised are to be used for the purchase of fixed assets and the need to raise the funds is evidenced by an actual capital increase plan:
(1) short-term investments, idle investments, or real estate investments for which there is no plan for disposal or active development; and
(2) among long-term investments, where the issuer has invested in a company primarily engaged in securities trading -- the amount invested (including advance payment for shares), any loans, and any assets pledged (or credit guarantee provided) as loan guarantee in favor of its investee company; provided, however, that this shall not apply where the investee company is a venture capital company.
10. Proceeds from the cash capital increase or corporate bond issuance are to be used for investment in any company with major business in trading securities or to establish securities related services.
11. The company is in serious violation of relevant laws or regulations and generally accepted accounting principles in its preparation of financial report.
12. The working drafts of the certifying accountant are seriously defective and as a result it is impossible to determine whether the financial report is appropriately presented.
13. The internal control system is seriously deficient in design or implementation.
14. There is an abnormal variation in the price of its stocks in the past three months prior to the registration or application with the SFC. However, the aforesaid restriction need not apply in case where the most recent annual or semi-annual financial report indicates substantial growth in business revenues, net profits, and pre-tax net earnings year-on-year and quarter-on-quarter, while any of the following conditions is satisfied or where a securities underwriter is committed to underwrite the shares on a firm commitment basis and it is expressly stipulated in the underwriting agreement that 50 percent or more of the shares allocated for underwriting shall be subscribed by the underwriter for its own account:
(1) purchase of fixed asset;
(2) acquisition of 50% or more shares of an enterprise in the same industry or of a manufacturer;
(3) investment in subsidiary which uses its acquired fund to purchase fixed asset.
15. The company's director or supervisor is in violation of Article 26 of the Act and their shares percentage has not been increased to the number required by law after receipt of notice from the SFC.
16. The issuer or the company's current chairperson, general manager or the responsible person in substance has been charged by the prosecutor for their serious violation of the principle of good faith in the past three years.
17. The issuer or the company's current chairperson, general manager or the responsible person in substance has been sentenced by the court for their violation of the principle of good faith in the past three years.
18. The court has decided that the issuer has an obligation for damages under the Act and the issuer has not met that obligation yet.
19. Pledge of company asset(s) as loan guarantee for any third party. However, the restriction shall not apply to loan guarantee for subsidiary due to business necessity.
20. Violation to serious extent of the regulations regarding mergers or spin-offs in Chapter 2, Section 5 of the Criteria for Handling Acquisition and Disposal of Assets by Public Companies, and new shares are to be issued due to merger or spin-off.
21. The plan for the issuance of new share due to acquisition of shares of another company does not comply with any one of the following circumstances:
(1) The acquired shares are the newly issued shares of another company, a long-term investment held by another company or already issued shares held by the shareholders of another company, and no pledges or limitations to trading exist with respect to the acquired shares.
(2) The given plan causes the issuer to produce a substantive benefit with respect to financial business.
(3) The important contents of the given plan are put into the form of an agenda and submitted to a directors' meeting for discussion and approval by resolution. The contents of the said plan shall include no less than the following:
(i) Name, quantity, and counterpart of acquired shares;
(ii) Anticipated degree of progress;
(iii) The decision method and reasonableness of the exchange rate of the related shares;
(iv) The conditions and limitations for future transferal of the acquired shares;
(v) The anticipated possible benefit produced;
(vi) The counterpart of the acquisition of the shares of another company is an affiliated enterprise or an interested party. The relationship between the affiliated enterprise or interested party, the reason for the selection of an affiliated enterprise or interested party, an appraisal of whether shareholders' rights and interests would be affected shall be listed.
(4) No violation of Article 167 paragraphs 3 or 4 of the Company Act.
22. In each of the preceding instances of the issuance of new shares due to merger, issuance of new shares due to acquisition of the shares of another company, or issuance of new shares due to acquisition or spin-off conducted in accordance with law, no reasonable benefit was produced, and no legitimate reason exists. However, this provision shall not apply where more than three years have passed between the actual date of completion of the plan and the time of reporting.
23. Where the event prescribed in Subparagraph 9 of Subparagraph 3 of Paragraph 1 of Article 12 occurs, and the directors, supervisors, and shareholders who hold 10% or more of total issued shares of the issuer fail to undertake to place certain percentage of shares to be under the custody of a securities centralized depository enterprise.
