Chapter 1 General Provisions
|
| Article 1 | These Criteria are prescribed in accordance with Paragraph 1of Article 22 of the Securities and Exchange Law ("the Law"). |
| Article 2 | Unless otherwise regulated by other laws, the offering and issuing of securities shall be subject to these Rules. |
| Article 3 | The Securities and Futures Commission ("SFC") shall supervise the offering and issuance, public offering, and supplemental public issue of securities, issuance of new bonus shares, and capital reductions through effective registration or application for approval.
The term "effective registration" means submission by the issuer of relevant documents to the SFC in accordance with law. Unless the documents are rejected by the SFC as a result of insufficient information contained in the said documents, or for the purpose of protecting the public's interests, the registration will become effective after designated business days from the date when the SFC or its designated institution receives the submission.
The term "application for approval" means that the SFC will review and examine the documents furnished by the issuer. If nothing unusual is found, the SFC shall approve the offering and issuing plan.
The issuer is prohibited from using the fact of effective registration or application for approval under paragraph 1 as reference in its promotion as if that the application materials have been verified or that the value of the securities has been guaranteed thereof.
The term "business day" as appearing in Paragraph 2 means the transaction date of securities market.
The term "OTC listed company" as it appears in these Criteria shall refer to stocks approved for trading on the OTC markets in accordance with Article 3 or Article 3bis of the Review Bylaws of the Republic of China Over-the-Counter Securities Exchange for Securities Trading on the Over-the-Counter Market or Article 3 of the Review Bylaws of the Republic of China Over-the-Counter Securities Exchange for Type II Stocks Trading on the Over-the-Counter Market. |
| Article 4 | In the occurrence of any one of the following events, the issuer may not offer and issue securities:
1. In the occurrence of events prescribed under Paragraph 1of Article 135 of the Company Law, no public offering is allowed.
2. If the issuer is in violation of Paragraph 2 of Article 247 of the Company Law or any one of the events under Article 249 of the same law occurs, the issuance of corporate bonds without guaranty is prohibited. However, the restriction of Article 247 of the Company Law does not apply when the issuance of corporate bonds is in accordance with Article 28-4 of the Securities and Exchange Law.
3. No issuance of corporate bonds is allowed if the issuer is in violation of Paragraph 1of Article 247 of the Company Law or any one of the events under Article 250 of the same law occurs. However, the restriction of Article 247 of the Company Law does not apply when the issuance of corporate bonds is in accordance with Article 28-4 of the Securities and Exchange Law.
4.No public issuance of preferred shares is allowed if any one of the events under Article 269 of the Company Law occurs.
5. The public issuing of new shares is prohibited in the event that any incident prescribed under Article 270 of the Company Law occurs. |
| Article 5 | When any significant events prescribed under Item 2 of Paragraph 2 of Article 36 of this Law which have great impact on the rights of shareholders and the value of stocks occur between the date of the issuer's submission of latest financial report and balance sheets and that when the registration becomes effective or the application for approval is granted, the issuer shall disclose this incident to the public and report to the SFC within two days after the occurrence of such event. In addition, the issuer shall provide to the SFC expert opinion on such occurrence based on the nature of the event involved and the evaluation from the certifying accountant regarding the impact of such event on the financial report.
From the date of reception of the report (application) documents by the SFC and its appointed agency until the report has become effective or the application has been approved, announced information shall be limited to the disclosure of facts, and excepting the contents of financial forecast information publicly announced in accordance with law, forecast information may not be made public. The external announcement of any information not in conformance with the report (application) documents shall be corrected accordingly and submitted to the SFC. |
| Article 6 | An issuer registering or applying for approval to offer and issue securities shall submit a prospectus.
If any one of the following events occurs when the issuer has registered with or applied for approval, the issuer shall ask the lead securities underwriter to evaluate the situation and the lawyer to review the relevant legal issues. The above-mentioned underwriter and lawyer shall provide evaluation report and legal opinions in accordance with regulatory requirements:
1. The cash injection by issuing new shares, issuance of new shares due to merger, issuance of new shares due to an acquisition of shares from another company, or issuance of new shares due to an acquisition or split conducted in accordance with law, by a public company whose stocks have been listed on a stock exchange (hereinafter referred to as "listed") or by an OTC company.
2. Public sale of stock of a company whose stock is approved for trading in the business places of securities firms in accordance with Article 5 of the ROC Over-The-Counter Market Rules Governing Trading of Emerging Stocks in the Over-The-Counter Markets by Securities Firms (hereinafter referred to as an "emerging stock company"), after the listing or OTC listing contract for the stock has been approved for record by the SFC, and before the company has issued new shares for cash and engaged a securities underwriter or recommending securities firm to handle the initial listing or OTC listing.
3. Companies whose stocks have not been listed on a stock exchange (hereinafter referred to as "unlisted") or whose stocks have not been traded in the business places of securities firms which have conducted cash offering of new shares and have allocated a certain percentage of their aggregate new shares to be publicly offered in accordance with Article 19.
4. The offering is used to establish a company.
5. The corporate bonds are to be offered publicly through a securities underwriter. If the issuer issues ordinary corporate bonds, it can be exempted from providing a securities firm evaluation report and legal opinion.
If the securities firms have obtained reports from the credit rating institutions approved or recognized by the SFC in the past year, they can be exempted from the requirement that the lead underwriter must issue an evaluation report.
The legal opinions in paragraph 2 and the preceding paragraph, and concluding opinions of the evaluation reports or rating report, shall be provided in the prospectus. |
| Article 7 | Upon the occurrence of any one of the following events, the SFC may reject the registration or application for approval from the issuer for offering and issuing securities:
1. The certifying CPA issues a disclaimer of opinion or an adverse opinion in the audit report.
2. The certifying CPA issues a qualified opinion in the audit report and such opinion has an impact on the fair presentation of the financial report.
3. The application review forms prepared by the issuer, reviewed by the certifying accountant, and produced by the securities underwriter has showed the occurrence of violation of laws or regulations or articles of incorporation of the issuer and such violation has affected the offering and issuing of securities.
4. The legal opinion issued by the lawyer indicates that there exists violation of law or regulations and such violation has affected the offering and issuing of securities.
5. The evaluation report from the underwriter fails to specify the feasibility, necessity, and reasonability of the subject offering and issuing plan.
6. The issuer files an application again under Paragraph 2 of the preceding article within three months after receipt of notice from the SFC in which the SFC has rejected the issuer's application, has refused to approve, has canceled the application, or the issuer has withdrawn its registration filing or application made under these Criteria. These restrictions shall not apply, however, in 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 an acquisition or split conducted in accordance with law.
7. The issuer applying for rights issue or issuing corporate bonds has any of the following conditions:
(1) the fund raised this time is to be used in direct or indirect investment in mainland China;
(2)the aggregated amount directly or indirectly invested in the mainland China area violates the regulations of the Investment Commission, Ministry of Economic Affairs. However, the aforesaid restriction need not apply to the case where the fund is to be used in purchase of domestic fixed assets and promise has been undertaken to refrain from increasing investment in mainland China.
8. Violation or failure to serious extent of performing the undertakings made upon application for listing in the stock exchange market or OTC market.
9. The SFC finds that violation of relevant laws or regulations has occurred to serious extent. |
| Article 8 | 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 this Law 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 Law, 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 Law, 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 Law, 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 this Law, 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 this Law.
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 injection 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 Items 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 injection or corporate bonds 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 Law 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.
(3) In terms of costs of fund or dilution of earnings per share, the said plan compares obviously less favorable with bank loan, bond issuance or other method of raising capital; provided that such restriction shall not apply to those with justifiable and necessary reasons.
6. When the issuing company merged another company to issue new shares, and the event prescribed under Item 1 of the preceding article has been found in the latest financial report of the merged company, or the event prescribed under Item 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 cash injection capitalization or issue corporate bonds.
8. Material abnormal transactions are found and have not been improved.
9. The company possesses large quantities of the following:
(1) Cash, equivalent of cash and short-term investment(s). However, the following items may be deducted:
(i) for remaining funds from previous capital-raising plan(s) that are deposited in whole under said category, the amount allocated for expenditure within one year in accordance with the aforesaid plan;
(ii) the amount allocated for use in the payment of cash dividends approved by a resolution of a shareholders' meeting within one year;
(iii) the amount committed for use in repaying principal and interest of corporate bonds to mature within one year or to pay redemptions applied for by holders of such bonds under the terms and conditions of the bond issue.
