| Title： |
Regulations Governing Certification of Capital upon Registration Applications of Companies(2011.03.29) |
| Date： |
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Article 1
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These Rules are enacted pursuant to Article 7 of the Company Law.
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Article 2
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When applying for registration of incorporation, or registration of corporate changes for merger, demerger, acquisition, share exchange, increase or reduction of the paid-in capital, a company shall bind together and submit a certified public accountant's ("CPA") audit report and a balance sheet as of the recordation date of the incorporation, merger, demerger, acquisition, share exchange, or increase or reduction of its paid-in capital, which shall be audited and certified by a CPA, along with, as necessary for such application, the following documents affixed with the corporate seal of the company and the seal of the responsible person of the company. However, if the capital reduction by redeeming treasury stocks is compliant with Article 28-2 of the Securities and Exchange Act, said balance sheet need not be audited by a CPA:
1. Statement of shareholders' capital contributions in cash.
2. Statement of capital contributions by claims.
3. Statement of capital contributions by properties.
4.Statement of allotment of shares through capitalization of earnings,
and statement of appropriation of earnings.
5.Statement of allotment of shares through capitalization of capital
reserve, and statement of sources of capital reserve.
6.When applying for registration of corporate changes for merger, demerger, acquisition, share exchange, or increase or reduction of the paid-in capital, a trial balance as of the date immediately before the recordation date shall also be submitted as an attachment.
7.Statement of allotment of shares after merger, and the balance sheet of the dissolved company as of the date immediately before the recordation date (if any shares are cancelled due to a merger, a statement of cancellation of shares after merger shall also be included).
8.Statement of allotment of shares after a demerger, and the types and amounts of assets and liabilities of the demerged portion of the demerged company as of the date immediately before the recordation date.
9. Statement of allotment of shares after acquisition.
10. Statement of allotment of shares after share exchange.
11. Statement of conversion of shares from convertible corporate bonds or share subscription warrants.
12. Statement of capital reduction. (In the event of a capital reduction as a result of a demerger, the types and amounts of the assets and liabilities of the demerged portion of the demerged company as of the date immediately before the recordation date shall also be included.)
In the case of a publicly issuing company, the statements specified in Subparagraphs 1, and 4 to 12 of Paragraph 1 of this Article shall apply only to its directors, supervisors or shareholders holding more than 10 percent of the total shares. For those shareholders holding less than 10 percent of the total shares, statements with consolidated information are acceptable.
In the case of a publicly issuing company, if all the equity capital is contributed by the issued shares according to special laws, the statements specified in Subparagraph 3, Paragraph 1 of this Article shall only apply to its directors, supervisors or shareholders holding more than 10 percent of the total shares. For those shareholders holding less than 10 percent of the total shares, statements with consolidated information are acceptable.
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Article 3
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When applying for increase or reduction of its working capital in the Republic of China, a foreign company shall bind together and submit a CPA's audit report along with a trial balance as of the date immediately before the recordation date of increase or reduction of its working capital in the Republic of China, and a balance sheet as of the recordation date, audited and certified by a CPA. [The trial balance and the balance sheet] must be affixed with the corporate seal of the branch office of the foreign company and the seal of the company's agent for litigious and non-litigious matters in the Republic of China; if the application is for an increase of its working capital in the Republic of China, photocopies of bank passbooks, account statements, or inquiry sheets shall also be enclosed.
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Article 4
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When applying for registration of incorporation, a Mainland Area business entity shall bind together and submit a CPA's audit report and a balance sheet as of the date of appropriation of its ear-marked working capital in Taiwan Area, audited and certified by a CPA, and affixed with the corporate seal of the branch office of the business entity and the seal of the business entity's agent for litigious and non-litigious matters in Taiwan Area.
When applying for increase or reduction of its working capital in Taiwan Area , a Mainland Area business entity shall submit a CPA's audit report together with a trial balance as of the date immediately before the recordation date of increase or reduction of its working capital in Taiwan Area, and a balance sheet as of the recordation date certified by a CPA. The trial balance and the balance sheet must be affixed with the corporate seal of the branch office of the business entity and the seal of the business entity's agent for litigious and non-litigious matters in Taiwan Area, and bounded.
If the application is for registration of incorporation or an increase of its working capital in the Republic of China, photocopies of the bankbooks, statements of accounts, or inquiry sheets shall also be attached.
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Article 5
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Except for accounts in connection with profit and loss of the Current fiscal year that have not yet been closed in the accounting books but adjusted off the books, the amounts of all other accounts on the balance sheet prepared by the company shall be consistent with those on the accounting books or relevant certificates.