24. Where the SFC deems it necessary to reject or disapprove the issuer's application to protect the public interests.
The company with major business in trading securities as referred to in Item 2 of Subparagraph 9 and Subparagraph 10 shall mean a company directly invested by the issuer or by a subsidiary of the said issuer, under the equity method, with its cash, equivalent of cash, short-term investment and securities issued by the issuer accounting for 50% or more of the total assets value of such company, and the revenue or profit/loss respectively from trading or holding the aforesaid assets accounting for 50% or more of the revenue or profit/loss of such company.
If the issuer is a securities, futures, or financial enterprise, it is not required to include short-term investments in its calculations when totaling the value of the assets set forth under Item 1 of Subparagraph 9 of Paragraph 1. The provisions in Item 1 of Subparagraph 9 of Paragraph 1 need not apply if the issuer is an insurance enterprise.
The provisions prescribed in Subparagraphs 9 and 16 of Paragraph 1 need not apply in case where an issuer, for purpose of enjoying tax incentives, conducts a rights issue in the amount not more than the upper limit set by the competent authority or NT$100 million.
Provisions of Subparagraphs 1, 4, 14, 16, 17, and 23 of Paragraph 1 need not apply in case of issuance of new shares due to merger, issuance of new shares due to acquisition of shares of another company, or issuance of new shares due to acquisition or spin-off conducted in accordance with law.
Provisions of Subparagraphs 1, 14 and 23 of Paragraph 1 need not apply in case where an issuer has committed a securities underwriter to offer its ordinary corporate bonds to the public.
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Article 9
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The issuer shall act in accordance with the following regulations in the event that its registration of offering and issuing securities has become effective or the application is approved:
1. Within 30 days after receipt of notice indicating that the registration has become effective or the application has been approved, the issuer shall act in accordance with Articles 252 or 273 of the Company Act.
2. With exception of the issuance of new shares due to merger, issuance of new shares due to acquisition of shares of another company, issuance of new shares due to acquisition or spin-off conducted in accordance with law, issuance of ordinary corporate bonds, and issuance of employee stock option certificates, an issuer shall consign a financial institution to collect price payments and deposit such in the designated account opened by the issuer, and shall, prior to collecting price payments, respectively enter into a payment collection agreement with the consigned financial institution and an agreement for deposit in the designated account with the bank thereof, and within two days from the signing of such agreements shall enter the name of the financial institution and the date of the agreement into the website specified by the SFC for reporting of information. The payment collection and deposit for designated account shall not be handled by the same business unit in a bank. The financial institution of
the designated account shall only allow an issuer to withdraw or use the money after the financial institution has received all the money due. Within two days after receipt of all the money due, the issuer shall enter the information on full collection of the proceeds into the website specified by the SFC for reporting of information.
3. Except where otherwise provided for by the SFC, within 30 days after the receipt of the approval letter for permission of incorporation or the amendment registration certificate of issuing new shares from the Ministry of Economic Affairs, the issuer of public offering shall have the securities certified in accordance with "Rules Governing Certification of Corporate Stock and Bond Issues by Public Companies". The securities shall be delivered to subscribers or offerees and a public announcement shall be made prior to the delivery; provided that in case where physical securities are not printed, certification of stocks and corporate bonds shall be exempt in accordance with "Rules Governing Certification of Corporate Stock and Bond Issues by Public Companies".
4. Before the utilization plan of the cash capital increase or corporate bond issuance is completed, the company having cash capital increase or issuing corporate bonds shall disclose the progress of the said plan in its annual report. In the case of the issuance of corporate bonds, within two days of the completion of the funds offering and prior to the tenth day of each month during the issuance period of the corporate bonds, information related to the issuance of the corporate bonds shall be input into the website specified by the SFC for reporting of information.
5. Within 10 days after the end of each quarter, the quarterly report on the plan for cash capital increase or corporate bond issuance and capital utilization" shall be input into the website specified by the SFC for reporting of information in accordance with SFC regulations.
