Chapter 1 General Provisions
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| Article 1 | These Guidelines are jointly established by the Taiwan Stock Exchange Corporation and the Taipei Exchange for the purpose of ensuring the quality of expert opinions and expressly defining expert responsibility.
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| Article 2 | These Guidelines apply to the following situations:
- As set forth by the Regulations Governing the Acquisition and Disposal of Assets by Public Companies (Acquisition and Disposal Regulations), where:
- a public company acquiring or disposing of real estate, equipment, or right-of-use assets engages an accountant in accordance with Article 9 or 14 of the Acquisition and Disposal Regulations to opine on the results of a professional appraiser’s appraisal and reasons for any discrepancy in and appropriateness of the transaction price or on the reasons for any discrepancy in the results of appraisals of two or more professional appraisers and the appropriateness of the transaction price;
- a public company acquiring real estate or their right-of-use assets from a related party evaluates the reasonableness of the transaction cost and engages an accountant to verify the evaluation results and render a specific opinion;
- a public company acquiring or disposing of securities, intangible assets or their right-of-use assets or memberships, engages an accountant in accordance with Article 10, 11, or 14 of the Acquisition and Disposal Regulations to opine on the reasonableness of the transaction price;
- a public company conducting a merger, spinoff, acquisition, or transfer of shares engages an accountant, attorney-at-law, or securities underwriter in accordance with Article 23 of the Acquisition and Disposal Regulations to opine on the reasonableness of the share exchange ratio, acquisition price, or distribution of cash or other property to shareholders.
- Where Article 6 of the Regulations Governing the Establishment and Related Matters of Special Committees of Public Companies for Merger/Consolidation and Acquisition applies, a special committee conducting a review shall engage an independent expert to opine on the reasonableness of the share exchange ratio or distribution of cash or other assets to shareholders.
- As set forth by the Regulations Governing Public Tender Offers for Securities of Public Companies (Public Tender Offer Regulations), where:
- an offeror buying back its shares pursuant to Article 28-2 of the Securities and Exchange Act engages an accountant or securities underwriter as required by Article 10 of the Public Tender Offer Regulations to opine on the reasonableness of the buyback price;
- the board of directors or review committee of an acquired company ascertaining the matters listed in Articles 14 and 14-1 of the Public Tender Offer Regulations engages an expert to provide an opinion on the reasonableness of the calculation of the price in cash, share exchange ratio, or appraisal of other assets in connection with the public tender offer.
- Pursuant to Article 13 of the Regulations Governing Information to be Published in Public Tender Offer Prospectuses, an offeror engages an independent expert to provide an opinion on the reasonableness of the calculation of the price in cash, share exchange ratio, or appraisal of other assets in connection with the public tender offer.
For the purposes of these Guidelines, an expert means an issuer of an opinion under the preceding paragraph.
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| Article 3 | An expert engaged to issue an opinion shall be governed by these Guidelines. Issues not addressed by these Guidelines shall refer to the Regulations on Real Estate Appraisal, Statements on Standards for Valuation promulgated by the Accounting Research and Development Foundation (ARDF), or international convention. The operating procedures shall be assessed item by item for their completion, correctness, and reasonableness; facts represented in an opinion shall be true and correct and information used in the operating procedures shall be reasonable and proper to provide a reasonable basis for the expression of opinions on the object under review. Any legitimate reason for failing to comply with these Guidelines shall be elucidated in the opinion.
For the purposes of these Guidelines, correctness means appropriate and reasonable information used from the source of the information.
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Chapter 2 Working Procedures
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Section 1 Assessment of Undertaking a Case
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| Article 4 | An expert shall, prior to undertaking a case, confirm its eligibility and independence as legally required for the type of case it undertakes and its compliance with the self-regulatory rules of the industry to which it belongs:
- The expert undertaking an engagement under the Acquisition and Disposal Regulations shall meet the qualification specified in Article 5, Paragraph 1 of the regulations, and shall not have any of the following circumstances or other situations which may affect its independence:
- the expert or his/her spouse is currently employed by the party of the case to perform routine work for which he/she receives a fixed salary, or currently serves as a director or supervisor thereof;
- the expert or his/her spouse has previously served as a director, supervisor, or manager of the party of the case or an employee of the party with material influence over the case, and has been discharged or resigned from the position for less than two years;
- the unit with which the expert or his/her spouse is employed and the party of the case are related parties of each other;
- the expert is a spouse or a blood relative within the second degree of kinship of a director, supervisor, or manager of the party of the case or an employee of the party with material influence over the case;
- the expert or his/her spouse invests materially in the party of the case or shares financial gains therewith;
- The expert undertaking an engagement under the Regulations Governing the Establishment and Related Matters of Special Committees of Public Companies for Merger/Consolidation and Acquisition or the Public Tender Offer Regulations shall not have a stake in a party to a merger/consolidation or acquisition, an offeror, or a public company whose securities are being acquired sufficient to affect its independence.
