Chapter 1 General Principles
|Article 1|| These Regulations are adopted pursuant to the provisions of Article 22, paragraph 4 of the Securities and Exchange Act (the "Act").
|Article 2|| Except where otherwise provided by laws and regulations, the offering and issuance of overseas securities by issuers shall be governed by these Regulations.
|Article 3|| A public company with shares listed on a stock exchange (a "listed company") or traded on an over-the-counter market in accordance with Article 3 of the Taipei Exchange Rules Governing the Review of Securities for Trading on the TPEx (an "OTC company meeting the provisions of Article 3 of the TPEx Securities Review Regulations") may register to offer and issue overseas corporate bonds and overseas stocks, to sponsor issuance of overseas depositary receipts, and to trade its issued stocks on offshore stock exchanges.
A public company that has entered into a listing contract with the Taiwan Stock Exchange Corporation or that, in accordance with Article 3 of the Taipei Exchange Rules Governing the Review of Securities for Trading on the TPEx, has applied and entered into a contract with the Taipei Exchange for over-the-counter (OTC) trading of securities, may register to offer and issue overseas stocks or to sponsor issuance of overseas depositary receipts concurrent with its domestic underwriting.
A public company with securities traded on OTC markets in compliance the Taipei Exchange Rules Governing the Review of Emerging Stocks for Trading on the TPEx (hereinafter referred to as an "emerging stock company") may register to offer and issue overseas convertible bonds and overseas corporate bonds with warrants.
A company which is neither a listed company nor meets the provisions of Article 3 of the TPEx Securities Review Regulations may register to offer and issue overseas straight corporate bonds, as well as overseas convertible bonds. Such a company may also apply to offer and issue overseas corporate bonds with warrants where the applicant intends to meet future demand for bond conversions or the exercise of share purchase rights by using the shares it owns in either a listed company or in an OTC company meeting the provisions of Article 3 of the TPEx Securities Review Regulations.
|Article 4|| The terms used herein shall have the following meanings:
- The term "sponsor issuance" refers to the issuer assisting in the implementation of the issuance plan for overseas depositary receipts and providing financial information to a depositary institution pursuant to a deposit contract.
- The term "depositary institution" refers to an institution located outside the territory of the Republic of China that issues depositary receipts pursuant to the securities regulations of the country where it is located.
- The term "custodian institution" refers to a bank located within the territory of the Republic of China that has been approved by the Financial Supervisory Commission (FSC) to engage in custodian business.
- The term "overseas depositary receipts" refers to receipts issued by a depositary institution outside the Republic of China pursuant to the securities regulations of the country where it is located to evidence the underlying securities held in the custody of a custodian institution.
- The terms "registration" and "effective registration" refer to where an issuer registers with the FSC by duly submitting all required documents, with the registration to automatically become effective after a specified number of business days have elapsed since the registration materials were received by the FSC or any FSC-designated agency unless the FSC has either returned the papers to the registrant for completion of missing items or has rejected the registration in order to safeguard the public interest.
- The term "business day" means days on which trading takes place in the securities markets.
- The term "financial reports" means consolidated financial reports, or if the issuer does not have a subsidiary, means individual financial reports.
|Article 5|| An issuer shall not register to offer and issue overseas securities upon the existence of any of the following circumstances:
- Where the issuer has violated Article 247, paragraph 2 of the Company Act, or any subparagraph listed under Article 249 of the Company Act, it shall not issue unsecured overseas corporate bonds; provided, however, that issuers who are in conformance with Article 28-4 of the Act shall not be subject to the restrictions of Article 247 of the Company Act.
- Where the issuer has violated Article 247, paragraph 1 or Article 250 of the Company Act, it shall not issue overseas corporate bonds; provided, however, that issuers who are in conformance with Article 28-4 of the Act shall not be subject to the restrictions of Article 247 of the Company Act.