6. Where the capital raised by the listed or OTC listed company has been restricted by the SFC for specific purpose(s), the listed or OTC listed company shall contact the original underwriter to comment on the reasonableness of the progress made regarding capital utilization and of the purposes for unused capital, and within 10 days after the end of each quarter, the listed or OTC listed company shall key in such comment in combination with information as referred to in the preceding Paragraph into the website specified by the SFC for reporting of information.
7. Listed or OTC listed companies issuing new shares due to a merger issuance of new shares due to acquisition of shares of another company, or issuance of new shares due to acquisition or spin-off conducted in accordance with law, shall, within ten days after the end of each quarter during the first year after completion and registration of the merger, acquisition of shares of another company, or acquisition or spin-off, ask the original lead underwriter to provide an assessment opinion as to whether any of the aspects of the merger would have an effect on the finances, business, and shareholders' rights and interests of the issuer, and input the same into the website specified by the SFC for reporting of information.
8. In the event of a change to an item in the plan for cash capital increase or corporate bond issuance or if the monetary amount of a particular item is changed, thus causing the total amount required for the original item to either decrease or increase by an amount equivalent to 20% or more of the funds that need to be raised, the company shall amend the plan and, within two days after the amendment has been ratified by resolution of the board of directors, make a public announcement and submit the amendment to a shareholders' meeting for ratification. If the company is a listed or OTC listed company, upon such amendment and thereafter within 10 days after the end of each quarter, the listed or OTC listed company shall contact the original underwriter to comment on the reasonableness of the progress made regarding capital utilization and of the purposes for unused capital, and key in the aforesaid change and comment in combination with information as referred to in Paragraph 5 into the website specified by the SFC for reporting of information.
In the event the issuer conducts a shelf registration to issue corporate bonds, any change to the filed material for the first issuance of corporate bonds occurring within the scheduled issuance date shall be reported to the SFC and be put in public announcement.
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Article 27
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Except as otherwise provided by law, an issuer registering the issuance of secured corporate bonds backed by stocks of another company shall comply with the following:
1. The collateral shall be restricted to stocks, owned for one year or more by the issuer, of a listed company or a company whose shares are traded at the business places of securities firms in accordance with Article 3 of the Securities Market Criteria Governing Review of Securities Traded on Over-the-Counter Markets. The said collateral shall not be attached with any restriction such as created pledge, restriction on trading in the Stock Exchange market or an OTC market, change of trading method, or cease of trading. GreTai
2. The value of the collateral upon registration shall not be lower than 150% of the principal and interest to be born by the subject corporate bonds to be issued.
3. Mortgage or pledge shall be created with the collateral for the trustee of creditor, and it shall be noted in the trust contract that during the term of the corporate bond, the trustee shall daily evaluate the collateral on the basis of its closing price on the same day. In case where loss of value of the collateral is to the extent that the collateral maintenance ratio is lower than a certain percentage of the principal and interest to be born by the subject corporate bonds to be issued, the trustee shall promptly notify the issuer to settle the shortfall. The issuer, besides settling the shortfall within 2 business days upon receipt of notification from the trustee, shall state in the trust contract the actions to be taken when the issuer fails to settle the shortfall within the time limit, as well as the responsibilities of the trustee.
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Article 28
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A public company may issue exchangeable corporate bonds whose repayment subject is the stocks, held by the public company for more than two years, of a listed company or a company whose shares are traded at the business places of securities firms in accordance with Article 3 of the Securities Market Criteria Governing Review of Securities Traded on Over-the-Counter Markets.
A public company may issue exchangeable corporate bonds only after it has submitted the Registration Form for Issuing Exchangeable Corporate bonds (attachment 18), provided all information required therein, along with required documents to the SFC, and after such registration becomes effective.
Paragraph 4 of Article 13, Articles 15 and 16, and Paragraphs 2 and 4 of Article 23 shall apply mutatis mutandis to the public company registering with the SFC in accordance with the preceding Paragraph.
When issuing exchangeable corporate bonds, the issuer shall set out the following items in the terms of issuance and exchange:
1. Subparagraphs 1 through 8, 10, 11, 13, and 17 of Article 32 shall apply mutatis mutandis;
2. the procedures for requesting exchange and the ways of payment;
3. the deposit procedures for the underlying objects of exchange.
The aforementioned deposit procedure shall be conducted by Taiwan Securities Central Depositary Co., Ltd. During the period of deposit, the objects of exchange shall not be pledged or retrieved.