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Article 6
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A statement of shareholders' capital contributions in cash shall indicate the names of shareholders, the dates and amounts of contributions, and the dates and bank account information where the contributions are deposited. The photocopies of deposit, or in the absence of such deposit, photocopies of bankbooks, statements of accounts, or inquiry sheets shall also be attached. If the company opens a special bank account to collect all the contributions, it may replace the photocopies of the deposit, the bankbooks, the statements of accounts or the inquiry sheets with the special account deposit contract (or contract for entrusted collection of contributions) and the certificate of collection of all the contributions issued by the bank (or photocopies of bankbooks). In the event of any inconsistency between the bank deposits and the accounting books, a reconciliation statement shall be prepared; where any contributions have been utilized, a statement of capital utilization affixed with the corporate seal of the company and the seal of the responsible person of the company indicating the purpose shall be additionally submitted; if necessary, the competent government authorities may require the company to submit photocopies of certificates of primary utilizations.
The statement of capital contributions by claims shall indicate the names of shareholders, reasons for and dates of incurrence of the claims, the amounts of the incurred claims, and the amount of contributions by claims, bear the signatures or seals of the creditors upon their consent, and be attached with the primary documents proving the incurrence of the claims. Where any contributions have been utilized, a statement of capital utilization indicating the purpose shall be additionally submitted; if necessary, the competent government authorities may require the company to submit photocopies of certificates of primary utilizations.
The statement of capital contributions by properties shall indicate the names of shareholders, the types, quantities, prices or criteria for appraising the prices of the property, and the shares or certificates allotted by the company.
The statement of allotment of shares through capitalization of earnings, capital reserve, merger, demerger, acquisition, or share exchange, the statement of capital reduction, or the statement of conversion of shares from convertible corporate bonds or shares subscription warrants shall all indicate the names of shareholders, the amounts and the dates.
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Article 7
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The audit report issued by a CPA for certification of fully paid capital shall indicate the source of the contributions (cash, monetary claims, technologies, stock certificates, other types of property, earnings, capital reserve, merger, demerger, acquisition or share exchange), the issuing prices, the number of shares being issued, and the capital amount, as well as the total number of shares issued and the capital amount before and after the capital increase.
In the event of capital contributions in cash, the status of contributions shall be examined; where the payments have been deposited in a bank, the deposit certificates shall be verified; where the payments are made by bills, whether these bills have been honored shall be verified; where the payments are made by monetary claims against the company, whether the reasons for incurrence of such claims is truthful shall be verified; where any contributions have been utilized, a statement shall be prepared explaining the purpose of utilization and the relevant certificates shall be verified; and where the contributions have been deposited as time deposits, the CPA's audit report shall indicate whether there is any pledges, cancellation of contract, or assignment.
Where contributions are made through technologies, stock certificates,
or other types of property, the names of the shareholders, the types, quantities, prices or criteria for appraising the prices of the property, and the shares or certificates allotted by the company shall be verified.
Where contributions are made through technologies, the technologies
developed by the company on its own shall not be used as contributions from employees or shareholders.
Moreover, where contributions are made through technologies or other types of property, except for companies invested by foreigners or overseas Chinese, the CPA shall obtain opinions of the institutions, organizations or experts concerned on the appraised prices, and, in addition to stating the adopted expert opinion in his/her working paper, state in the audit report that the relevant property has already been registered under the name of the company according to the law prior to the recordation date of increase of its capital; however, for those properties not legally required to be registered, the audit report shall state that the relevant property has already been delivered to the company before the recordation date of increase of its capital.
Where contributions are made through share certificates of another company, the CPA shall also indicate in the audit report the appraisal criteria as well as the fairness of the criteria. Shares issued by a company that is not listed on the Taiwan Stock Exchange or not traded on the Gre Tai Securities Market, or not Emerging Stocks, may be appraised based on the net worth of the company on the date of evaluation; Emerging Stocks may be appraised based on the average trading price of such stocks on the date of evaluation; shares issued by a listed company or a company traded on the Gre Tai Securities Market may be appraised based on the closing price of such shares on the date of evaluation. Where there is no transaction price of Emerging Stocks on the date of evaluation, the price shall be appraised based on the average trading price on the last transaction day before the date of evaluation; in the event of severe fluctuation of the price of such Emerging Stocks, the price shall be appraised based on the average trading price for the 30-day period before the date of evaluation. Where there is no transaction price of shares issued by a listed company or a company traded on the Gre Tai Securities Market on the date of evaluation, the price shall be appraised based on the closing price on the last transaction day before the date of evaluation; in the event of severe fluctuation of the price of such shares, the price shall be appraised based on the average of the closing prices the 30 days before the date of evaluation. The date of evaluation shall fall within the four months prior to the recordation date.