- Where the issuer has violated Article 269 or Article 270 of the Company Act, it shall not carry out a capital increase through a new share issue in order to facilitate the issue of overseas depositary receipts, nor shall it carry out a capital increase through the issue of overseas stocks.
|Article 6|| An issuer intending to issue and offer overseas securities shall, after obtaining a letter of approval from the Central Bank, duly file with the FSC for effective registration, enclosing all required documents.
When an issuer registers to issue and offer overseas securities, it shall engage a securities underwriter for evaluation and duly produce an evaluation report. However, this does not apply to an issue of straight corporate bonds or a registration for issuance of overseas depositary receipts pursuant to Article 12-1.
An amended registration shall be filed promptly with the FSC if there is any change in the particulars registered in the documents submitted.
|Article 7|| When an issuer registers a planned offering and issuance of overseas securities with the FSC by duly submitting all required documents, the registration will automatically become effective after 12 full business days from the day on which the registration materials were received by the FSC and any FSC-designated agencies.
The FSC may suspend the effectiveness of a registration where the registration materials submitted are not complete or have not been completely filled out, or where it is necessary to do so in order to safeguard the public interest.
Where an issuer submits incomplete registration materials or fails to fill out its registration materials completely, and acts on its own to rectify such insufficiency before the FSC issues a notification to suspend the registration, the registration shall become effective after 12 full business days from the day on which the materials rectifying the insufficiency were received by the FSC or an FSC-designated agency.
Where an issuer registers to sponsor issuance of overseas depositary receipts or to offer and issue overseas stocks, and a subsequent change in the issue price prompts it to submit amended registration materials to the FSC or an FSC-designated agency before the registration becomes effective, the registration will still become effective within the registration waiting period set forth under paragraph 1, and the provisions of the preceding paragraph shall not apply.
After receiving notice of suspension of registration, an issuer may submit further materials to rectify the cause of suspension; if the FSC does not then reject the registration or notify the registrant to effect further rectification, the registration shall become effective after 12 full business days from the day on which the rectified registration materials are received by the FSC and any FSC-designated agencies.
After the FSC suspends a registration, if the issuer fails, within 12 business days from the day on which it receives a letter notifying it of said suspension, to act in accordance with the provisions of the preceding paragraph to apply for lifting of the suspension, or it applies for lifting of the suspension but the cause of suspension has not been eliminated, the FSC may reject the registration.
|Article 8|| If an issuer files for registration to offer and issue overseas securities and, during the time period from the balance sheet date of the most recent financial report submitted therefore to the date of effective registration, an event occurs having a material impact on shareholders' equity or the price of the securities as set out in Article 36, paragraph 3, subparagraph 2 of the Act, then in addition to making a public disclosure and filing a report with the FSC within 2 days from the actual occurrence of that event as required, the issuer shall submit an opinion by a relevant expert according to the nature of the event, and arrange for the certifying CPA to submit a report to the FSC indicating its impact on the financial report.
From the date on which the FSC or its designated institution receives the registration documentation until the date of effective registration, except for information issued in accordance with laws and regulations, an issuer may not state or issue any forecasted financial or business information to any specified or unspecified person.
An issuer that externally issues any information that is not consistent with that in the registration documentation shall amend the relevant information and report it to the FSC.
|Article 9|| Where any of the circumstances listed below exists at an issuer, the FSC may reject its plan for offering and issuance of overseas securities:
The term "engaged primarily in the business of trading of securities" as referred to in subparagraph 7 of the preceding paragraph shall mean, of a company merged by the issuer, that the merged company's cash, together with cash equivalents, financial assets listed under current assets, and holdings of securities issued by the issuer account for 50 percent or more of the total assets value of such company, and the revenue or profit/loss respectively from trading or holding of the aforesaid assets account for 50 percent or more of the revenue or profit/loss of such company.
- Any of the circumstances referred to in Article 156, paragraph 1 of the Act.
- The plan for the current offering and issuance of overseas securities is unfeasible, unnecessary, or unreasonable.
- The implementation of any previous plan for offering and issuance, or private placement, of securities has been accompanied by any of the following problems and no improvement has been made:
- The implementation is seriously behind schedule without justifiable reason and has not been completed.
