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Article 7
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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the SFC has rejected the issuer's application, has refused to approve, has canceled the application, or the issuer has withdrawn its registration filing or application made under these Criteria.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.
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Article 8
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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.
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Article 9
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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.
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Article 13
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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).
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.
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Article 14
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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.
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Article 17
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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.
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Article 18
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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.
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Article 19
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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.
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Article 29
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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.
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Article 30
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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.
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Article 31
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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.
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Article 32
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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.
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Article 34
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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.
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Article 37
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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.
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Article 41
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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.
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Article 42
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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.
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Article 43
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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.
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Article 44
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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.
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Article 45
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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.
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Article 49
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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.
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Article 55
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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.
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Article 59
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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.
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Article 61
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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.
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Article 69
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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.
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Article 70
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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.
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Article 71
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(Deleted)
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Article 72
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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.
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Article 78
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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.
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