(iv) In case of the issuance of ordinary corporate bonds, funds committed for use in the purchase of fixed assets within one year.
(v) amounts payable as creditor's rights in reorganization that are due within one year.
(2) As listed under the item of long-term investment: If the invested company is primarily engaged in securities trading, the reinvestment amount (including advance payment for shares), loan(s) and encumbered assets for loan guarantee in favor of its invested company or credit guarantee. However, where an invested company is a venture capital company, such restrictions shall not apply.
(3) As listed under the item of long-term investment: amount entered in accounts of bonds, beneficiary certificate(s) and depositary receipt(s).
(4) Loan(s), not business-related, to any other party.
(5) Unused asset(s) or real estate investment(s) not planned for disposal or development.
10. Proceeds from the cash injection or corporate bonds 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 this Law 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 this Law 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 Guidelines 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 Law.
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 Item 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 the 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.
The provisions in Sub-subparagraphs 1 and 3 of Subparagraph 9 of Paragraph 1 need not apply if the issuer is a securities, futures, or financial enterprise. The provisions in Sub-subparagraphs 1, 3, and 5 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. |
| Article 9 | 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 Law.
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 for Certification of Stocks and Corporate Bonds Issued 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 for Certification of Stocks and Corporate Bonds Issued by Public Companies".
4. Before the utilization plan of the cash injection capitalization or corporate bonds issuance is completed, the company having cash injection 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 capital increase by cash injection 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 a material change has been made to the plan of cash injection and corporate bonds issuance, the company shall disclose such information in public announcement and report to the SFC. In addition, it shall submit the change to the shareholders' meeting for ratification. If the company is a listed or OTC listed company, upon such change 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. |
| Article 10 | With exception for the case where physical certificate is not printed, when the issuer produces certificates evidencing payment for the purpose of cash injection or corporate bonds issuance, such certificates shall be certified prior to delivery by the certifying institutions in accordance with "Rules for Certification of Stock and Corporate Bonds Issued by Public Companies". Before the amendment registration is approved by the competent authority over corporate registration, the company may use the documents evidencing the effective registration or approval for cash injection or corporate bonds issuance and those evidencing all money for shares or bond has been paid in to serve us the basis for certification.
With exception for the case where physical certificate is not printed, the aforementioned certificate evidencing payment may be made in the minimum trading unit prescribed by the Stock Exchange or Over-the-Counter Securities Exchange or the unit section can be left blank so that the subscriber or offerees can request the issuing company to produce shares or corporate bonds in fractional units.
With exception for the case where physical certificate is not printed, the aforementioned certificate evidencing payment shall list out the date and document reference number for the effective registration and approval of application. Or the receipts can be produced before the registration becomes effective or the application approved and be stamped with the date and document reference number for effective registration or approval of application afterwards.
In connection with the issuance of marketable securities, in case where physical certificate is not printed in accordance with Article 8 of these Criteria, certification in accordance with "Rules for Certification of Stocks and Corporate Bonds Issued by Public Companies" need not apply.
In case where delivery of certificate and payment are made through book entry in accordance with Article 8 of these Criteria, the issuance or cancellation shall be handled in accordance with relevant rules of the securities centralized depository enterprises. |
| Article 11 | The SFC may revoke or void the registration or approval after the issuer's registration or application for offering and issuing securities has become effective or approved by it if any one of the following events occurs:
1. The subscription payment has not been fully raised and paid in cash after three months from the date of receipt of effective registration or approval of application from the SFC.
2 .Any one of the events prescribed under Paragraph 1 of Article 251 or Paragraph 1 of Article 271 of the Company Law occurs.
3. The issuer is in violation of Paragraph 1 of Article 20 of this Law.
4. The issuer is in violation of Article 5.
5. Where the issuer violates or fails to execute its undertakings as submitted to the SFC upon registration (application) for public offering or issuance of securities and the situation is serious.
6. The issuer is in violation of these Rules or the restrictions or prohibitions effective at the time when the SFC notifies the issuer that its registration has become effective or application has been approved.
In the event the holders of securities make public offering to the unspecific people, the SFC may revoke the registration when the situation prescribed under the aforementioned Items 3, 5 or 6 occurs after the registration with it has become effective. From either the date of effectiveness of the report or the date of approval of the application until the date of completion of the securities offering, where forecast type information has been externally expressed not in conformity with regulations or where announced information is not in conformity with the report (application) documents, and where the securities prices or shareholders' rights and interests have been effected substantially, the SFC may revoke or void the effectiveness of the report or application approval.
After the effective registration or approval is revoked, if the issuer or holder has received money from others for purchasing securities, it shall return such payment with interests as regulated by laws within 10 days upon receipt of the cancellation notice from the SFC and be responsible for damages. |
Chapter 2 Issuing Stock
|
| Article 12 | In the event the issuer processes any one of the following cases, it shall be allowed to do so only after it duly fills out the appropriate application forms in accordance with the nature of its application (attachments 2 to 4) and submit all relevant documents to apply for the SFC's approval:
1. offering made to establish the company;
2. any one of the following events has occurred while processing matters under Subparagraphs 1 or 3 of Paragraph 2 of Article 6:
(1) The case conducted in accordance with Paragraph 2 of Article 6 has been previously rejected, disapproved or revoked by the SFC. However, this restriction need not apply to the case where, since the registration taking effect or upon arrival of notification of approval, the issuance has not been fully subscribed and payment thereof has not been fully collected in cash while the case has been rejected or revoked by the SFC.
(2) The issuer had been sanctioned up to three times by the SFC in accordance with Articles 171 through 178 of this Law for its violation of this Law and other relevant laws and regulations in the year of application and the previous year.
(3) The public financial forecast has been requested to be corrected for two times by the SFC in the year of application and the previous two years, or the financial forecast has been modified more than two times in any year;
(4) The profits or net profits before tax of the issuer show losses in the recent two years or the latest financial report indicates that the net asset value of its shares is lower than its par value. However, this restriction shall not apply where an application has been filed [and approved] for listing of the shares as Class II Securities traded on over-the-counter markets (hereinafter, "Class II Stocks").
(5) The issuer is required to allocate special reserve for its non-arm's length transactions and such reserve is not canceled yet;
(6) The event prescribed under Article 185 of the Company Law has occurred in the year of application or the previous two years or a portion of the business or R&D result is transferred to another company. However, if the business income of those transferred items or the expenses accumulated for R&D does not exceed 10% of the business profit or R&D expenses shown by the financial report of the previous year, such restriction shall not apply;
(7) In the case where the purpose for the previous capital increase by cash injection or issuing new shares to sponsor in GDR issuance by a depository institution was to repay debt, the aggregate debt in the latest financial report decreases than that in the financial report of the year prior to the time such capital was fully paid in by less than 50% of the originally projected decrease and the business income fails to increase by at least 20%. However, if the time when all capital was paid in is more than three years prior to the application date, such restriction shall not apply;
(8) In the case where the purpose for the previous cases conducted in accordance with Paragraph 2 of Article 6 or issuing new shares to sponsor in GDR issuance by a depository institution was to increase working capital, the earning per share in the latest financial report is lower than the retroactively adjusted one in the financial report of the year prior to the time such capital was fully paid in. However, if the time all such capital was paid in is more than three years prior to the application date or the earning per share in the latest annual financial report is one dollar or more, such restriction shall not apply;
(9) A material change has occurred to the management right in the year of application or the previous two years and any one of the following events takes place:
(i) The submitted financial report or forecast indicates an addition to the principal products(meaning that the business income derived from the products accounts for 20 percent or more of the business income of the company) and that the total business income or profit derived from the added principal products accounts for 50% or more of the same respective categories of that year. However, the difference between the business income for the preceding and following periods did not reach 50 percent or more therefore the principal products shall not be counted;
(ii) The submitted financial report or forecast indicates that the issuer has acquired an on-going or completed construction project and the business income or profit from that project has reached 30% of the same respective categories of that year;
(iii) The submitted financial report or forecast indicates that the issuer has been transferred a portion of the business and R&D results of another company and the business income or profit derived from that partial business and R&D result has reached 30% of the same respective categories of that year.
In the event that the submitted documents are incomplete or the information furnished is insufficient, the SFC may demand supplementation or correction from the issuer within a certain period of time. If the issuer fails to do that within the prescribed time, the SFC may reject its application.
