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Regulations Governing the Offering and Issuance of Overseas Securities by Issuers(2004.12.09) |
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Article 4
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The terms used herein shall have the following meanings:
1. The term "sponsor issuance" refers to the issuer assisting in the implementation of the issuance plan for overseas depositary receipts and providing financial information to a depositary institution pursuant to a deposit contract.
2. The term "depositary institution" refers to an institution located outside the territory of the Republic of China that issues depositary receipts pursuant to the securities regulations of the country where it is located.
3. The term "custodian institution" refers to a bank located within the territory of the Republic of China that has been approved by the Executive Yuan's Financial Supervisory Commission (FSC) to engage in custodian business.
4. The term "overseas depositary receipts" refers to receipts issued by a depositary institution outside the Republic of China pursuant to the securities regulations of the country where it is located to evidence the underlying securities held in the custody of a custodian institution.
5. The terms "registration," "effective registration," and "registration by notification" refer to where an issuer registers with the FSC by duly submitting all required documents, with the registration to automatically become effective after a specified number of business days have elapsed since the registration materials were received by the FSC or any FSC-designated agency unless the FSC has either returned the papers to the registrant for completion of missing items or has rejected the registration in order to safeguard the public interest.
6. The terms "approval of application" and "apply for approval" refer to where the FSC examines application materials submitted by an issuer, with the application to be approved as long as nothing improper is discovered.
7. The term "business day" means days on which trading takes place in the securities markets.
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Article 9
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The FSC may reject or deny approval for the offering and issuance of overseas securities if any one of the following circumstances applies to the issuer:
1. where there exists any of the circumstances referred to in Article 156, paragraph 1 of the Act;
2. where the plan for the current offering and issuance of overseas securities is unfeasible, unnecessary, or unreasonable;
3. where the implementation of any previous plan for offering and issuance of securities has been accompanied by any of the following problems and no improvement has been made:
(1) The implementation is seriously behind schedule without justifiable reason and has not been completed.
(2) The plan was materially changed without justifiable reason; provided, however, that this provision shall not apply where the time between the actual completion of the plan and the filing of the registration (application) exceeds three years.
(3) The plan was materially changed without being submitted to and approved by a shareholders' meeting.
(4) The issuer has not complied in the most recent one year with Article 11 herein and with Article 9, paragraph 1, subparagraphs 4 through 9 of the Regulations Governing the Offering and Issuance of Securities by Securities Issuers.
(5) Reasonable returns have not been achieved without justifiable reason; provided, however, that this provision shall not apply if the period between the actual completion date of the plan and the registration (application) date is more than three years.
4. where an important part of the plan for this offering and issuance of overseas securities (such as issuance rules, source of funds, project particulars, implementation schedule, and expected returns) has not been proposed and submitted to a board meeting or shareholders meeting for discussion and resolution/approval in accordance with the Company Act and the issuer's articles of incorporation;
5. where the company has lent large amounts of capital to others in excess of financing needs resulting from the company's business transactions with other companies or firms, and no improvement has yet been made at the time of registration (application);
6. where the company has entered into an irregular transaction of material significance, and has not rectified the situation at the time of filing the registration (application);
7. where the company holds short-term investments, idle assets, or idle real property, has no plan to actively dispose of or develop such holdings, and their total value is equivalent to either: (1) 40 percent or more of shareholders' equity in the most recent CPA-audited and -attested financial report, or (2) 60 percent of the total amount of funds to be raised through the overseas securities issue that the company is registering (or applying) to issue; provided, however, that this provision shall not apply when the funds to be raised will be used to purchase fixed assets and there is a concrete plan for fund raising evidencing the necessity to raise the funds;
8. where the company has provided its assets as security for a loan to another party; provided, however, that this provision shall not apply if the assets were provided as security for a loan needed by a subsidiary for business purposes;
9. where the overseas securities being offered and issued are to be purchased by a subscriber that is related to the issuer, or the ultimate source of the funds used to purchase the issue is a party related to the issuer. The meaning of the term "related party" shall be interpreted according to paragraph 2 of Statement of Financial Accounting Standards No. 6;
10. where the offering and issuance of overseas securities is accompanied by one of the following circumstances:
(1) The amount of capital to be directly or indirectly invested in mainland China as set forth in the funds utilization plan is greater than 20% of the capital raised from the offering; provided, however, that this provision shall not apply where the overseas securities to be offered and issued are securities that confer shareholder rights, such as stocks, depositary receipts, convertible corporate bonds, and corporate bonds with warrants, and provided, furthermore, that the amount of direct or indirect investment in mainland China under the funds utilization plan does not exceed 40 percent of the total amount in the current offering, and the issuance rules or conversion rules expressly provide that the bearer may not request redemption, conversion, subscription, or reimbursement within one year of the issuance of the overseas securities.
