| Title： |
Taiwan Stock Exchange Corporation Rules for Regulating Primary Listed Foreign Issuers(2008.09.04) |
| Date： |
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I General Principles
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| Article 1 | These Rules are adopted under Article 2 of the Listing Agreement for Securities, and Article 43 of the Operating Rules, of the Taiwan Stock Exchange Corporation (TWSE) to regulate the preparation of financial reports, certified public accountant (CPA) audit reports, review of financial reports, regulation by exception, lending of funds, provision of endorsements and guarantees, and continuing obligations with respect to primary listed companies after listing on the TWSE market.
For the purposes of these Rules, the term "primary listed company" means a foreign issuer having successfully sought primary listing of its shares on the TWSE by submitting an application pursuant to Article 28-1 of the TWSE Rules Governing Review of Securities Listings. |
| Article 2 | Except as otherwise provided in applicable laws, regulations, or rules, matters related to the preparation of financial reports, certified public accountant (CPA) audit reports, review of financial reports, regulation by exception, lending of funds, provision of endorsements and guarantees, and continuing obligations with respect to primary listed companies shall be governed by these Rules. If there is a change to any regulatory provision under which a provision of these Rules is made, the new provision shall prevail. |
| Article 3 | All financial reports, annual reports to shareholders, and other materials submitted to the TWSE by a primary listed company shall be in Chinese, and may accompanied by English versions. |
II Preparation of Financial Reports and Certified Public Accountant Audit Reports
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| Article 4 | After listing on the TWSE, a primary listed company shall publish its financial reports on the information reporting website designated by the TWSE and additionally submit the hardcopy versions for meeting the regulatory filing requirement, and the financial reports thus published and filed shall conform to the following:
1. The financial reports shall be prepared in accordance with the financial reporting standards adopted in Taiwan or the United States or otherwise in accordance with the international financial reporting standards, using the New Taiwan Dollar (NTD) as the reporting currency.
2. The financial reports shall be prepared using period-to-period comparison and shall comprise the four major financial statements (namely, the consolidated balance sheet, consolidated income statement, consolidated cash flow statement, and consolidated statement of changes in shareholders' equity) and the accompanying notes, except that in the case of a quarterly consolidated financial report the consolidated statement of changes in shareholders' equity is not required to be included. The accompanying notes included in financial reports shall include an indication of the specific accounting principles used, and, if the financial reports are not prepared under the financial reporting standards of Taiwan, a disclosure of any differences between the period-to-period balance sheet and income statement accounts presented under such other financial reporting standards and those presented under Taiwan's financial reporting standards, specifying in particular any line-item that involves a significant difference and the amount affected.
3. An annual financial report shall be published and filed within four months following the end of each business year, accompanied by an audit report issued by two domestic CPAs of an accounting firm approved by the competent authority to certify and attest to the financial reports of public companies; a semi-annual financial report shall be published and filed within 75 days following the end of each business half-year, accompanied also by an audit report issued by two domestic CPAs of an accounting firm approved by the competent authority to certify and attest to the financial reports of public companies; and a first or third quarter financial report, as the case may be, shall be published and filed within 45 days following the end of each first or third quarter of the business year, for which no CPA audit or review is required.
4. The financial reports published and filed pursuant to regulatory requirements shall all bear the signature or seal of the chairperson and managerial and accounting officers, who shall also issue a statement that the financial reports contain no misrepresentations or nondisclosures. |
| Article 5 | A CPA engaged to audit or review the financial report of a primary listed company shall in the scope paragraph of the audit or review report include an indication of the accounting principles used by the primary listed company and the differences between those principles and the generally accepted accounting principles in Taiwan, if applicable, and also an index to the accompanying notes, and shall also expressly state that the audit was conducted in accordance with Taiwan's Regulations Governing Auditing and Certification of Financial Statements by Certified Public Accountants and its generally accepted auditing standards.