The bondholder who requests for exchange shall fill out the Exchange Request Form and submits the form along with the bonds in question to the issuer or its agent. The exchange becomes effective at the time of receipt of the aforementioned documents. After receiving the exchange request from the bondholder, the issuer or its agent shall deliver the exchange underlying stock to the bondholder within the next business day. If the exchange results in odd-lot units of less than 1,000 shares, the stocks can be delivered within 5 business days.
When issuing exchangeable corporate bonds, the issuer shall engage securities underwriter(s) to handle a public offering of the entire issue, to which the provisions of Article 33, Paragraph 1 of Article 35, and Articles 38 and 40 shall apply mutatis mutandis.
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Article 32
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The following items shall be specified in the terms of issuance and conversion when issuing convertible bonds:
1. issue date;
2. coupon rate and payment of interest;
3. date of interest payment;
4. type of corporate bonds, the face value of each bond and the aggregate amount of this issuance;
5. the availability of collateral or guarantee;
6. name of trustee and material covenants;
7. terms of repayment (e.g. repayment of principal upon maturity, payment of principal prior to maturity, terms of call or redemption, etc.);
8. the listing or trading at the places of business of securities firms of convertible bonds of a listed or OTC-listed company;
9. procedures regarding request for conversion;
10. criteria for setting terms and conditions of conversion (including conversion price, conversion period and the classes/types of shares to be converted with);
11. adjustment of conversion price;
12. the disposition of interests and dividends in the year of conversion;
13. disposition of money less than the conversion value of one share while processing a conversion;
14. rights and obligations after conversion;
15. the number of times and date for the bondholder to acquire new stocks by submitting the certificate of conversion;
16. conversion shall be performed by either issuing new shares or delivering already issued shares, provided that conversion by an emerging stock company or an unlisted company or a company not traded at the places of business of securities firms shall be effected only through the issuance of new stock;
17. procedure for obtaining the convertible bonds;
18. other important agreements.
Where secured convertible corporate bonds are backed by the stocks of another company held by the issuer, the provisions of Article 27 shall apply mutatis mutandis.
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Article 35
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Beginning after a designated period of time following the bond issuance date and continuing until 10 days before the expiration date, the bondholder may request for conversion at any time in accordance with the procedures of conversion set by the issuer, except during the period in which transfer is suspended by laws.
The designated period of time referred to in the preceding Paragraph shall be set by the issuer in its procedures for conversion.
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Article 43
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The following items shall be provided in the terms and conditions when issuing corporate bonds with equity warrants:
1. issue date;
2. coupon rate and payment of interest;
3. date of interest payment;
4. type of corporate bonds, the amount of each bond and the aggregate amount of this issuance;
5. The units of warrant represented by each corporate bond with warrant;
6. the availability of security or guarantee;
7. name of trustee and material covenants;
8. terms of repayment (e.g. repayment of principal upon maturity, payment of principal prior to maturity, terms of call or redemption, etc.);
9. the listing or trading at the business places of securities firms of listed or OTC-listed companies' corporate bonds with equity warrants;
10. procedures regarding request for exercising warrant; payment for stock price shall be made either in cash or by corporate bonds of the issuer;
11. criteria for setting terms and conditions of exercising warrant (including exercise price, exercise period, the classes/types of shares with which to exercise warrant, and the number of shares represented by each unit of warrant);
12. adjustment of exercise price;
13. the disposition of interests and dividends in the year of exercising warrant;
14. rights and obligations after exercising warrant;
15. performance of contract shall be made only by issuing new shares;
16. the number of times and date for the bondholder to acquire new stocks by submitting the certificate;
17. procedure for obtaining the corporate bond with warrant;
18. other agreements.
Secured corporate bonds with warrants are backed by the stocks of another company held by the issuer, the provisions of Article 27 shall apply mutatis mutandis.
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Article 47
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Beginning after a designated period of time following the bond issuance date and continuing until 10 days before the expiration date, the bondholder may request for exercise at any time in accordance with the terms set by the issuer, except during the period in which transfer is suspended by laws. However, the exercise period shall not be longer than the repayment period for the said corporate bond.
The designated period of time referred to in the preceding Paragraph shall be set by the issuer in its terms for issuance and exercise.
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