(2) The total dollar amount of direct or indirect investment in mainland China exceeds the upper limit set by the Investment Commission, Ministry of Economic Affairs; provided, however, that this provision shall not apply where the capital is used to purchase domestic fixed assets and a commitment is made not to increase investment in the mainland.
11. where any one of the following descriptions applies to shareholdings of the entire body of the company's directors or supervisors:
(1) The percentage of their equity stake is in violation of Article 26 of the Act and the FSC has notified them to make up for the shortfall but they have not yet done so.
(2) The percent of their equity stake still does not meet the required equity stake set forth under Article 26 of the Act even after accounting for the share issue that the company is now registering (or applying for); provided, however, that this shall not apply where the entire body of the company's directors or supervisors pledges to make up for the shortfall upon completion of the offering.
(3) During the fiscal year in which the registration (application) is made, and also in the preceding fiscal year, the entire body of the company's directors or supervisors did not honor a promise to make up for a shortfall in their equity stake.
12. where the company's financial statements in the most recent two years have not been prepared in accordance with relevant acts, regulations, and generally accepted accounting principles, and such violations are significant;
13. where the issuer or its current chairperson, general manager, or the responsible person in substance has been adjudged guilty by a court, and received a final and unappealable sentence, for breach of faith in the past three years;
14. where new shares are issued for the purpose of a merger, for the purpose of acquiring the shares of another company, or for the purpose of an acquisition or split conducted in accordance with law, and such issue has been conducted under any of the following conditions:
(1) The issue involves a material violation of the provisions of Chapter II, Section V of the Regulations Governing the Acquisition or Disposal of Assets by Public Companies.
(2) The acquisition of shares or of a corporation involves shares that are not newly issued by another company, or long-term holdings of another company, or outstanding shares that are held by the shareholders of another company.
(3) The ownership rights of the acquired shares, business, or assets are impaired or encumbered in some way, such as through the creation of pledge thereupon or placing of restrictions on the purchase or sale thereof.
(4) The provisions of Article 167, paragraph 3 or 4 of the Company Act are violated.
(5) An audit report with unqualified opinion was not issued by a CPA regarding the financial report on the acquired company for the most recent fiscal year, except where an audit report with qualified opinion was issued together with an unqualified opinion regarding the balance sheet.
15. where the internal control system is materially flawed in terms of either design or enforcement;
16. where the company's share price has fluctuated abnormally during the month prior to the date of registration of (application for) the offering and issuance;
17. where other acts and regulations are violated, or where the FSC deems disapproval necessary for protection of the public interest or national reputation.
The foregoing subparagraphs 4 to 10 are not applicable in the case of registrations (applications) to use outstanding shares to sponsor issuance of overseas depositary receipts, or to use outstanding shares to engage in trading on offshore stock exchanges.
The provisions of Article 1, subparagraphs 3 and 10 shall not apply where the issuer registers (applies) to sponsor issuance of overseas depositary receipts through capital increase, which in turn is done in order to acquire a foreign company, to acquire the shares of a foreign company, or to issue new shares for the purpose of an acquisition or split of a foreign company conducted in accordance with the law.
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Article 11
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Upon issuance of its overseas securities, an issuer shall comply with the following:
1. A prospectus prepared in accordance with the securities acts and regulations of the country where the offering took place must be uploaded to the information reporting website specified by the FSC; provided, however, that the same shall not apply to the issuance of overseas depositary receipts for conversion of or subscription to overseas corporate bonds;
2. If the funds utilization plan has not yet been fully executed, the issuer shall disclose the implementation progress of the plan in the annual report; where the issuer is issuing overseas corporate bonds, information relating to the corporate bond issue shall be posted by the issuer to the information reporting website specified by the FSC within two days from the date of completion of the raising of capital, and by the tenth day of each month for the duration of the period during which the overseas corporate bonds are being issued.
3. The issuer shall, within ten days after the end of each quarter and in accordance with FSC regulations, post the funds utilization plan and the quarterly report on the status of funds utilization to the information reporting website specified by the FSC.