When CPAs are engaged to review or audit the financial report of a primary listed company, a domestic CPA shall issue an audit or review report in which no reference is made to the audit work of any other CPA.
If any other audit work is performed by a foreign CPA firm, the foreign CPA firm shall be an international CPA firm. |
III Lending of Funds and Provision of Endorsements and Guarantees
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| Article 6 | A primary listed company may not lend funds to any of its shareholders or any other person except under either of the following circumstances:
(1) Where an inter-company or inter-firm business transaction calls for a loan arrangement.
(2) Where an inter-company or inter-firm short-term financing facility is necessary.
The term "short-term" as used in the preceding paragraph means one year, or one operating cycle if the primary listed company's operating cycle exceeds one year. |
| Article 7 | For the purposes of these Rules, "endorsements and guarantees" mean any of the following:
1. Financing endorsements or guarantees, including:
(1) Bill discount financing.
(2) An endorsement or guarantee made to meet the financing needs of another company.
(3) Issuance of a separate negotiable instrument to a non-financial enterprise as security to meet the financing needs of the primary listed company itself.
2. A customs duty endorsement or guarantee, meaning an endorsement or guarantee for the primary listed company itself or for another company with respect to customs duty matters.
3. Other endorsements or guarantees, meaning any endorsements or guarantees beyond the scope of the above two subparagraphs.
Any creation by a primary listed company of a pledge or mortgage on its chattel or real property as security for the loans of another company shall also be subject to these Rules. |
| Article 8 | A primary listed company may make endorsements or guarantees for the following companies:
1. A company with which it does business.
2. A company in which the primary listed company directly or indirectly owns more than 50 percent of the voting shares.
3. A company that directly or indirectly owns more than 50 percent of the voting shares in the primary listed company.
Notwithstanding the preceding paragraph, a primary listed company may make an endorsement or guarantee when it is contractually required to provide a mutual guarantee for another company in the same industry for purposes of undertaking a construction project, or when it, as a contributing shareholder in a joint venture, makes an endorsement or guarantee for the invested company in proportion to its shareholding percentage. |
| Article 9 | If a primary listed company violates any provision of Article 6 or 8, the TWSE may impose a monetary penalty on it commensurate with the circumstances of the particular case, and if the violation is serious in nature, alter the method by which its listed securities are traded or suspend their trading pursuant to Article 49-1, paragraph 1, subparagraph 10, or Article 50-3, paragraph 1, subparagraph 9 of the TWSE Operating Rules.
Article 9 of the TWSE Procedures for Verification and Disclosure of Material Information of Listed Companies shall apply mutatis mutandis with respect to the imposition of monetary penalties under the preceding paragraph. |
IV. Review of Financial Reports and Annual Reports to Shareholders and Regulation by Exception
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| Article 10 | The TWSE may review the financial reports of primary listed companies by either formality review or substantive review.
The results of formality reviews shall be reported in consolidated form to the competent authority within three working days following the due date for the submission of financial reports. If a formality review reveals that the documentation submitted by a primary listed company is incomplete, or that the CPA audit report contains an opinion other than an unqualified opinion and thus has a significant effect on the financial report of the primary listed company, the TWSE may require the primary listed company to give explanatory information on specified matters and submit a regulatory filing of the explanatory matters on the TWSE-designated information reporting website, and where necessary may require the primary listed company to hold an informational press conference.
If a substantive review of a primary listed company's financial report regarding major accounts or changes in financial ratios or of its material information published during the last year identifies any material irregularity in its financial information or material information, the TWSE may require the primary listed company or its CPA or lead underwriter, or agent for litigious and non-litigious matters in Taiwan, or independent director(s) to give explanatory information on specified matters and may, in consideration of the actual situation, require the primary listed company to submit a regulatory filing of the explanatory matters on the TWSE-designated information reporting website; where necessary, the TWSE may require the primary listed company to hold an informational press conference.
