Chapter II Formulation of Operation Procedures
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Section I Loans of Funds to Others
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| Article 8 | A public company intending to loan funds to others shall formulate its Operational Procedures for Loaning Funds to Others in compliance with these Regulations, and, after passage by the board of directors, submit the Procedures to each supervisor and submit them for approval by the shareholders' meeting; where any director expresses dissent and it is contained in the minutes or a written statement, the company shall submit the dissenting opinion to each supervisor and for discussion by the shareholders' meeting. The same shall apply to any amendments to the Procedures.
Where a public company has appointed independent directors, when it submits its Operational Procedures for Loaning Funds to Others for discussion by the board of directors under the preceding paragraph, the board of directors shall take into full consideration each independent director's opinion. If an independent director expresses any dissent or reservation, it shall be noted in the minutes of the board of directors meeting.
A public company without the intention of loaning funds to others may, after passage by the board of directors, be relieved from the obligation of formulating the Operational Procedures for Loaning Funds to Others. If such a company subsequently intends to loan funds to others, it shall still comply with the preceding two paragraphs.
Where a public company has established an audit committee, when it adopts or amends its Operational Procedures for Loaning Funds to Others, the procedures or amended procedures shall require the approval of one-half or more of all audit committee members, and furthermore shall be submitted for a resolution by the board of directors, and the provisions of paragraph 2 shall not apply.
If the approval of one-half or more of all audit committee members as required in the preceding paragraph is not obtained, the Operational Procedures may be implemented if approved by two-thirds or more of all directors, and the resolution of the audit committee shall be recorded in the minutes of the board of directors meeting.
The terms "all audit committee members" in paragraph 4 and "all directors" in the preceding paragraph shall be counted as the actual number of persons currently holding those positions.
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| Article 9 | A public company shall specify the following matters in its Operational Procedures for Loaning Funds to Others, and shall comply with those Operational Procedures when loaning funds:
- Entities to which the company may loan funds.
- Evaluation standards for loaning funds to others:
- Where funds are loaned for reasons of business dealings, evaluation standards shall be specified for determining whether the amount of a loan is commensurate to the total amount of trading between the two companies.
- Where short-term financing is needed, the reasons for and conditions of extending loans shall be enumerated.
- The aggregate amount of loans and the maximum amount permitted to a single borrower shall each be prescribed separately for business transactions and for short-term financing respectively.
- Duration of loans and calculation of interest.
- Procedures for handling loans of funds.
- Detailed review procedures, including:
- The necessity of and reasonableness of extending loans to others.
- Borrower credit status and risk assessment.
- Impact on the company's business operations, financial condition, and shareholders' equity.
- Whether collateral must be obtained and appraisal of the value thereof.
- Announcement and reporting procedures.
- Subsequent measures for control and management of loans, and procedures for handling delinquent creditor's rights.
- Penalty for violation of these Regulations or of the company's Operational Procedures for Loaning Funds to Others by managers or personnel in charge.
- Procedures for controlling and managing loans of funds to others by subsidiaries.
- Other particulars required by the FSC.
A public company that engages in short-term financing under Article 3, paragraph 5, in addition to complying with the preceding paragraph, furthermore shall perform enhanced risk assessment for, respectively, unsecured financing, financing to enterprises in any single industry, and financing to any single group of affiliated enterprises or members of a single corporate group, and shall prescribe limits on the amounts that may be loaned in such financing.
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| Article 10 | Where a subsidiary of a public company intends to make loans to others, the public company shall instruct it to formulate its own Operational Procedures for Loaning Funds to Others in compliance with these Regulations, and it shall comply with the Procedures when loaning funds.
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Section II Endorsements/Guarantees for Others |
| Article 11 | A public company intending to make endorsements or guarantees for others shall formulate its Operational Procedures for Endorsements/Guarantees in compliance with these Regulations, and, after passage by the board of directors, submit the same to each supervisor and for approval by the shareholders' meeting. Where there any director expresses dissent and it is contained in the minutes or a written statement, the company shall submit the dissenting opinions to each supervisor and for discussion by the shareholders' meeting. The same shall apply to any amendments to the Procedures.
Where a public company has appointed independent directors, when it submits the Operational Procedures for Endorsements/Guarantees for discussion by the board of directors pursuant to the preceding paragraph, the board of directors shall take into full consideration each independent director's opinions. If an independent director expresses any dissent or reservation, it shall be specifically recorded in the minutes of the board of directors meeting.
A public company without the intention of making endorsements or guarantees for others may, after passage by the board of directors, be relieved from the obligation of formulating the Operational Procedures for Endorsements/Guarantees. If such a company subsequently intends to make endorsements or guarantees, it shall still comply with the preceding two paragraphs.
Where a public company has established an audit committee, when it adopts or amends its Operational Procedures for Endoresements/Guarantees, the provisions of Article 8, paragraphs 4 to 6 shall apply mutatis mutandis.
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| Article 12 | A public company shall specify the following matters in its Operational Procedures for Endorsements/Guarantees, and shall comply with those Operational Procedures when making endorsements/guarantees:
- Entities for which the company may make endorsements/guarantees.
- Where an endorsement/guarantee is made due to needs arising from business dealings, evaluation standards shall be specified for determining whether the amount of an endorsement/guarantee is commensurate the total amount of trading between the two companies.
- The ceilings on the amounts a public company is permitted to make in endorsements/guarantees, including on the public company’s aggregate endorsement/guarantee amount and the amount of its endorsements/guarantees for any single entity, as well as on the aggregate endorsement/guarantee amount, and the amount of endorsements/guarantees for any single entity, that the public company and its subsidiaries as a whole are permitted to make. If the aggregate amount of endorsements/guarantees that is set as the ceiling for the public company and its subsidiaries as a whole reaches 50% or more of the net worth of the public company, an explanation of the necessity and reasonableness thereof shall be given at the shareholders meeting.
- Procedures for making endorsements/guarantees.
- Detailed review procedures, including:
- The necessity of and reasonableness of endorsements/guarantees.
- Credit status and risk assessment of the entity for which the endorsement/guarantee is made.
- The impact on the company's business operations, financial condition, and shareholders' equity.
- Whether collateral must be obtained and appraisal of the value thereof.
- Procedures for controlling and managing endorsements/guarantees by subsidiaries.
- Procedures for use and custody of corporate chops.
- Hierarchy of decision-making authority and delegation thereof.
- Announcing and reporting procedures.
- Penalty for violation of these Regulations or the company's Operational Procedures for Endorsements/Guarantees by managers and personnel in charge.
- For circumstances in which an entity for which the company makes any endorsement/guarantee is a subsidiary whose net worth is lower than half of its paid-in capital, relevant follow-up monitoring and control measures shall be expressly prescribed.
- Other particulars required by the FSC.
In the case of a subsidiary with shares having no par value or a par value other than NT$10, for the paid-in capital in the calculation under subparagraph 11 of the preceding paragraph, the sum of the share capital plus paid-in capital in excess of par shall be substituted.
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| Article 13 | Where a subsidiary of a public company intends to make endorsements/guarantees for others, the public company shall instruct it to formulate its own Operational Procedures for Endorsements/Guarantees in compliance with these Regulations, and it shall comply with the Procedures when making endorsements/guarantees.
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