4. A company listed on a securities exchange or traded on an OTC market shall, on a quarterly basis, request the original securities underwriter or CPA to prepare an evaluation opinion on progress in implementation of the funds utilization plan, the legitimacy of the purpose of the unused funds, and a statement concerning whether there has been any change to the plan. Within ten days after the end of each quarter, the issuer shall post such opinion together with the information referred to in the preceding subparagraph to the information reporting website specified by the FSC.
5. Where the issuer is sponsoring issuance of overseas depositary receipts through capital increase, and its purpose in so doing is to acquire a foreign company, acquire the shares of a foreign company, or sponsor issuance of new shares for the purpose of an acquisition or split of a foreign company conducted in accordance with the law, the issuer shall, on a quarterly basis for the first year following completion of registration, request the original underwriter to prepare an opinion evaluating the impact of such matters upon the issuer's financial operations, business operations, and shareholders' equity. The issuer shall post such opinions to the information reporting website specified by the FSC.
6. Where, as the result of a change to an item or a dollar amount in an individual item in the funds utilization plan, the total amount of capital needed for the original item increases or decreases by 20% or more of the total amount of capital raised, after reporting the change for approval by the government authority for foreign exchange business, the issuer shall register an amendment of the plan and, within two days after the amendment is approved by a resolution of the board of directors, the issuer shall make a related public announcement via the information reporting website specified by the FSC. The issuer shall also submit the change to a shareholders meeting for confirmation. Where the funds utilization plan is amended, the issuer shall, upon such change and within ten days after the end of each subsequent quarter, also request the original underwriter to issue an evaluation opinion on the progress of implementation of the funds utilization plan and the legitimacy of the purpose of the unused
funds, and shall post such opinion together with the information referred to in subparagraph 3 above to the aforementioned website.
If overseas securities are subscribed to by specific persons or strategic investors, the issuer shall disclose the subscription list as well as individual subscription prices and quantities in the prospectus, and shall post this information to the information reporting website designated by the FSC.
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Article 12
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An issuer registering (applying) to use either (i) a capital increase through a new share issue or (ii) outstanding shares, to sponsor issuance of overseas depositary receipts by a depositary institution, shall, depending on the nature of the issue, file [one of ten different types of] Registration (Application) to Sponsor Issuance of Overseas Depositary Receipts (Attachments 1 to 10), specifying therein the required particulars, together with the required supporting documents, and may proceed to the issuance only after the registration has become effective or the FSC has granted approval of application.
An issuer registering (applying) to use a capital increase through a new share issue to sponsor issuance of overseas depositary receipts shall state the basis for setting the issue price, the legitimacy thereof, and any effects on shareholders' equity and refer the same to a shareholders meeting for approval by resolution.
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Article 14
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After the issuance of overseas depositary receipts, additional depositary receipts shall only be issued when a registration becomes effective or the FSC grants approval of application, unless one of the following conditions exists:
1. The additional depositary receipts are issued in accordance with the provisions of the Regulations Governing Investment in Securities by Overseas Chinese and Foreign Nationals; provided, however, that the deposit contract and custody contract must expressly provide that overseas depositary receipts may be re-issued following redemption.
2. Following the issuance of overseas depositary receipts, the issuer carries out a cash capital increase through a new share issue, a new share distribution from earnings, or a new share distribution from capital reserve, and in connection therewith issues additional depositary receipts corresponding to the amount of the newly issued shares.
An issuer's director, supervisor, manager, or shareholder holding more than 10 percent of the total issued shares, intending to issue additional depositary receipts under subparagraph 1 of the preceding paragraph shall comply with Article 22-2, paragraph 1, subparagraph 1 of the Act by filing an application (Attachment 11) specifying therein the required particulars and may proceed to the issuance only after the approval by the FSC.
Where the issuer referred to in paragraph 1 needs to issue additional overseas depositary receipts in order to carry out a cash capital increase through a new share issue, if the proceeds raised offshore are to be converted into New Taiwan Dollars and used onshore, the issuer shall obtain a consent letter from the government authority for foreign exchange business before registering with (applying to) the FSC to carry out a cash capital increase.
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Article 20
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With respect to an issuer that is seeking to sponsor issuance of overseas depositary receipts, once the registration becomes effective or approval of application is granted, the issuer shall submit one of each of the following documents to the FSC for recordation within ten days after issuance of the overseas depositary receipts:
1. a prospectus prepared in accordance with the securities acts and regulations of the country where the offering took place; provided, however, that these requirements do not apply to the issuance of overseas depositary receipts for conversion of or subscription to overseas corporate bonds;
2. a duplicate copy of the deposit contract;
3. a duplicate copy of the custody contract;
4. an opinion letter in Chinese issued by an ROC attorney-at-law confirming that there is no material discrepancy between the issuance rules and the particulars of the issuance as set forth in a registration that the FSC has allowed to become effective, or in an application that the FSC has approved;
5. documentary evidence providing proof of deposit of funds collected in full;
6. a list of those whose subscriptions account for 10 percent or more of the total value of the issue as well as the individual subscription prices and quantities thereof; and
7. other documents required by the FSC.