- The plan was materially changed without justifiable reason; provided, however, that this provision shall not apply where the time between the actual completion of the plan and the filing of the registration exceeds 3 years.
- The securities offering and issuance plan was materially changed without being submitted to and approved by a shareholders' meeting.
- The issuer has not complied in the most recent 1 year with Article 11 herein and with Article 9, paragraph 1, subparagraphs 4 through 9 of the Regulations Governing the Offering and Issuance of Securities by Securities Issuers.
- Failure to faithfully comply with the Directions for Public Companies Conducting Private Placements of Securities, where the circumstances are of material significance.
- Reasonable benefits have not been achieved without justifiable reason; provided, however, that this provision shall not apply if the period between the actual completion date of the plan and the registration date is more than 3 years.
- An important part of the plan for this offering and issuance of overseas securities (such as issuance rules, source of funds, project particulars, implementation schedule, and expected benefits) has not been proposed and submitted to a board meeting or shareholders meeting for discussion and resolution/approval in accordance with the Company Act and the issuer's articles of incorporation.
- The company has lent large amounts of capital to others in excess of financing needs resulting from the company's business transactions with other companies or firms, and no improvement has yet been made at the time of registration.
- The company has entered into an irregular transaction of material significance, and has not rectified the situation at the time of filing the registration .
- The company holds liquid financial asset investments, idle assets, or investment property, with no plan to actively dispose of or develop such holdings, and they amount to either: (1) 40 percent or more of equity attributable to owners of the parent in the most recent CPA-audited and -attested financial report, or (2) 60 percent of the total amount of funds to be raised through the overseas securities issue that the company is registering to issue; provided, however, that this provision shall not apply when the funds to be raised will be used to purchase property, plant and equipment or used for merger of a company that is not engaged primarily in the business of trading of securities, and furthermore there is a concrete plan for fund raising evidencing the necessity to raise the funds.
- The company has provided security for a loan to another party in violation of Article 5 of the Regulations Governing Loaning of Funds and Making of Endorsements/Guarantees by Public Companies, where the circumstances are serious, and the violation has not been rectified.
- The overseas securities being offered and issued are to be purchased by a subscriber that is related to the issuer, or the ultimate source of the funds used to purchase the issue is a party related to the issuer. The meaning of the term "related party" shall be determined in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers.
- The total dollar amount of direct or indirect investment in mainland China exceeds the upper limit set by the Investment Commission, Ministry of Economic Affairs; provided, however, that this provision shall not apply where the capital utilization plan for the present offering is to purchase domestic property, plant and equipment and a commitment is made not to increase investment in the mainland.
- Any one of the following descriptions applies to shareholdings of the entire body of the company's directors or supervisors:
- The percentage of their equity stake is in violation of Article 26 of the Act and the FSC has notified them to make up for the shortfall but they have not yet done so.
- The percent of their equity stake still does not meet the required equity stake set forth under Article 26 of the Act even after accounting for the share issue that the company is now registering; provided, however, that this shall not apply where the entire body of the company's directors or supervisors pledges to make up for the shortfall upon completion of the offering.
- During the fiscal year in which the registration is made, and also in the preceding fiscal year, the entire body of the company's directors or supervisors did not honor a promise to make up for a shortfall in their equity stake.
- The company's financial statements in the most recent 2 years have not been prepared in accordance with relevant acts, regulations, and generally accepted accounting principles, and such violations are significant.
- In the past 3 years, a court has rendered a final and unappealable judgment against the issuer or its current chairperson, general manager, or de facto responsible person due to violation of laws governing business operations such as the Act, Company Act, Banking Act, Financial Holding Company Act, and Business Accounting Act, or due to a breach of good faith crime such as corruption, malfeasance, fraud, breach of fiduciary duty, or embezzlement.
- New shares are issued for the purpose of a merger, for the purpose of acquiring the shares of another company, or for the purpose of an acquisition or separation conducted in accordance with law, and such issue has been conducted under any of the following conditions:
- The issue involves a material violation of the provisions of Chapter II, Section V of the Regulations Governing the Acquisition or Disposal of Assets by Public Companies.