No expert may charge any remuneration or be remunerated, or draw conclusions of its opinions in advance.
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| Article 5 | An expert shall confirm the following with the principal before undertaking a case to identify the scope of work:
- purpose and use of the opinion, and laws and regulations involved;
- contents of the object under review;
- record date of evaluation;
- reference on which the principal relies in determining the price (for example, the principal’s appraisal data or appraisal report, report issued by any other expert it engages, results of evaluation by the principal, etc., and working papers of such report or evaluation results, etc.)
- the opinion is issued based on the value of the object under review that is appraised by the expert itself, or on other expert report or the principal’s self-appraisal report with validation of the results of the principal’s evaluation;
- possible appraisal or valuation method or validation procedure to be adopted;
- role and responsibilities of and between each of the expert and other experts;
- time of issuance and restrictions on the use of the opinion;
- other important restrictions on the conditions and scope of engagement.
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| Article 6 | Upon identifying the scope of work, an expert shall ascertain whether the principal is able to provide reference materials for price determination and evaluate whether the expert possesses adequate expertise and sufficient time and manpower and is able to perform its work in accordance with applicable laws and regulations and standards to issue an appropriate opinion.
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Section 2 Executing a Power of Attorney
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| Article 7 | In deciding to undertake a case, an expert shall at least:
- evaluate the independence of expert .
- evaluate the undertaking of case.
- execute a power of attorney and reach an agreement with the principal on the basis of execution of the case, and incorporate the following in the power of attorney subject to the applicable circumstances:
- the principal shall advise the way in which, and the reference based on which, the price is determined, have provided all reference information for price determination and a representation of the truthfulness of the information, and provide the working papers when necessary.
- if the expert bases the opinion it issues on any other expert report provided by the principal, the principal shall provide the power of attorney and other representation of expert independence between the principal and such other expert. When necessary, the expert shall request the principal obtain the working papers from such other expert.
- if the expert verifies the results of evaluation by the principal in accordance with Article 16 or 17 of the Acquisition and Disposal Regulations, the principal shall provide an evaluation report and a representation that the reasonableness of the transaction cost has been evaluated as required, and, when necessary, further provide the working papers.
- matters with which the principal and relevant parties shall comply, such as a representation of material subsequent events.
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| Article 8 | The power of attorney shall be amended or re-executed in the event of a material change to the purpose of the expert opinion, object under review, record date of evaluation, or scope of engagement in the course of the expert conducting a case.
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Section 3 Executing the Operating Procedures
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| Article 9 | An expert shall properly devise the specific tasks and steps to be implemented, execution timeline, personnel deployment, and place of execution, etc. in accordance with the contents set out in the power of attorney.
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| Article 10 | An expert shall record accurately in the working paper of the case the relevant execution procedures, data collected, and essential matters for drawing conclusions.
The source and reasonableness of information pertaining to a case under review shall be verified if the information is provided by the principal or related party.
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| Article 11 | An expert shall base its opinion on the following in accordance with the contents of engagement:
- appraisal of the value of the object under review by itself;
- adoption of other expert’s report or the principal’s self-appraisal report;
- verification of the results of the principal’s evaluation.
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| Article 12 | To draw a conclusion of its opinion, an expert shall evaluate by the applicable circumstances whether each of the following complies with relevant regulations in order to examine the degree of consistency and reliability between the work executed and the opinion:
- whether the opinion fully reflects the scope of work which should be covered by the engagement.
- completion, correctness, and reasonableness of the operation procedures.
- adequacy and relevance of the information used and examinations, inquiries, calculations, or other necessary analyses conducted.
- relevance and reasonableness of material assumptions made.
- appropriateness and reasonableness of the method of appraisal or valuation employed and parameters used.
- pre-adjustment value and reasons, basis, relevance and appropriateness of any adjustment to a discount or premium.
- appropriateness and reasonableness of analysis, judgement, inference procedures, and conclusions conducted or reached, and whether they can be substantiated.
- reasonableness of a revision to a conclusion made upon an explanation with the principal or an approved related party prior to the issuance of an opinion.
- completeness of the contents of a working paper, the appropriateness and reasonableness of raw data used, and the degree to which the expert supports the opinion.
- whether any material subsequent events and their impact which exist after the record date of evaluation and before the issuance of the opinion have been appropriately addressed.