Subparagraph 2 of Paragraph 1 need not apply to cases 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. |
| Article 13 | When offering and issuing stocks, except those applications conducted in accordance with the previous Article, the issuer shall submit relevant registration form based on the nature of its application. It shall also provide the necessary information and register with SFC along with all relevant documents. Only after the registration becomes effective can the issuer proceed with such offering and issuance.
In the event the issuer registers in accordance with the previous Paragraph, the registration will become effective 12 business days after receipt of the application form for issuing new shares (in the form of attachments 5 through 6, and attachments 21 and 26) by the SFC or its designated institution. However, if the registration concerns any one of the following events or the issuer has obtained the rating report from a credit rating institution approved or recognized by the SFC, the time required for effective registration will be cut short to 7 business days:
1. Those emerging stock companies or unlisted or non-OTC listed companies conducting cash injection by means of issuing new stocks who are exempted from the requirement that certain percentage of its new stocks shall be offered to the public (attachments 9 and 9-1).
2. Those emerging stock companies or unlisted or non-OTC listed companies who issue new shares due to merger or issuance of new shares due to acquisition or spin-off conducted in accordance with law (attachments 10 to 11).
3. Those emerging stock companies carrying out cash capital increase through the issue of new shares in accordance with the provisions of Subparagraph 2 of Paragraph 2 of Article 6.
An issuer issuing new shares due to acquisition of shares of another company must submit the report document (attachments 12, 13), duly filled out, together with any required documents. These documents must be submitted to the SFC on the same day. The report documents shall become effective 12 business days from the date of their reception by the SFC and its designated agency.
If the registration form is incomplete, the information is incomplete, or any one of the events prescribed under Article 5 occurs, and the issuer makes necessary correction before receiving notice from the SFC indicating that its effective registration shall be stopped, its registration shall become effective upon the expiration of the time period starting from the date when the SFC or its designated institution receives the corrected documents to the time period for becoming effective as prescribed under the preceding two paragraphs.
In cash offering of new shares, where the offering price is changed if the issuer submits all corrected documents to the SFC or its designated institution for the change of issue price prior to the effective date of its original registration, its registration shall become effective in accordance with Paragraph 2. The previous Paragraph shall not apply in such a case. |
| Article 14 | When an issuer issues preferred stocks with warrants, the preferred stocks and warrants shall not be separable.
For issuance of preferred stocks with warrants, the terms and conditions shall provide for the following items:
1. issue date;
2. class of the preferred stocks and total issue amount;
3. the units of warrant represented by each preferred stock with warrant;
4. The listing or trading at the places of business of securities firms of the preferred stocks with warrants of a listed or OTC-listed company;
5. criteria for setting conditions for exercising the warrant (including exercise price, exercise period, type of the share for warrant exercise, and the number of shares represented by each warrant);
6. the adjustment of exercise price;
7. procedure of request for exercising the warrant and method of paying for stock price. The method of paying for stock price shall be conducted by means of a choice of payment of cash or an offset of preferred stocks from the given offering;
8. the rights and obligations after exercising warrant;
9. shares for performance of contract shall be restricted to the issuance of new shares;
10. the number of times and date for the stockholder to acquire new stocks by submitting the certificate of payment for stock price;
11. procedure for obtaining the preferred stocks with warrants;
12. other important agreements.
Paragraph 2 of Article 44, and Articles 45 through 51 shall apply mutatis mutandis to issuance of preferred stocks with warrants by an issuer. |
| Article 15 | The SFC may terminate the effective registration of the issuer for issuing new stocks in the case that any one of the following events occurs:
1. The registration form is incomplete or the information contained therein is insufficient;
2. Any one of the events prescribed under Article 5 occurs;
3. The SFC considers doing so is necessary to protect the interests of the public. |
| Article 16 | After receiving the notice from the SFC that the registration will stop being effective, the issuer may make corrections in response to the reasons given in the said notice and apply for the revocation of the SFC's decision. If the issuer does not receive any notice of supplementation/correction from the SFC or its case is not rejected, its registration shall become effective upon the expiration of the time period starting from the last date when the SFC or its designated institution receives the corrected documents to the time required for becoming effective as prescribed under Paragraphs 2 and 3 of Article 13.
If, after the SFC terminates its effective registration in accordance with the previous Article, within 12 business days after receipt of such notice, the issuer does not apply for revocation of such decision or the reasons given in the SFC's notice still exist even it has applied for revocation, the SFC may reject the issuer's application. |
| Article 17 | When a listed company or OTC listed company handles an issuance of new shares in a cash capital increase, unless those who are prohibited from trading stocks in the market under Paragraph 2 of Article 139 of this Law, the issuer shall allocate 10% of the aggregate number of new shares for public offering at market price and is exempted from Paragraph 3 of Article 267 of the Company Law which prescribes that the current shareholders shall be entitled to subscribe the new shares in proportion to the percentage of their respective shareholding. However, if the shareholder meeting decides to have a higher percentage, its resolution should be observed.
The provisions of the preceding paragraph shall apply mutatis mutandis to a cash offering of new shares by an emerging stock company as the public offering [prior to] initial listing on the stock exchange or OTC listing.
Offer of new shares for cash injection by a company whose shares are listed or traded at the places of business of securities firms, in addition to allocation of a certain percentage of the aggregate number of new shares for public offering pursuant to the preceding two paragraphs, shall be handled in accordance with Paragraph 3 of Article 267 of the Company Law.
Where the issuer allocates shares for public offering at market price in accordance with Paragraphs 1 and 2, the prices the employees of the issuer or the original shareholders pay for the new shares in the same issuance shall be the same as the price set for public offering.
When offering shares, which are subject to Article 3 of the ROC Over-the-Counter Securities Exchange Guidelines for Examination of Class II Stocks Traded on Over-the-Counter Markets, to the public at market price in accordance with Paragraph 1, it shall be noted in prospectus and subscription form that the shares are Class II stocks being traded at the business places of securities firms and therefore had not been subject to the precondition of profitability when applied for OTC-listing, and that investors are reminded to pay special attention to investment risks. |
| Article 18 | In the cash offering of new shares by listed or OTC listed companies or cash offering of new shares by an emerging stock company as the public offering prior to initial listing on the stock exchange or OTC listing, the underwriter shall evaluate the feasibility of its financial forecast in the year of registration or application and the plan of distribution of dividends in the next year. The underwriter shall also explain the means and basis of the price setting. If the date of registration or application is more than nine months after the end of the business year, the underwriter shall evaluate the financial forecast for the next year as well.
The aforementioned financial forecast shall be prepared and reviewed in accordance with "Criteria Governing the Public Disclosure of Financial Forecast Information by Public Companies" issued by the SFC and the generally accepted accounting and auditing principles published by the ROC Accounting Research and Development Foundation. |
| Article 19 | If the number of registered shareholders holding 1,000 shares or more of an unlisted company or of a company whose shares are not traded in the business places of securities firms does not reach 300, or the company fails to reach the shareholding dispersion standard prescribed by the competent authorities, upon conducting cash offering of new shares, the company shall allocate 10% of the new shares for public offering and is exempted from Paragraph 3 of Article 267 of the Company Law which prescribes that the current shareholders shall be entitled to subscribe the new shares in proportion to their respective shareholding percentage, unless any one of the following events occurs. However, if the shareholder meeting decides to set a higher percentage, its resolution shall be applicable:
1. It conducts the initial public offering.
2. It has been incorporated for less than 3 complete fiscal years.
3. The company's final operating profit and pre-tax income as ratios of paid-in capital as reported in the individual financial statements and the consolidated financial report compiled in accordance with the Financial Accounting Standards Gazette No. 7, fail to meet any of the below conditions. However, the profitability as reported in the said consolidated financial report does not take into account the effects on the company of net income (loss) on its minority shareholdings.
(1) the said ratios for the most recent fiscal year reach four percent or more, and the company has no accumulated losses for the most recent accounting period;
(2) the said ratios for the most recent two fiscal years reach two percent or more;
(3) the average of the said ratios for the most recent two fiscal years reaches two percent or more, and the profitability of the company for the most recent fiscal year is more favorable than that for the previous fiscal year.
4. The number of shares allocated for public offering in accordance with the 10% requirement or the percentage set by the resolution of the shareholders meeting does not reach 500,000.