If the TWSE deems it necessary, a primary listed company shall conduct a special audit within or outside of Taiwan in full cooperation with the TWSE or its appointed lawyer, CPA or other professional individual or organization, and shall provide all such information as may be required by the TWSE or the afore-mentioned professional individual or organization; the costs for hiring the professional individual or organization and the fees and expenses incurred by the TWSE or the professional individual or organization shall be the responsibility of the primary listed company.
The results of substantive reviews shall be reported in consolidated form to the competent authority within two months following the due date for submission of financial reports by primary listed companies. If the complexity of a particular case requires an extension of the audit period, such shall be reported to the competent authority for approval and recordation. |
| Article 11 | If any of the following material events occurs to a primary listed company, the TWSE shall conduct verification and public disclosure operations following its Procedures for Verification and Disclosure of Material Information of Listed Companies, and shall further collect relevant information on the material event and prepare an analysis report accordingly:
1. Finances
(1) The primary listed company's financial statements for the current period show serious loss, such that the company's net worth is lower than the stock capital stated in the financial report.
(2) The CPA issues an audit or review report expressing an opinion other than an unqualified opinion or a non-standard audit or review report, and the circumstances are serious.
(3) The primary listed company or its parent company or any of its subsidiaries has experienced a loss of creditworthiness.
(4) A principal debtor of the listed company has filed for bankruptcy or experienced any other similar event, or a principal debtor in favor of whom the company has made an endorsement or guarantee is unable to settle a debt or obligation when due.
(5) From financial information submitted by the primary listed company it is found that the company has provided any endorsement or guarantee for a company with which it does not do business, or that it has provided company assets as collateral for loan borrowings of another person.
(6) The assets (excluding all types of domestic stocks and open-end bond funds) acquired or disposed of by the primary listed company or its subsidiaries reach 20% or more of the capital stock stated in the company's financial report, or NT$300 million or more.
(7) The amount of open interest in derivatives held for trading purposes in the current month shows a month-on-month increase of 10% or more of the capital stock stated in the financial report, or the combined amount of realized and unrealized losses shows a month-on-month increase of NT$100 million or more.
2. Business
(1) The financial statements of the primary listed company for the current period indicate a serious reduction in production, or a suspension of manufacturing operations in whole or in part, resulting in serious loss, and it is predicted that the circumstance cannot be improved within a short time.
(2) Any of the primary listed company's plants or major facilities has been rented out, or all or a substantial part of the company's major assets have been pledged, such that there is a likelihood of operational difficulties or suspension of operations.
(3) Any instance of major disaster, protest, strike, or environmental pollution occurs to the primary listed company and it is predicted that the business operations cannot be restored within a short time, or the predicted losses exceed 20% of its shareholders' equity.
3. Other
(1) Any matter involving litigious or non-litigious proceedings, an administrative disposition, or contentious administrative proceedings, with a material effect on the primary listed company's financial or business operations.
(2) The primary listed company issues any material information, or the press/media report any event with a material effect on the company's operations.
(3) An independent director's office that the primary listed company establishes in accordance with regulatory requirement becomes vacant for any reason other than illness, death, or other force majeure event, resulting in an insufficient number of independent directors, or as a result the company has no independent director with a household registration in Taiwan.
(4) A circumstance arises in which the primary listed company has no agent for litigious and non-litigious matters in Taiwan.
(5) The competent authority or the TWSE otherwise deems necessary.
In administering regulation by exception, the TWSE may require a primary listed company or its CPA or lead underwriter, or agent for litigious and non-litigious matters in Taiwan, or independent director(s) to give explanatory information on specified matters and may, in consideration of the actual situation, require the primary listed company to submit a regulatory filing of the explanatory matters on the TWSE-designated information reporting website or require the primary listed company to hold an informational press conference.