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| Article 13 | An expert who bases its opinion on the value of the object under review that is appraised by the expert itself shall obtain relevant data of the object on the basis of price determination from the principal, collect necessary information, and perform the following procedures and in accordance with Articles 14 to 18:
- obtain basic information of the object under review, such as location of real estate, use restrictions, the business, product, financial data and prospective financial information of the company under review.
- analyze the past and present operational or use condition of the object under review and, when necessary, understand its planning for future operation or use.
- understand information on macroeconomics, the industry, capital market, and laws and regulations.
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| Article 14 | An expert shall adopt an appropriate appraisal or valuation method according to the purpose of engagement, nature of the object under review, and status of data collection, etc. to ensure the conclusion in the opinion is drawn from the appraisal or valuation method that best reflects the value of the object.
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| Article 15 | When an expert evaluates the appropriateness and reasonableness of the appraisal or valuation method adopted, and where the adoption of two or more appraisal or valuation methods are required according to the Regulations on Real Estate Appraisal, Statements on Standards for Valuation, or international conventions it refers to, the expert shall have sufficient reasons for only using a single appraisal or valuation method.
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| Article 16 | An expert shall make a comprehensive comparison of the results derived from different appraisal or valuation methods, re-examine those with a noticeable discrepancy in amounts, and consider the degree of similarity of pricing factors based on the reliability of the data collected from different appraisal or valuation methods and the differences in the purpose or conditions of transaction to draw a final conclusion of the evaluation, and shall detail the reasons for its determination.
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| Article 17 | An expert shall evaluate the level of future operating income and profitability of the object under review and take at least the following into account when adopting the income approach:
- future benefit flow
- obtaining historical financial information and making the necessary routine adjustments thereto.
- considering the industrial prosperity, market conditions, and the past operation or use conditions of the object under review.
- analyzing the reasonableness of assumptions made in the analysis of key factors concerning prospective financial information, comparing projected values and historical values of the material financial information items on which the prospective financial information is based, and analyzing the reasons for and reasonableness of material discrepancies (if any) between those values, with relevant supporting material obtained.
- increased capital expenditure and financial cost to accommodate future operational needs.
- determination and basis of the number of periods(forecast period and perpetual period) for estimating future income.
- determination of the future benefit flow and final value and basis and reasonableness of the relevant parameters (such as growth rate, tax rate, inflation rate), which should be compared with the corresponding information of market participants.
- consistency between the growth or decline of the future benefit flow and the analysis of economic and market conditions and management’s anticipation of the future performance of the object under review, etc.
- discount rate
- parameters and basis used for the choice of the discount rate, and reasons therefor.
- consistency between the discount rate and basis of extrapolation of the future cash flow.
- the discount rate of an intangible asset is normally higher than the overall discount rate of the enterprise using said asset.
- provide data in support of a premium or discount, for example, obtain information of a professional database or professional study report or consult other experts, and, if a similar transaction is drawn on, evaluate the appropriateness and reasonableness of the information on the transaction used.
- conduct a sensitivity analysis of any change to an assumption of a key input value where necessary.
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| Article 18 | An expert shall take the following into account if it adopts the market approach:
- a comparable company or comparable transaction selected shall share similar metrics and a high risk association with the object under review. Lack of sufficient comparability necessitates a necessary adjustment. Factors to be evaluated in the selection of a comparable case include:
- similarity to the object under review, including in terms of quality and quantitative.
- quantity, verifiability, time effectiveness, and relevance of the comparable data.
- the price of the comparable transaction shall be that of an arm’s length transaction.
- The following shall be factored in in the selection, calculation, and adjustment of a value multiple:
- apply valuation multiples which can reasonably estimate the value of the object under review.
- a consistent basis and calculation method shall be employed in regard to valuation multiples used for comparison.
- evaluate the appropriateness and reliability of the comparable company or comparable transaction.
- identify factors that may affect the value of the object under review, assess and analyze each of them against the comparable company or comparable transaction to be drawn on, and, where necessary, adjust the reference valuation multiples or transaction price by the features of the object under review.
- provide reasonable data in support of a premium or discount.
- conduct a sensitivity analysis of any change to an assumption of a key input value where necessary.
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| Article 19 | An expert basing its opinion on other expert reports (such as real estate appraisal reports or valuation reports) or a self-valuation report of the principal shall at least implement the following procedures:
- consider the requirements governing use of information generated by management’s experts as set forth in ARDF Auditing Standards nos. 620, “Using the Work of an Auditor's Expert,” and 500, “Audit Evidence,” when evaluating the professional capability, competence, and objectivity of other experts or the personnel of the principal conducting the valuation.