5. Preferred stocks with warrants are issued.
6. Any situation where the SFC considers the public offering is unnecessary or inappropriate.
Where a company is a major national economic enterprise as determined and certified by the competent authority for the enterprise, the provisions of Items 1 through 3 of the preceding Paragraph shall not be applicable.
Where an issuer publicly offers its securities in accordance with Paragraph 1, the prices the employees of the issuer or the original shareholders pay for the new shares in the same issuance shall be the same as the price set for public offering. |
| Article 20 | The provisions of Article 18 shall apply mutatis mutandis to unlisted companies or companies whose shares are not traded in the business places of securities firms when conducting public offering in accordance with the preceding Article, and it shall be noted in prospectus and subscription form that its shares are not listed in the Stock Exchange or not sold at the business places of securities firms. |
| Article 20-1 | The issuer may conduct a cash offering of new shares at below par value. An issuer reporting (applying for) a cash offering of new shares at below par value shall state its reasons for not using other cash raising methods and the reasonableness thereof, its method for setting the issue price, and any possible effects on shareholders' rights and interests, and shall submits the report to a shareholders' meeting for approval by resolution in accordance with the Company Law or securities laws and regulations.
An issuer reporting (applying for) a cash offering of new shares at below par value shall, upon the effectiveness of the report to the SFC or the approval of the application, using a prominent font, record in the prospectus and the warrant the necessity and reasonableness of issuing the new shares at a discount, and the reasons and reasonability of not using other cash raising methods. |
| Article 21 | The issuer may conduct a cash offering of new shares at below par value. An issuer reporting (applying for) a cash offering of new shares at below par value shall state its reasons for not using other cash raising methods and the reasonableness thereof, its method for setting the issue price, and any possible effects on shareholders' rights and interests, and shall submits the report to a shareholders' meeting for approval by resolution in accordance with the Company Law or securities laws and regulations.
An issuer reporting (applying for) a cash offering of new shares at below par value shall, upon the effectiveness of the report to the SFC or the approval of the application, using a prominent font, record in the prospectus and the warrant the necessity and reasonableness of issuing the new shares at a discount, and the reasons and reasonability of not using other cash raising methods. |
Chapter 3 Issuance of Corporate Bonds
|
Section 1 Common Corporate Bonds
|
| Article 22 | Where a public company intends to issue corporate bonds, it shall retain a credit rating institution approved or recognized by the SFC to evaluate the bonds to be issued and the said institution shall produce a ratings report as prescribed in the following:
1. the ratings report for the unsecured debenture to be issued;
2. the ratings report for the secured corporate bonds backed by assets;
3. the ratings report for the secured corporate bonds guaranteed by financial institution, or the ratings report for the most recent year for the financial institution. |
| Article 23 | A public company may issue corporate bonds only after it has submitted the Registration Form for Issuing Corporate Bonds (attachments 14 and 15), provided all information required therein and sent the registration form along with relevant documents to the SFC and obtained an effective registration.
In the event the public company registers with the SFC or its designated institution in accordance with the preceding Paragraph, its registration shall become effective 7 business days after the Registration Form for Issuing Corporate Bonds is received by the SFC or its designated institution.
The provisions of Paragraph 4 of Article 13, Article 15, and Article 16 shall apply mutatis mutandis to public companies that file for registration in accordance with Paragraph 1.
After registering for issuing corporate bonds, if the public company changes the terms of issuance or the interest rate and then submits the modified relevant documents to the SFC or its designated institution before the original registration becomes effective, its registration will become effective in accordance with the time frame prescribed in the preceding Paragraph. |
| Article 24 | In the event the issuer meets all the following conditions simultaneously, it may submit the Shelf Registration Form for Issuing Corporate Bonds (attachment 16), provide all information required therein, along with all required documents to the SFC for effective registration and complete the issuance within the expected issue period.
1. Its stocks have been listed in the stock exchange market or OTC listed for a combined period of three years or more. However, this provision shall not apply under the following circumstances:
(i) Where the issuer is a government-owned enterprise;
(ii)Where the issuer is a financial holding company conforming to Article 4 paragraph 4 of the Financial Holding Company Law providing that the subsidiary bank, subsidiary insurance company, or subsidiary securities firm be listed or its shares be traded in the business places of securities firms for a total of three years.
2. It has periodically or non-periodically disclosed its financial information to the public in accordance with Article 36 of this Law or other relevant laws for the past 3 years.
3. No occurrence of rejection, disapproval, or withdrawal by the SFC with regard to the registration or application for offering and issuing securities for the past three years. However, this restriction need not apply to the case where, since the registration taking effect or upon arrival of notification of approval, the issuance has not been fully subscribed and payment thereof has not been fully collected in cash and the case has been rejected or revoked by the SFC.
4. The cash injection or corporate bonds issuance plans approved or effectively registered with SFC for the past three years have been implemented in accordance with the schedules and no material changes have occurred.
5. Within the past year, a credit rating institution approved or recognized by the SFC has rated the issuer or the corporate bonds as up to or above a certain level.
6. The certified public accountants retained by the issuer have not received a warning or more severe sanctions for their handling of securities offering and issuance within the last 3 years.
7. The lead underwriter retained by the issuer has not been punished in accordance with Subparagraph 2 of Paragraph 66 of the Law to discharge its director, supervisor, or manager or with more severe sanctions in connection with handling of securities offering and issuance within the last 3 years.
Paragraph 4 of Article 13, Articles 15 and 16, and Paragraphs 2 and 4 of the preceding article shall apply mutatis mutandis to the issuer that registers with the SFC in accordance with the preceding Paragraph.
The expected issuance period referred to in Paragraph 1 shall not exceed two years counting from the date of effective registration. The issuer shall set the said period at the time of registering with the SFC.
Where an issuer issues corporate bonds during the expected issuance period, it shall consign an underwriter to underwrite the issuance on a firm commitment basis. |
| Article 25 | When issuing corporate bonds within the expected issue period as referred to in the preceding Article, the issuer shall, on the next business day after it has put such issuance plan in public announcement in accordance with Article 252 of the Company Law and completed payment collection, submit the Supplementary Form for the Shelf Registration for Issuing Corporate bonds (attachment 17) complete with all required information, together with required documents, to the SFC for recordation.
In case of change of accountant or lead underwriter retained by the issuer during the expected issuance period as referred to in the preceding Article, qualifications prescribed in Subparagraphs 6 and 7 of the preceding Paragraph 1 of Article 23 shall apply to the succeeding accountant or lead underwriter.
The SFC may cancel the additional complementary issue of corporate bonds supplemental to the current issuance in case where an issuer violates Articles 7 and 8 and Paragraph 1 of the preceding article during the expected issuance period. |
| Article 26 | Upon the occurrence of any one of the following events, the effective registration of the shelf registration for issuing corporate bonds shall be terminated:
1. The issuer has the condition prescribed in Paragraph 3 of the preceding article.
2. The expected issue period expires.
3. The expected total issue amount has been fully issued.
4. The SFC deems revocation of the shelf registration to be necessary to protect the public interest.
Prior to the termination of such shelf registration, the issuer is not allowed to register for issuing ordinary corporate bonds again. |
| Article 27 | Except otherwise provided by the law, an issuer applying to issue 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 Guidelines for Examination of Securities Traded on Over-the-Counter Markets issued by the ROC Over-the-Counter Securities Exchange. The said collateral shall not be attached with any restriction such as created pledge, restriction on trading in the Stock Exchange market or the OTC market, change of trading method, or cease of trading.
2. The value of the collateral upon application 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. |
| Article 28 | 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 Guidelines for Examination of Securities Traded on Over-the-Counter Markets issued by the ROC Over-the-Counter Securities Exchange.
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.
Articles 33 and 34, Paragraph 1 of Article 35, and Articles 38 and 40 shall apply mutatis mutandis to the issuer who registers to issue exchangeable corporate bonds. |
Section 2 Convertible Bonds
|
| Article 29 | Listed or OTC-listed companies issuing convertible bonds and having any one of the situations prescribed under Subparagraph 2 of Paragraph 1 of Article 12 shall submit the Application Form for Issuing Convertible Bonds (attachment 19), provide all information required therein, along with required documents to the SFC for approval. They can commence issuing the said bonds only after being approved by the SFC.