- The acquisition of shares or of a corporation involves shares that are not newly issued by another company, or the non-current equity investment holdings of another company, or outstanding shares that are held by the shareholders of another company.
- The ownership rights of the acquired shares, business, or assets are impaired or encumbered in some way, such as through the creation of pledge thereupon or placing of restrictions on the purchase or sale thereof.
- The provisions of Article 167, paragraph 3 or 4 of the Company Act are violated.
- An audit report with unqualified opinion was not issued by a CPA regarding the financial report on the acquired company for the most recent fiscal year, except where an audit report with qualified opinion was issued together with an unqualified opinion regarding the balance sheet.
- The internal control system is materially flawed in terms of either design or enforcement.
- The company's share price has fluctuated abnormally during the month prior to the date of registration of the offering and issuance.
- The provisions of Article 8, paragraph 2 are violated.
- A listed company, OTC company, or emerging stock company fails to appoint a remuneration committee in accordance with Article 14-6, paragraph 1 of the Act, or fails to comply with applicable laws and regulations regarding remuneration committees, where the circumstances are of material significance.
- Failure to adopt electronic transmission as one of the methods for exercising voting rights in accordance with the proviso to paragraph 1 of Article 177-1 of the Company Act.
- The securities underwriter, at the time the issuer files for registration, has received cumulatively 10 demerit points in the most recent year from the FSC, TWSE, TPEx, and Taiwan Securities Association, and three months have not elapsed since the date when the demerit points cumulatively reached 10 points.
- Other acts and regulations are violated, or where the FSC deems disapproval necessary for protection of the public interest or national reputation.
Subparagraphs 4 to 10 of paragraph 1 are not applicable in the case of registrations to use outstanding shares to sponsor issuance of overseas depositary receipts, or to use outstanding shares to engage in trading on offshore stock exchanges.
The provisions of paragraph 1, subparagraphs 3, 5, and 10 shall not apply where the issuer registers to sponsor issuance of overseas depositary receipts through capital increase, which in turn is done in order to acquire a foreign company, to acquire the shares of a foreign company, or to issue new shares for the purpose of an acquisition or separation of a foreign company conducted in accordance with the law.
When an issuer that is a financial holding company, banking enterprise, securities enterprise, or futures enterprise, calculates the assets of paragraph 1, subparagraph 7, it need not include investments in financial asset items distinguished as current in such calculations. An issuer that is an insurance enterprise need not apply the provisions of paragraph 1, subparagraph 7.
|Article 10|| With regard to an issuer's offering and issuance of overseas securities, after a registration becomes effective or approval of application is granted, the FSC may revoke or annul the registration or the approval if it discovers any of the following situations:
Subparagraphs 1 to 3 and 7 of the preceding paragraph do not apply to a registration for issuance of overseas depositary receipts pursuant to Article 12-1.
- The overseas securities have not been fully subscribed to and the cash proceeds thereof have not been fully collected within 3 months from the date on which the FSC's notice of effective registration is received; provided, however, that the FSC may grant an extension of 3 months upon application where proper reasons have been given (only one extension shall be allowed).
- The issuance of overseas depositary receipts is sponsored, or the overseas stock is offered and issued, using a method that is at variance with the particulars of registration (application) and the issuance rules set forth in the accompanying documents, and no application for change has been filed with the FSC before the date of execution of a deposit contract or the date of fixing the price for the issuance; provided, however, that this provision shall not apply if the issuer registers (applies) to use outstanding shares to sponsor issuance of overseas depositary receipts, or to use outstanding shares to engage in trading on offshore stock exchanges.
- Overseas convertible bonds or bonds with warrants are not issued in accordance with registration (application) particulars, the statement of issuance methods, and other conversion rules or warrant exercise rules, and where no application for change has been filed with the FSC before the date for fixing the price of the issue.
- Violation of Article 20, paragraph 1 of the Act.
- Violation of Article 8 herein.