- evaluate, in light of each of the following with regard to the object under review, whether the procedures by which the opinions and conclusions in other expert reports or a self-valuation report of the principal are developed are comprehensive, correct, and reasonable, and confirm said procedures are legally compliant and consistent with the Regulations on Real Estate Appraisal, relevant Statement on Standards for Valuation, or international convention being drawn on or applied: relevant information, scope of the appraisal or valuation report, appraisal or valuation method employed, major assumptions, parameters, adjustment and inference procedures, opinions and conclusions, sources of data used, examinations, inquiries, calculations, or necessary analyses conducted. The expert shall, where necessary, request the principal to obtain the working papers from other experts.
- analyze the reasons for and reasonableness of any discrepancy in the opinions and conclusions of the reports if two or more reports are relied on.
- evaluate whether such other expert reports or the principal’s self-valuation report make sufficient basis for the expert to form an opinion, and, where necessary, collect other related data and implement other procedures, and, upon obtaining sufficient and proper information, analyze whether the difference between the results of evaluation and contents of engagement (such as the estimated transaction price or share exchange ratio, acquisition price etc. of the object under review) substantiates a reasonable conclusion sufficiently.
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| Article 20 | An expert validating the principal’s evaluation results in accordance with Article 16 or 17 of the Acquisition and Disposal Regulations shall at least implement the following procedures:
- whether the evaluation method employed for validation is legally compliant;
- obtain raw data or collect data by itself to confirm the appropriateness and reasonableness of data used by the principal;
- verify the similarity between the object under review and like cases introduced by the principal and confirm neither party to the transaction is an interested party of the company;
- recalculate the evaluation results to verify their correctness;
- examine the difference between the evaluation results and estimated transaction price and evaluate whether such difference substantiates a conclusion that the latter is reasonable.
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Section 4 Retain working papers
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| Article 21 | An expert shall draw on ARDF Statement on Standard for Valuation no. 5, Valuation Working Paper, in preparing, compiling, filing, and safekeeping the working papers of an engaged case.
Working papers shall be safekept for not less than seven years from the date of the opinion report or until the conclusion of any litigation or other legal procedure that may be involved for over seven years. No working paper may be destroyed until the expiration of the safekeeping period and completion of internal approval procedures.
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Chapter 3 Issuance of an Opinion
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| Article 22 | An opinion shall comprise a synopsis, representations, the text, and the expert’s resume, and may additionally include appendices where necessary.
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| Article 23 | The synopsis of an opinion shall include, as a minimum:
- principal’s name, contents of the engagement, and laws and regulations and article numbers being relied on, with an outline of the basis on which the opinions are developed and of the conclusions;
- name and address of the institution of the expert;
- signature or stamp of the expert;
- date of the opinion.
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| Article 24 | Representations shall include representations that the expert is both professional and independent, that it has evaluated the major basis on which its opinions are developed, that it has evaluated [and confirms] the appropriateness and reasonableness of information used, that it complies with these Guidelines and relevant laws and regulations, that there is no contingent compensation, and that no presumption is made of the conclusions of the opinions etc.
An expert is responsible for the opinions it expresses. No representation as made above may be a representation that the liability of the expert is reduced by the use of other expert reports or information provided by the principal.
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| Article 25 | The text shall include:
- name and address of the expert’s institution;
- name of the principal;
- contents of the engagement, including the purposes and uses of the opinion, and laws and regulations and article numbers on which the opinion is based;
- basics of the object under review;
- disclosures made in accordance with Articles 26 to 29 on the basis on which it applies to the issuance of the opinion.
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| Article 26 | The text of an opinion which an expert issues based on the value of its own estimation of the object under review shall specify, as a minimum:
- value criterion and value premise;
- record date of evaluation;
- material assumptions and restrictions applied;
- reasons for employing the appraisal or valuation method and related parameters employed, and process of calculation;
- adjustments, analyses, and determinations made;
- information used and its sources, for example CPA-audited financial statements, Market Observation Post System, databases etc. Whether the evaluation procedure and information are appropriate and reasonable shall be indicated if information is sourced from the internal information of the principal or object under review which has not been verified by an impartial third party, for example the expert’s own unaudited figures and prospective financial information etc. ;
- final value or value interval;
- conclusions of opinions: comparison between the contents of engagement, for example the estimated transaction price or share exchange ratio, acquisition price etc. of the object under review, and the final value or value interval, and express opinion on the relevant reasonableness.
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| Article 27 | The text shall, in addition to disclosing the above in accordance with the preceding article, specify the following as a minimum if the object under review being appraised by an expert is an equity, the value of an enterprise, a share exchange ratio, an intangible asset or its right-of-use assets:
- historical financial information of the object under review.