In the event the application forms and materials provided by the listed or OTC listed companies are incomplete or the information contained therein insufficient, the SFC may demand them to make supplement or correction within a certain period. If they fail to do so within the prescribed time, the SFC may reject their applications. |
| Article 30 | In addition to complying with the procedures described in the preceding Article, listed or OTC listed companies shall submit the Registration Form for Issuing Convertible Bonds (attachments 20 and 20-1), provide all information required therein, along with required documents to the SFC for registration. The companies can commence issuing convertible bonds only after the registration becomes effective.
The registration filed by a listed company or OTC listed company in accordance with the previous Paragraph shall become effective 12 business days after being received by the SFC or its designated institution, and Paragraph 4 of Article 13, Articles 15 and 16, and Paragraph 4 of Article 23 shall apply mutatis mutandis. The time required for becoming effective will be shortened to 7 business days in the event the issuer or the corporate bonds issued by it has been graded by a credit rating institution approved or recognized by SFC within the last year.
An emerging stock company or a company not listed or traded at the places of business of securities firms that submits a registration in accordance with Paragraph 1 shall submit with the registration a credit rating report on the subject issue produced by a credit rating agency approved or recognized by the SFC. The Registration Form for Issuing Convertible Bonds will become effective seven business days after its receipt by the SFC and SFC-designated agencies, and Paragraph 4 of Article 13, Articles 15 and 16, and Paragraph 4 of Article 23 shall apply mutatis mutandis. |
| Article 31 | When listed or OTC listed companies issue convertible bonds, the underwriter shall be required to comment on the financial forecast in the year of registration or application and the feasibility of the dividend distribution plan of next year. However, in the event the date of registration or application is more than nine months from the end of the year, the financial forecast for the next year shall be evaluated as well.
The aforementioned financial forecast shall be prepared and reviewed in accordance with the Criteria Governing the Public Disclosure of Financial Forecast Information by Public Companies promulgated by the SFC and the generally accepted accounting and auditing principles published by the ROC Accounting Research and Development Foundation. |
| Article 32 | 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. |
| Article 33 | The face value of convertible bond is limited to NTD 100,000 or multiples thereof and the repayment period shall not be longer than 10 years. Those bonds in the same issuance shall have the same repayment period. |
| Article 34 | When issuing convertible bonds, with the exception of listed or OTC-listed companies, for which an underwriter shall be engaged to underwrite all bonds issued on a firm commitment basis, the bonds may not be underwritten and offered to the public. |
| Article 35 | Beginning from a designated starting date after the bond issuance date 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 starting date referred to in the Preceding Paragraph shall not be shorter than 3 months and not longer than 6 months. The said time period shall be set by the issuer in its procedures for conversion. |
| Article 36 | The conversion of convertible bonds to stocks shall not be subject to Article 140 of the Company Law providing that the issue price of the stocks may not be below par value. |
| Article 37 | When the bondholder requests for conversion, unless otherwise regulated by the SFC, the holder shall fill out a conversion request form and submit it along with the bond in question, or the passbook in which the bond is recorded, to the issuer or its agent for such purpose. The conversion will become effective at the time the said documents have arrived at the business places of the issuer or its agent. After receiving such request for conversion, the issuer or its agent shall enter the name of the bondholder into the shareholder register and it shall deliver the new shares or certificate of rights of bond conversion to the holder within 5 business days.
The shares or certificate of rights of bond conversion to stocks of listed, OTC-listed, or emerging stock companies issued under the preceding paragraph can be traded in the market or at the places of business of securities firms on the date of its delivery to shareholders.
Where the issuer makes delivery of newly issued shares under Paragraph 1, it shall, within 15 days after the close of the current quarter, publicly announce the amount of new shares issued in the preceding quarter.
For new shares issued under Paragraph 1, the day, month, and year of effective registration or approval as stated in the SFC notification may be substituted for the day, month, and year of amendment registration for issuance of new shares under Article 162, Paragraph 1, Subparagraph 2 of the Company Law; after such issuance of new shares, the issuer shall, at least once per quarter, submit an application for capitalization amendment registration to the competent authority for company registration, annexing the SFC's letter of approval for the original issue of convertible corporate bonds.
Before the end of each fiscal year, the issuer shall present the consent letter from the SFC which previously approved the issuance of convertible bonds and apply with the competent authority over the corporate registration/incorporation to register the change in its capital and to issue new shares. |
| Article 38 | The convertible bond and the certificate of bond conversion to stocks or shares converted in accordance with law shall be in the registered form. |
| Article 39 | Before the formal delivery of shares or certificate of bond conversion to stocks converted in accordance with Article 37, these shares or certificates shall be certified by the certifying organization in accordance with the Rules for Certification of Stocks and Corporate Bonds issued by Public Companies. |
| Article 40 | The conversion price of the convertible bond shall be announced to the public by the issuer prior to the sale of the bonds.
The conversion price referred to in the preceding Paragraph shall mean the face value of convertible bond required for converting it to one share of stock. |
Section 3 Corporate Bonds with Warrants
|
| Article 41 | For an issuer issuing corporate bonds with equity warrants, the corporate bond and the warrant shall not be separable.
A listed or OTC-listed company with any condition as prescribed under Subparagraph 2 of Paragraph 1 of Article 12 may only issue convertible bonds after it has submitted the Application Form for Issuing Corporate Bonds with Equity Warrants (attachment 21) and provided all information required therein, along with required documents, to the SFC, and has obtained approval from the SFC.
In the event that the application forms and materials provided by the listed or OTC listed companies are incomplete or the information contained therein insufficient, the SFC may demand them to make supplement or correction within a certain period. If they fail to comply within the prescribed time, the SFC may reject their applications. |
| Article 42 | In addition to complying with the procedures prescribed in the preceding Article, listed or OTC listed companies may only issue corporate bonds with equity warrants after it has submitted the Registration Form for Issuing Corporate Bonds with Equity Warrants (attachments 22 and 22-1), and provided all information required therein, along with required documents to the SFC for registration, and has subsequently obtained approval from the SFC.
The Registration filed by a listed or OTC-listed company in accordance with the preceding Paragraph shall become effective 12 business days after being received by the SFC or its designated institution, and Paragraph 4 of Article 13, Articles 15 and 16, and Paragraph 4 of Article 23 shall apply mutatis mutandis. However, the time required for becoming effective will be shortened to 7 business days in case where the issuer or the corporate bonds issued by it has been rated by a credit rating institution approved or recognized by SFC within the last year.
An emerging stock company or a company not listed or traded at the business places of securities firms that submits a registration in accordance with Paragraph 1 shall submit with the registration a credit rating report on the subject issue produced by a credit rating agency approved or recognized by the SFC. The Registration Form for Issuing Convertible Bonds will become effective seven business days after its receipt by the SFC and SFC-designated agencies, and Paragraph 4 of Article 13, Articles 15 and 16, and Paragraph 4 of Article 23 shall apply mutatis mutandis. |
| Article 43 | 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. |
| Article 44 | The face value of a corporate bond with warrant is limited to NT$100,000 or multiples thereof.
In cases where it is necessary to issue new shares due to exercise of warrants, the total number of new shares multiplied by the exercise price per share shall not exceed the total issued amount, in terms of face value, of the subject corporate bonds.
Article 31 shall apply mutatis mutandis with regard to the issuance of corporate bonds with equity warrants by listed or OTC-listed companies. |
| Article 45 | When issuing corporate bonds with equity warrants, with the exception of listed or OTC-listed companies, for which an underwriter shall be engaged to underwrite all bonds issued on a firm commitment basis, the bonds may not be underwritten and offered to the public. |
| Article 46 | Prior to offering the corporate bonds with warrants, the issuer shall make public announcement on the exercise price. |
| Article 47 | Beginning from a designated starting date after the bond issuance date 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 starting date referred to in the preceding Paragraph shall not be shorter than 1 months and not longer than 3 months. The said time period shall be set by the issuer in its terms for issuance and exercise. |
| Article 48 | The performance of obligations by the issuer regarding exercise of warrant shall not be subject to Article 140 of the Company Law providing that the issue price of the stocks may not be below par value. |
| Article 49 | When requesting for exercising warrant, the holder shall fill out an exercise request form and submit such to the issuer or its agent for such purpose. After receiving such request and full payment of the stock price, the issuer or its agent shall enter the name of the bondholder into the shareholder register and deliver the new shares or certificate of payment of stock price to the holder within 5 business days.