- Violation of, or failure to perform, any undertaking made at the time it offered and issued securities, where the circumstances are serious.
- During the period from the date on which registration becomes effective until the date on which the securities offering is completed, any publicly disclosed financial forecasts or issued information is inconsistent with the registration documentation, and there is a material impact on the securities price or shareholders equity.
- There is a violation of any provision of these Regulations, or of any restriction or prohibition that was in place at the time of the FSC's notice of effective registration or approval of application.
Overseas securities shall not be listed and traded overseas in New Taiwan Dollars.
|Article 11|| Upon issuance of its overseas securities, an issuer shall comply with the following:
If overseas securities are subscribed to by specific persons or strategic investors, the issuer shall disclose the subscription list as well as individual subscription prices and quantities in the prospectus, and shall post this information to the information reporting website designated by the FSC.
- A prospectus prepared in accordance with the securities acts and regulations of the country where the offering took place must be uploaded to the information reporting website specified by the FSC; provided, however, that the same shall not apply to the issuance of overseas depositary receipts for conversion of or subscription to overseas corporate bonds.
- If the funds utilization plan has not yet been fully executed, the issuer shall disclose the implementation progress of the plan in the annual report; where the issuer is issuing overseas corporate bonds, information relating to the corporate bond issue shall be posted by the issuer to the information reporting website specified by the FSC within 2 days from the date of completion of the raising of capital, and by the tenth day of each month for the duration of the period during which the overseas corporate bonds are being issued.
- The issuer shall, within 10 days after the end of each quarter and in accordance with FSC regulations, post the funds utilization plan and the quarterly report on the status of funds utilization to the information reporting website specified by the FSC.
- A company listed on a securities exchange or traded on an OTC market shall, on a quarterly basis, request the original securities underwriter or CPA to prepare an evaluation opinion on progress in implementation of the funds utilization plan, the legitimacy of the purpose of the unused funds, and a statement concerning whether there has been any change to the plan. Within 10 days after the end of each quarter, the issuer shall post such opinion together with the information referred to in the preceding subparagraph to the information reporting website specified by the FSC.
- Where the issuer is sponsoring issuance of overseas depositary receipts through capital increase, and its purpose in so doing is to acquire a foreign company, acquire the shares of a foreign company, or sponsor issuance of new shares for the purpose of an acquisition or separation of a foreign company conducted in accordance with the law, the issuer shall, on a quarterly basis for the first year following completion of registration, request the original underwriter to prepare an opinion evaluating the impact of such matters upon the issuer's financial operations, business operations, and shareholders' equity. The issuer shall post such opinions to the information reporting website specified by the FSC.
- Where, as the result of a change to an item or a dollar amount in an individual item in the funds utilization plan, the total amount of capital needed for the original item increases or decreases by 20 percent or more of the total amount of capital raised, after reporting the change for approval by the Central Bank, the issuer shall register an amendment of the plan and, within 2 days after the amendment is approved by a resolution of the board of directors, the issuer shall make a related public announcement via the information reporting website specified by the FSC. The issuer shall also submit the change to a shareholders meeting for confirmation. Where the funds utilization plan is amended, the issuer shall, upon such change and within 10 days after the end of each subsequent quarter, also request the original underwriter to issue an evaluation opinion on the progress of implementation of the funds utilization plan and the legitimacy of the purpose of the unused funds, and shall post such opinion together with the information referred to in subparagraph 3 above to the aforementioned website.
- Where a material event occurs that requires real-time public announcement or reporting in accordance with the laws of the country in which the overseas securities are listed or the rules and bylaws of its securities exchange, the issuer shall simultaneously post the information to the information disclosure website specified by the FSC.
The provisions of the preceding two paragraphs do not apply to a registration for issuance of overseas depositary receipts pursuant to Article 12-1.
When an issuer that offers and issues overseas securities receives a written inquiry from the competent authority for securities of the country in which the securities are listed, it shall report to the FSC within 2 business days from the date on which it receives the inquiry and at the same time that it provides the information requested by the inquiry.