- the following if the valuation method adopts the income approach:
- management’s projections of the future performance of the object under review (for example, analyses of the business cycle and market situation of the industry etc.), and reasons.
- assumptions of key factors concerning prospective financial information, and reasons.
- extrapolated number of periods of future income (forecast period and permanent period) .
- future benefit flow and basis of calculation of future value.
- sources and process of creation of primary parameters such as discount rate, capitalization rate etc. .
- bases and reasons for adjustments to value premiums and discounts.
- preliminary estimates of value and value interval.
- the following if the valuation method adopts the income approach:
- comparable company or comparable transaction selected and conditions of selection.
- selection, calculation, and adjustment of value multiples, and reasons for application and adjustment.
- bases and reasons for adjustments to value premiums and discounts.
- preliminary estimates of value and value interval.
- general analysis, adjustment, and description of the difference between the preliminary value or value interval derived from different valuation methods, including specific reasons taken into account for employing a particular valuation and its weight if each of the above valuation methods has a different or the same weight; and the necessary analysis and description if no adjustment is possible.
- in the event of a public tender offer, where the reasonableness of the consideration is evaluated based on the premium interval of previous public tender offers of a certain period, the previous public tender offers selected, and specific reasons for such selection, with consideration given to the reasonableness of the selection.
- at least the following disclosures as required by Article 13, paragraph 2 of the Regulations Governing Information to be Published in Public Tender Offer Prospectuses if the expert issues its opinion in accordance with said article:
- method, principles, or calculation method for the pricing of the public tender offer, and comparison among market value approach, cost approach, and discounted cash flow in international convention.
- comparison of the financial condition, profit earning, and price-to-earning ratio between the acquired company and TWSE- or TPEx-listed companies in the same industry.
- contents and conclusions of an appraisal report of an appraisal institution on which report the tender offer price is drawn.
- impact assessment on the soundness of the finance and business of the acquired company or surviving company, if an asset or share of the acquired company or surviving company is provided as collateral of the offeror’s financing plan.
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| Article 28 | If an expert bases its opinion on other expert reports or the principal’s self-appraisal report, the text shall evaluate and elucidate each of the items listed in Articles 26 and 27 as applicable to the circumstances, describe the procedures of examination, inquiry, calculation or other necessary analysis of such other expert reports or the principal’s self-appraisal report, etc., explain other procedures, if any, performed by the expert, and opine on whether adequate and appropriate information is obtained.
The text shall, in addition to complying with the preceding article, indicate the following if an expert bases its opinion on Article 9 or 14 of the Acquisition and Disposal Regulations:
- rate of difference between the result of appraisal of a professional real estate appraiser and the estimated transaction amount.
- reasons for any difference between the appraisal result and transaction amount that accounts for at least 20% of the transaction amount.
- reasons for any discrepancy between the appraisal results of two or more professional appraisers that accounts for at least 10% of the transaction amount if the estimated transaction amount is at least TWD 1 billion.
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| Article 29 | Where an expert verifies the results of the principal’s evaluation, the text shall disclose, inter alia, the following, subject to the circumstances:
- The disclosure shall cover the following, where the expert verifies the results of evaluation which the principal conducts in accordance with Article 16 of the Acquisition or Disposal Regulations:
- method of evaluation employed by the principal and results of such evaluation; in the event of imputation, imputation formula and results of recalculation by the expert.
- raw data used by the principal and results of verification by the expert.
- conclusions of opinions: whether the evaluation method of the principal is legally compliant, and specific opinion on the results of validation of the estimated transaction price.
- The disclosure shall cover the following, where the expert verifies the objective evidence which the principal introduces in accordance with Article 17 of the Acquisition or Disposal Regulations:
- method of evaluation employed by the principal and results of such evaluation; in the event of imputation, imputation formula and results of recalculation by the expert.
- raw data used by the principal and results of verification by the expert.
- where the principal introduces a non-stakeholder transaction as an example, results of verification by the expert that the parties to such transaction are not stakeholders of the principal company and as to the transaction time, amount, place, area, conditions of transaction etc., and whether the comparison with the object under review is legally compliant.
- conclusions of opinions: specific opinions on whether the evaluation method of the principal is legally compliant, on whether the estimated transaction price is comparable to the conditions of transaction with a non-stakeholder, and on the reasonableness of the estimated transaction price etc. .
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Chapter 4 Supplementary Provisions |
| Article 30 | These Guidelines shall take effect after having been submitted to and approved by the Competent Authority. Subsequent amendments thereto shall be effected in the same manner.
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