The aforesaid shares or certificate of payment for stock price issued by listed, OTC-listed, or emerging stock companies in accordance with the preceding paragraph may be traded in the stock exchange market or at the places of business of securities firms from the day of delivery to shareholders.
Where the issuer delivers shares under Paragraph 1, it shall, within 15 days after the close of the current quarter, publicly announce the amount of new shares issued in the preceding quarter.
For new shares issued under Paragraph 1, the day, month, and year of effective registration or approval as stated in the SFC notification may be substituted for the day, month, and year of amendment registration for issuance of new shares under Article 162, Paragraph 1, Subparagraph 2 of the Company Law; after such issuance of new shares, the issuer shall, at least once per quarter, submit an application for capitalization amendment registration to the competent authority for company registration, annexing the SFC's letter of approval for the original issue.
Before the end of each fiscal year, the issuer issuing the certificate of payment for stock price in accordance with Paragraph 1 shall present evidence of full payment for stock price and the consent letter from the SFC which previously approved the issuance of corporate bonds with warrants and apply to the competent authority in charge of the corporate registration to register the change in its capital and to issue new shares. |
| Article 50 | The corporate bond with warrant, and the certificate of payment for stock price or stock shall all be in registered form. |
| Article 51 | With exception for the case where physical certificate is not printed, before the formal delivery of exchanged shares or certificate of payment for stock price in accordance with Article 49, these shares or certificates shall be certified by the certifying organization in accordance with the Rules for Certification of Stocks and Corporate Bonds issued by Public Companies. |
Chapter IV Issuance of Employee Stock Options
|
| Article 52 | Where an issuer applies for issuance of employee stock options, the SFC may reject the application upon any one of the following events:
1. the applicant has been posting losses for the most recent two (2) consecutive years; provided that the said restriction need not apply to the case where the business nature justifies longer preparation period or where a sound business plan is presented to demonstrate capability of improving profitability;
2. the assets are insufficient to cover debts;
3. occurrence of major default which has yet to be settled or less than three (3) years have elapsed since the settlement thereof;
4. failure of the issuer, which already issued employee stock options, to perform terms and conditions thereof, and the situation has not been improved or less than three (3) years have elapsed since the improvement thereof;
5. where the SFC deems it necessary to reject or disapprove the issuer's application to protect the public interests. |
| Article 53 | Where an issuer applies for issuance of employee stock options, the number of shares for each issuance of employee stock options shall not be more than 10% of its total issued shares, and when outstanding employee stock options are taken into account, the aggregated volume shall not be more than 15% of total issued shares.
Where an issuer issues employee stock options, the volume of stock option granted to each recipient shall not be more than 10% of the total volume of each issue of employee stock options, and the number of shares that may be subscribed to by each person for any given fiscal year shall not be more than one percent of the total number of shares that have been issued by the concluding day of the fiscal year. |
| Article 54 | The employee stock options shall not be transferable, with exception for inherited ones. |
| Article 55 | Where a listed company or OTC company reports issuance of employee stock options, the exercise price shall not be lower than the closing price of the company stocks as of the issue date.
Where emerging stock company, unlisted company, or company whose shares are not traded in the business places of securities firms issues employee stock options, the exercise price shall not be lower than the net price per share in the financial report verified and certified by a certifying accountant issued for the most recent period, provided that when at the date of issuance the company is already listed or OTC- listed, the provisions of the preceding paragraph shall apply. |
| Article 56 | With exception for the lock-up period in accordance with the law, an employee may request for exercising the stock option pursuant to the terms and conditions set by the company after two full years since the issuance of the employee stock options.
The term of the employee stock options shall not be more than ten years. |
| Article 57 | An issuer issuing employee stock options shall submit a report on the issuance (attachment 23) documenting all required items, together with all required documents, to apply to the SFC, and subsequently obtains the approval of the SFC.
The aforesaid report shall become effective 7 business days after its receipt by the SFC or its designated institution, and Paragraph 4 of Article 13, and Articles 15 and 16 shall apply mutatis mutandis. |
| Article 58 | An issuer reporting issuance of employee stock options shall obtain approval by the majority votes in a meeting of Board of Directors which two-thirds (2/3) or more directors are present. The following matters shall be provided in the terms and conditions regarding the issue and exercise of stock option:
1. issue period;
2. qualifications and conditions for eligible employee for stock option;
3. number of total issued units of the employee stock options, number of shares each unit represents, total number of new shares to be issued due to exercise of stock option, or the number of shares for shares buy-back as required per Article 28-2 of the Law;
4. criteria for setting the terms and conditions for exercising stock option (including exercise price, exercise period, class of shares with which to exercise stock option, handling process in case of inheritance/employee resignation, etc.);
5. performance of contract: by either issuance of new shares or delivery of already issued shares by a listed company or OTC-listed company. However, for emerging stocks, unlisted stocks, or stocks not traded in the business places of securities firms, performance of contract shall be by issuance of new shares;
6. adjustment of exercise price;
7. upon capitalization of retained earnings or capitalization of capital reserves, additional employee stock options may be issued or adjust the number of shares subscribable; however, this shall apply only where the articles of incorporation at the time of subscription expressly provide that there is a sufficient number of shares to be made available for subscription.
8. procedure for exercising stock option;
9. rights and obligations after exercising stock option;
10. other important agreements.
The issue period as referred to in Subparagraph 1 of the preceding Paragraph shall be not more than one (1) year starting from the date when the registration taking effect. In case where there are remaining units to be issued after the issue period expires, the issuer shall reapply .
Any change in any Subparagraph of Paragraph 1 shall be made only after being approved by the majority votes in a meeting of Board of Directors at which two-thirds (2/3) or more directors are present.
In case of any change in any Subparagraph under Paragraph 1, the issuer shall submit as supplementary documents the minutes of the meeting of the Board of Directors as well as relevant materials after the amendment, and Paragraph 5 of Article 13 shall apply mutatis mutandis. |
| Article 59 | An issuer reporting issuance of employee stock options shall, after the reporting to the SFC has taken effect , on the day next following the arrival of the notification of effective reporting, make public announcement for the main content of the requirements for issuance and subscription. If performance of contract is conducted by means of issuance of new shares, any possibility of dilution of the shareholders' rights and interests shall also be publicly announced.
An issuer applying for issuance of employee stock options shall, after the application takes effect, input the status of the issuance into the website specified by the SFC for reporting of information on the day following the issuance or the expiry of the issuance period.
For an issuer applying for issuance of employee stock options, where the issuer executes its contractual obligations using already issued shares, once the application with the SFC takes effect, the issuer shall, within two days of a directors' meeting resolving that the company shall repurchase its own shares for use as employee stock options as part of the execution of its contraction obligations, publicly announce the cost of the shares which it anticipates to obtain, the difference between the price of the employee stock options and the company's cost of obtaining the shares, and any effects on the shareholders' rights and interests. Any change in the main content regarding the terms and conditions of the issuance as referred to in Paragraph 1 shall be made only after being approved by the majority votes in a meeting of Board of Directors at which two-thirds (2/3) or more directors are present, and public announcement shall be made after the minutes of the meeting of the Board of Director and relevant materials regarding the amendment have been submitted to the SFC for recordation. |
| Article 60 | When executing its obligations regarding stock options, the issuer shall not be subject to Article 140 of the Company Law providing that the execution price of the stocks shall not be lower than the par value.. |
| Article 61 | When a holder of employee stock options requests for exercising of stock option, the holder shall fill out an exercise request form and submit such to the issuer or its agent. After receiving the said request and collecting full payment for the stocks, in the case of exercise with already issued shares, the issuer or its agent shall deliver the stocks within the next two business days; in the case of exercise by issuing new shares, the issuer or its agent shall enter the name of the holder into the shareholder register and deliver the new stocks or the certificate of payment for exercising stock option to the holder within 5 business days.
The aforesaid stocks or certificates of payment for exercising stock option issued by a listed, OTC-listed or emerging stock company in accordance with the preceding paragraph may be traded in the stock exchange market or in the business places of securities firms from the day of delivery to shareholders.
An issuer delivering stocks pursuant to the paragraph 1 shall announce the number of newly-issued additional shares in the preceding quarter within 15 days after the conclusion of that quarter.