If the TWSE deems it necessary, a primary listed company shall conduct a special audit within or outside of Taiwan in full cooperation with the TWSE or its appointed lawyer, CPA or other professional individual or organization, and shall provide all such information as may be required by the TWSE or the afore-mentioned professional individual or organization; the costs for hiring the professional individual or organization and the fees and expenses incurred by the TWSE or the professional individual or organization shall be the responsibility of the primary listed company. |
| Article 12 | A primary listed company shall, within 20 days following a general shareholders meeting, submit two copies of its annual report to shareholders to the TWSE for review.
Any failure by a primary listed company to submit the annual report within the time period specified in the preceding paragraph, or to prepare its annual report in compliance with regulatory requirements, and to cure such a failure within the time limit specified by the TWSE in a letter requiring it to cure the failure, shall be treated as an "any other event having a material impact on shareholders equity" under the TWSE Procedures for Verification and Disclosure of Material Information of Listed Companies, and shall thus be brought to the attention of investors.
When the circumstance under the preceding paragraph applies to a primary listed company, the TWSE may require the primary listed company to submit a regulatory filing of the matter on the TWSE-designated information reporting website, and where necessary may require the primary listed company to hold an informational press conference. |
| Article 13 | If either of the following circumstances exists with respect to a primary listed company when the TWSE or its appointed lawyer, CPA, or professional organization conducts an audit of the company according to Article 10 or 11 hereof, the TWSE may impose a monetary penalty on it commensurate with the circumstances of the particular case, and if the circumstance is serious in nature, alter the method by which its listed securities are traded or suspend their trading pursuant to Article 49-1, paragraph 1, subparagraph 10, or Article 50-3, paragraph 1, subparagraph 9 of the TWSE Operating Rules.
1. If it refuses, impedes, or evades an examination conducted by the TWSE or its appointed lawyer, CPA, or other professional individual or organization.
2. If it fails to produce account books, forms/statements, documents, or other reference or reporting materials within a specified time period to the TWSE or its appointed lawyer, CPA, or other professional individual or organization.
Article 9 of the TWSE Procedures for Verification and Disclosure of Material Information of Listed Companies shall apply mutatis mutandis with respect to the imposition of monetary penalty under the preceding paragraph. |
| Article 14 | If in the course of reviewing the financial report of a primary listed company or conducting regulation by exception it is found that the company is in violation of any of the TWSE rules or regulations or any domestic laws or regulations in Taiwan, the TWSE may take any corresponding measures under its rules or regulations and may further take the following actions as appropriate:
1. The TWSE may issue a letter requesting the primary listed company to take improvement action, and may further require the primary listed company or its CPA or lead underwriter to propose an improvement action plan in a response letter addressed to the TWSE
2. The TWSE may report the event to the competent authority for initiation of any action authorized under law. |
V. Continuing Obligations
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| Article 15 | A primary listed company shall continuously engage a lead underwriter in the listing year and in the following two fiscal years to assist with ensuring compliance with Taiwan's securities laws and regulations, TWSE rules, regulations, and public announcements, and the Listing Agreement. After the end of the time period, the primary listed company may engage the same lead underwriter or any other securities firm qualified under Article 28-2 of the TWSE Rules Governing Review of Securities Listings or other qualified professional institution for fulfilling its continuing compliance obligations. |
| Article 16 | A primary listed company shall comply with Article 28-4 of the TWSE Rules Governing Review of Securities Listings regarding the continuous maintenance of independent directors and an audit committee or supervisors.
Article 4 of the TWSE Operating Guidelines Governing the Establishment of Independent Directors by Listed Companies shall apply mutatis mutandis with respect to primary listed companies. |
| Article 17 | A primary listed company after listing shall continuously comply with Taiwan's securities laws and regulations, TWSE rules, regulations, and public announcements, and the Listing Agreement. |
VI. Supplementary Provisions |
| Article 18 | These Rules, and any amendments hereto, shall be implemented after approval and recordation by the competent authority. |