In the event of capitalization of earnings, whether the appropriation of earnings meets the applicable provisions under the Company Law shall be verified against the Articles of Incorporation, the financial statements and the proposal for appropriation of earnings ratified by the shareholders' meeting (or consented by the shareholders). In the event of any inconsistency between the ending balance set forth in the statement of appropriation of earning and the amount listed on the balance sheet as of the recordation date, the reasons for such discrepancy shall be stated in the audit report.
In the event of capitalization of capital reserve, whether the type, source and contents thereof comply with the applicable provisions of the Company Law and whether the calculation of the appropriated amounts is consistent with the amounts charged over the years shall be verified. In the event that the balance of the capital reserve after appropriation is inconsistent with the amount listed on the balance sheet as of the recordation date, the reasons for such discrepancy shall be stated in the audit report.
In case of a merger, the CPA shall state in the audit report whether the accounting of the issuances of new shares for the merger is handled in accordance with the Business Accounting Law, the Guidelines for Handling Business Accounting, the generally accepted accounting principles and related regulations.
The CPA shall also check the names of shareholders, the respective number of shares issued and related matters according to the resolutions of the shareholders' meeting(s) and the board of directors meeting(s) (or the consent of the shareholders) and the merger agreement. In case that goodwill of the merged companies is recognized, the CPA shall first verify the calculation of the relevant figures, so as to ascertain whether the identifiable assets acquired and the liabilities assumed by the surviving company or the newly established company from the merger are evaluated at fair values. The CPA shall then compare the fair value of the acquired identifiable net assets with the acquisition cost, and if the acquisition cost exceeds the fair value of the acquired identifiable net assets, the difference shall be recognized as goodwill.
In case that new shares are to be issued in demerger, the CPA shall check the names of shareholders, the respective number of shares to be issued and related matters according to the resolution of the shareholders' meeting(s) and the demerger plan. The CPA shall also state in the audit report the book value or fair value of the demerged part of the demerged company and the total number of new shares to be issued by the surviving company or the newly established company to the demerged company or its shareholders and related matters.
In case that new shares are to be issued in acquisition, the CPA shall check the names of shareholders, the respective number of shares to be issued and related matters according to the resolution of the shareholders' meeting(s) and the acquisition plan. The CPA shall also state in the audit report the book value or fair value of the acquired part and the total number of new shares to be issued by the acquirer company to the acquiree company or its shareholders and related matters.
In case that new shares are to be issued in share exchange, the CPA shall check the names of shareholders, the respective number of shares to be issued and related matters according to the resolution of the shareholders' meeting(s) and the share exchange plan. The CPA shall also state in the audit report the book value or fair value of the conveyance company and the total number of new shares to be issued by the surviving company or the newly established company to the conveyance company or its shareholders and related matters.
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Article 8
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The audit report issued by a CPA for capital reduction of a company shall state the reasons for the capital reduction (such as redemption or buying-back of shares for capital reduction, return of paid-in capital for capital reduction, making-up losses by capital reduction, and capital reduction by demerger), the number of cancelled shares, the amount of capital reduced, as well as the total number of shares issued and the total amount of capital before and after the capital reduction.
The reduction in the paid-in capital shall be verified against the names of shareholders and the number of cancelled shares set forth in the resolution of the shareholders' meeting or the board of directors meeting (or the consent of the shareholders).
In the event of a capital reduction by a demerger, the CPA shall verify such capital reduction against the names of shareholders and the number of cancelled shares set forth in the resolution of the shareholders' meeting and the demerger plan, and shall state in the audit report the book value of the demerged portion of the demerged company, the amount of reduction capital, as well as the total number of new shares to be issued to the shareholders of the demerged company by the surviving company or the newly established company.
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Article 9
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Unless provided otherwise in these Rules, a CPA's audit report shall contain the following particulars:
1.The name of the statement audited and the date of such statement.
2.The name of the company audited and its company uniform number; in
the case of application for incorporation of a company, the company uniform number is not required.
3.The CPA's audit scope and his/her CPA's opinion.
4.Autograph and seal of the CPA.
5.The date of auditing and certification.
6.The name, location and telephone number of the accounting firm.
The CPA shall prepare working paper for the audit, for which the competent government authorities may request for review at any time.
The date of auditing and certification as referred to in above Subparagraph 5, Paragraph 1 shall mean the date on which the audit is completed; provided that certification shall commence from the date of the audited balance sheet and shall be after the financial instruction's business hours.
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Article 10
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Where the responsible person of a company appoints a CPA to audit and certify the capital of the company, a power of attorney shall also be submitted. The CPA shall verify the identity of the appointer.
If the CPA discovers any false information when auditing a company's
capital, he/she shall refuse to certify the capital.
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Article 11
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These Rules shall take effect from the date of promulgation hereof.
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