For new stocks issued in accordance with paragraph 1, the year, month, and day of the SFC notice of effectiveness or approval may be taken as the year, month, and day of incorporation or amendment of registration for issuance of new shares set forth in Article 162, paragraph 1, subparagraph 2 of the Company Law. After the issuance of new shares, the issuer shall also apply to the competent authority governing company registration at least once per quarter to amend registration of paid-in capital, attaching the original SFC letter of approval for issuance of employee stock option certificates.
For issuance of certificates of payment for exercise of stock options in accordance with paragraph 1, the issuer shall, before the end of each fiscal year, present the consent letter from the SFC which previously approved the issuance of employee stock options and photocopy of certificates of payment for exercising stock option, and apply to the competent authority in charge of the corporate registration to register the change in its capital, as well as issue new shares. |
| Article 62 | Except in case where physical certificate is not printed, before the formal delivery of certificate of payment for exercising stock option, the said certificate shall be certified by the certifying organization in accordance with the Rules for Certification of Stocks and Corporate Bonds issued by Public Companies. |
CHAPTER V Public Offering
|
| Article 63 | In the event the holders of securities conduct public offer to unspecified persons in accordance with Paragraph 3 of Article 22 of this Law, they shall submit the Registration Form For Public Offering of Securities (attachment 24), provide all information required therein, along with required documents to the SFC. The said holders can proceed with public offering only after the registration with the SFC becomes effective.
For those securities that are not publicly offered in accordance with this Law, in the event their holders intend to register with the SFC for publicly offering to unspecified persons, these holders shall request the issuer of these securities to apply for supplementary review procedure for public issuance with the SFC. Before the registration with the SFC becomes effective, the holders cannot proceed with public offering.
In the event the holders of securities register in accordance with Paragraph 1, such registration will become effective 7 business days after the receipt of the Registration Form for Public Offering of Securities by the SFC or its designated institution, and the provisions of Paragraph 4 of Article 13, and Articles 15 and 16 shall apply mutatis mutandis.
The provisions of Paragraphs 1 and 2 shall not apply to the auction or sale procedures conducted in accordance with laws. |
| Article 64 | When registering to conduct public offering, the holders of securities shall submit the offering prospectus containing the following information:
1. The motive and purpose of the public offering.
2. The calculation formula for the offering price and explanation.
3. The evaluation report made by the underwriter. |
| Article 65 | In the case any one of the following events occurs when the holders of emerging stocks, or unlisted stocks or -stocks that are not traded in the business places of securities firms offer the said stocks to unspecified persons, the SFC may reject their registration:
1. Less than three years have elapsed since the incorporation registration of the issuer of the stocks.
2. The final operating profit and pre-tax income as ratios of paid-in capital as reported in the issuer's individual financial statements and consolidated financial report compiled in accordance with the Financial Accounting Standards Gazette No. 7, fail to meet any of the below conditions. However, the profitability as reported in the said consolidated financial report does not take into account the effects on the company of net income (loss) on its minority shareholdings.
(1) the said ratios for the most recent fiscal year reach four percent or more, and the company has no accumulated losses for the most recent accounting period;
(2) the said ratios for the most recent two fiscal years reach two percent or more;
(3) the average of the said ratios for the most recent two fiscal years reaches two percent or more, and the profitability of the company for the most recent fiscal year is more favorable than that for the previous fiscal year.
3.The net asset value of the shares issued by the issuer in the most recent year is lower than its par value, or the net worth before distribution does not reach one-third of total assets.
4. Where the SFC deems the public offering to unspecified persons inappropriate. |
| Article 66 | After the securities holders' registration with the SFC for public offering in accordance with Article 63 becomes effective, in addition to the requirement that listed or OTC listed stocks shall be sold by the underwriter, the holders shall request the underwriter to conduct firm commitment underwriting. Additionally, to comply with Paragraph 2 of Article 71 of this Law, it shall be prescribed in the underwriting agreement that more than 50% of the stocks subject to the underwriting shall be subscribed by the underwriter. However, if its share transfer plan for the next three years has been approved by the competent authority in charge of the enterprise and such authority has produced an opinion that its accounting system is sound, it can be exempted from the aforementioned percentage requirement regarding subscription by the underwriter.
The underwriter shall explain the way and basis the public offering price is decided. |
| Article 67 | When selling the securities it is underwriting, the underwriter shall deliver the prospectus on behalf of the holders of the said securities. |
CHAPTER VI Supplemental Public Issue
|
| Article 68 | In the event that the issuer conducts initial public offering in accordance with Paragraph 1 of Article 42 of this Law and Paragraph 4 of Article 156 of the Company Law, it shall submit the registration form (attachment 25) to the SFC, providing the necessary information and annexing the relevant documents such as the stock issue prospectus. The registration will become effective 12 business days after the receipt of the registration form by the SFC or its designated institution.
The Criteria Governing Information to be Published in Public Offering and Issuance Prospectuses and the Criteria Governing Information to be Published in Financial Industry Prospectuses for Offering and Issuance of Securities shall apply mutatis mutandis to the information to be provided in the stock issue prospectus under the preceding paragraph.
Article 5, Paragraph 4 of Article 13, Article 15, and Article 16 shall apply mutatis mutandis to submission of the registration form under Paragraph 1.
If, after effective registration for initial public offering under Paragraph 1, any circumstance set forth in Subparagraphs 3, 4, or 6 of Paragraph 1 of Article 11 is discovered to exist, the SFC may revoke or void the effective registration.
A company conducting an initial public offering of stock under Paragraph 1 shall concomitantly conduct an initial public offering of employee stock option certificates previously issued under Article 167-2 of the Company Law.
A company conducting an initial public offering of stock under Paragraph 1 may concomitantly conduct an initial public offering of ordinary corporate bonds previously privately placed under Article 248 of the Company Law, after three years have elapsed from the delivery date of the privately placed ordinary corporate bonds. |
| Article 69 | In any of the following circumstances, the SFC may reject an application for approval of an initial public offering filed under Article 42, Paragraph 1 of the Law or Article 156, Paragraph 4 of the Company Law:
1. The certifying CPA issues an adverse opinion or disclaimer of opinion in the audit report.
2. The certifying CPA issues a qualified opinion in the audit report, and such qualified opinion has an impact on the fairness of presentation of the financial report.
3. The application review forms prepared by the issuer and reviewed by the certifying CPA show violations of laws or regulations or the articles of incorporation, where the violation is serious.
4. The applicant has failed to institute an internal control system including and adopt internal audit implementation rules and have them passed by the board of directors pursuant to the Criteria Governing the Establishment of Internal Control Systems by Public Companies.
5. Any of the following circumstances arise in the CPA project audit of the efficacy of the internal control system design or implementation:
(1) failure of the audited company to provide a Statement regarding the efficacy of the internal control system design or implementation.
(2) the CPA report indicates material deficiencies in the design or implementation of the audited company's internal control system and failure to improve them, or is a disclaimer of opinion.
6. Employee stock option certificates have previously been issued under Article 167-2 of the company Law, but a concomitant initial public offering is not conducted for the certificates along with that for the stock.
7. The SFC discovers a violation of law or regulation, where the circumstances are serious.
Where conducting an initial public offering for privately placed ordinary corporate bonds under Paragraph 6 of the preceding Article and three years have not elapsed since the delivery date of the privately placed ordinary corporate bonds, the SFC may reject the application. |
| Article 70 | For the below-listed securities privately placed by a public company in accordance with law and securities subsequently distributed, converted, or subscribed, the public company must arrange with the SFC for a public offering, at least three full years after the delivery date of the privately placed securities, before it may apply to the Stock Exchange or the ROC Over-the-Counter Stock Exchange for listing or for trading at the places of business of securities firms:
1. Stocks privately placed under Article 43-6 of the Law and shares subsequently obtained as bonus shares thereof.
2. Ordinary corporate bonds privately placed in accordance with law.
3. For employee stock option certificates privately placed under Article 43-6 of the Law, subsequently subscribed certificates of payment of shares, shares, and shares obtained as bonus shares thereof.
4. For preferred shares with warrants, corporate bonds with warrants, and convertible corporate bonds privately placed in accordance with Article 43-6 of the Law, the privately placed preferred stock with warrants, corporate bonds with warrants and convertible corporate bonds, and the subsequently subscribed certificates of payment of shares, certificates of entitlement to new shares from convertible bonds, shares, and shares obtained as bonus shares.
5. For private placement of overseas corporate bonds, overseas stocks, and participation in the private placement of overseas depositary receipts in accordance with Article 43-6 of the Law, the shares that obtained through redemption, conversion, or subscription, or obtained as bonus shares.
A filing for registration to conduct a public offering under the preceding paragraph shall be submitted to the SFC with a Registration Form (attachments 26 to 31-1) specifying all required information and with the required documents attached. The registration shall become effective seven full business days after the Registration Form is received by the SFC or its designated institution, and the provisions of Article 5, Paragraph 4 of Article 13, Article 15, and Article 16 shall apply mutatis mutandis.
If, after effective registration for public offering under Paragraph 1, any circumstance set forth in Subparagraphs 3 to 6 of Paragraph 1 of Article 11 is discovered to exist, the SFC may revoke or void the effective registration. |
| Article 71 | (Deleted) |
| Article 72 | In any of the following circumstances, the SFC may reject a filing by a public company for registration to conduct cases set forth in Article 70:
1. Less than three years have elapsed since the delivery date of the privately placed securities.
2. A lawful resolution has not been adopted by a shareholders meeting or board of directors meeting in accordance with Article 43-6 of the Law. However, this restriction shall not apply where a final judgment of guilty has been handed down, the full term of the sentence has been served, and post-approval of the shareholders meeting or board of directors has been submitted.
3. The offerees and their number do not comply with the provisions of Article 43-6 of the Law. However, this restriction shall not apply where a final judgment of guilty has been handed down, the full term of the sentence has been served, and post-approval of the shareholders meeting or board of directors has been submitted.
4. A report is not submitted within 15 days to the competent authority for recordation in accordance with Article 43-6 of the Law. However, this restriction shall not apply where a sanction has duly been imposed and an administrative fine has been paid and the report has subsequently been submitted.
5. Relevant matters were not set forth and explained in the causes and subjects stated in the notice of convening of the shareholders meeting regarding the private placement of securities listed, or relevant matters were not set forth and explained in the causes and subjects stated in the notice of convening of the shareholders meeting prior to carrying out private placement by installments. However, this restriction shall not apply where a sanction has duly been imposed and an administrative fine has been paid and there has been subsequent ratification by a meeting of shareholders.
6. Where securities trading has been restricted under Article 139, Paragraph 2 of the Law and the SFC has not yet lifted the restriction.
7. The certifying CPA issues a disclaimer of opinion or an adverse opinion in the audit report.
8. The certifying CPA issues a qualified opinion in the audit report, where such qualified opinion would affect the fair presentation of the financial report.
9. The case checklist filled out by the issuer and checked and issued by the certifying CPA shows any violation of law or regulation or the company's articles of incorporation, where the circumstances are serious.
10. Less than three full years have elapsed since delivery of privately placed convertible corporate bonds there has been an exercise of conversion rights.
11. The SFC discovers any violation of law or regulation, where the circumstances are serious. |
CHAPTER VII Distribution of Bonus Shares and Capital Reductions
|
| Article 73 | A listed or OTC company intending to carry out a capital reduction shall be allowed to do so only after it duly fills out the required information on the appropriate application forms in accordance with the nature of its application (attachment 32) and submits them with all relevant documents to the SFC for approval. However, this shall not apply where the reduction is conducted due to spin-off.
If the application documents submitted by the listed or OTC company are incomplete or are deficient in content and the applicant fails to supplement them by a deadline set by the SFC, the SFC may reject the application.
If, after approval of an application for capital reduction by a listed or OTC company, any circumstance in Subparagraphs 3 to 6 of Paragraph 1 of Article 11 is discovered to exist, the SFC may revoke or void the approval.
Article 5 shall apply mutatis mutandis to cases handled under the provisions of Paragraph 1. |
| Article 74 | A public company conducting a case listed below shall submit a filing for registration to the SFC with a Registration Form specifying all required information and with the required documents attached. The registration shall become effective seven full business days after the Registration Form for issuance of new shares is received by the SFC or its designated institution
1. Issuance of new bonus shares (attachment 33).
2. Capital reduction by an emerging stock company or a company that is unlisted or whose shares are not traded at the business places of securities firms (attachment 34).
The provisions of Article 5, Paragraph 4 of Article 13, Article 15, and Article 16 shall apply mutatis mutandis to cases handled under the preceding paragraph.
If, after effective registration pursuant to Paragraph 1, any circumstance in Subparagraphs 3 to 6 of Paragraph 1 of Article 11 is discovered to exist, the SFC may revoke or void the effective registration. |
| Article 75 | A listed or OTC company carrying out a capital reduction because of a spin-off shall submit a filing for registration to the SFC with a Registration Form (attachment 35) specifying all required information and with the required documents attached. The registration shall become effective 12 full business days after the Registration Form for issuance of new shares is received by the SFC or its designated institution
The provisions of Article 5, Paragraph 4 of Article 13, Article 15, and Article 16 shall apply mutatis mutandis to cases handled under the preceding paragraph.
If, after effective registration pursuant to Paragraph 1, any circumstance in Subparagraphs 3 to 6 of Paragraph 1 of Article 11 is discovered to exist, the SFC may revoke or void the effective registration. |
| Article 76 | In any of the following circumstances, the SFC may reject or decline to approve a filing for issuance of bonus shares and capital reduction by a public company:
1. The certifying CPA issues an adverse opinion or disclaimer of opinion in the audit report.
2. The certifying CPA issues a qualified opinion in the audit report, and such qualified opinion has an impact on the fairness of presentation of the financial report.
3. The case review forms prepared by the issuer and reviewed by the certifying CPA show violations of laws or regulations or the articles of incorporation, where the violation is serious.
4. Any of the following circumstances exist with respect to a filing for conversion of earnings into capital:
(1) the balance after statutory allocation of special reserves from undistributed earnings in accordance with Paragraph 1 of Article 41 of the Law is inadequate for distribution;
(2) the listed company or company whose shares are traded at the business places of securities firms fails to prescribe a concrete dividend policy in the articles of incorporation.
5. A filing for conversion of capital reserves into capital, where losses have been incurred in the most recent two consecutive years.
6. Violation of or failure to perform commitments made at the time of application for listing or trading at the business places of securities firms, where the circumstances are serious.
7. The SFC discovers any violation of law or regulation, where the circumstances are serious. |
| Article 77 | A public company carrying out issuance of new bonus shares or capital reduction shall comply with the following provisions:
1. It shall comply with Article 273 of the Company Law within 30 days of delivery of the notification of effective registration or approval of application.
2. Within 30 days of service of the letter of approval of amendment registration for issuance of new shares by a public company from the Ministry of Economic Affairs, it shall have the securities certified in accordance with the Rules for Certification of Stocks and Corporate Bonds Issued by Public Companies, deliver the securities to the subscribers, and make a public announcement prior to the delivery. However, if physical securities are not printed, the requirement of certification in accordance with the Rules for Certification of Stocks and Corporate Bonds Issued by Public Companies shall be waived.
A public company that carries out issuance of bonus shares or capital reduction and makes delivery by the book-entry method shall comply with regulations pertaining to centralized securities depository enterprises, and need not print physical securities. |
CHAPTER VIII Supplementary Provisions |
| Article 78 | For the purpose of registration or application for approval made in accordance with these Criteria, all required attachments shall be prepared in accordance with the forms prescribed and the attachment should be put in binders.
For the supplementary documents furnished in accordance with Articles 13, 16, 23, 24, 28, 30, 42, 57, 58, 63, 68, 70, 74, and 75, the modified registration documents shall be put in binder pursuant to the forms required by the attachments. The cover of the binder shall indicate the documents being modified and the number of times of their modification. An index regarding the modifications made shall be prepared and put in front of the main table of contents of the registration documents. The parts subject to modification shall be underlined and noted. If the documents are written in vertical form, the underline mark shall be at the right side of the text while it shall be beneath the sentences if the documents are arranged horizontally.
When the issuer registers or applies for offering and issuance of securities, supplemental public issuance, issuance of new bonus shares, or capital reduction, or when the holder of securities registers to conduct public offering of such securities, it shall put the registration/application documents or supplements/modification into binders. In addition, at the time of registration/application or supplementation/modification, a copy of these documents shall be sent to the Exchange Stock, OTC Securities Exchange, the Securities Dealers Association, the Securities and Futures Institute or other organizations designated by the SFC for the public's review. |
| Article 79 | These Criteria shall become effective on the date of promulgation.
Amendment to these Criteria, except where another effective date has been set, shall become effective on the date of promulgation. |