If an issuer sponsoring issuance of overseas depositary receipts is required by a deposit contract to provide any information to a depositary institution, within three days after providing such information the issuer shall report such provision to the FSC for recordation.
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Article 22
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An issuer intending to issue and offer overseas corporate bonds shall submit a Registration (Application) to Offer and Issue Overseas Corporate Bonds (Attachments 12-17) specifying therein the required particulars, together with the required supporting documents and may proceed to the issuance only after the registration becomes effective or approval of application is granted by the FSC.
An emerging stock company registering (applying) to offer and issue overseas convertible bonds or overseas corporate bonds with warrants shall submit a credit rating report on the underlying from a credit rating institution approved or ratified by the FSC.
An issuer who has issued and offered overseas corporate bonds and wishes to use overseas depositary receipts for the conversion of or subscription to overseas corporate bonds in accordance with conversion rules or warrant exercise rules shall file a Registration (Application) to Offer and Issue overseas depositary receipts (Attachments 18-21) specifying therein the required particulars, together with the required supporting documents and may proceed to the issuance only after the registration becomes effective or approval of application is granted by the FSC.
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Article 27
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With regard to an issuance of overseas corporate bonds, after the registration becomes effective or application of approval is granted, the issuer shall submit one of each of the following documents to the FSC within ten days of the issuance of the overseas corporate bonds:
1. a prospectus prepared in accordance with the securities acts and regulations of the country in which the bonds are offered;
2. a duplicate copy of the issuance agreement;
3. a duplicate copy of the deposit contract and custody contract (if the bonds are convertible or have warrants for the purchase of overseas depositary receipts);
4. a duplicate copy of the paying agency agreement;
5. a duplicate copy of the purchase agreement;
6. a duplicate copy of the trust deed;
7. an opinion letter in Chinese issued by an ROC attorney-at-law confirming that there is no material discrepancy between the issuance rules for the overseas corporate bonds and the particulars of the issuance as set forth in a registration that the FSC has allowed to become effective, or in an application that the FSC has approved;
8. documentary evidence providing proof of deposit of funds collected in full;
9. a list of those whose subscriptions account for 10 percent or more of the total value of the issue as well as the individual subscription prices and quantities thereof; and
10. other items as specified by the FSC.
Any information that the issuer is required, pursuant to the acts and regulations of the country where the stocks are issued, to provide or disclose, shall also be filed with the FSC within three days after such provision.
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Article 29
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An issuer registering (applying) to carry out a cash capital increase through the issue of overseas stocks, or to list its outstanding shares on a foreign securities exchange, shall file an Registration (Application) for Issuance of Overseas Stocks (Attachments 22-25) specifying therein the required particulars, together with the required supporting documents, and may proceed to the issuance only after the registration becomes effective or approval of application is granted by the FSC.
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Article 35
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When a registration (or application for) an overseas stock issue becomes effective (or approval is granted), the issuer shall submit one of each of the following documents to the FSC within ten days after issuance or listing:
1. a prospectus prepared in accordance with the securities acts of the country where the stocks are issued; provided, however, that these requirements do not apply to cases where the shares have not been issued for the purpose of raising capital;
2. a duplicate copy of the overseas stock service agency agreement;
3. a duplicate copy of the custody contract;
4. an opinion letter in Chinese issued by an ROC attorney-at-law confirming that there is no material discrepancy between the issuance rules for the overseas stock issuance and the particulars of the issuance as set forth in a registration that the FSC has allowed to become effective, or in an application that the FSC has approved;
5. documentary evidence providing proof of deposit of funds collected in full;
6. a list of those whose subscriptions account for 10 percent or more of the total value of the issue as well as the individual subscription prices and quantities thereof; and
7. other documents required by the FSC.
Any information that the issuer is required, pursuant to the acts and regulations of the country where the stocks are issued, to provide or disclose, shall also be filed with the FSC within three days after such provision.
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Article 39
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These Regulations shall enter into force from the date of promulgation.
The amended portions of these Regulations shall enter into force from the date of their promulgation, with the exception of Article 12, 22, and 29, which shall enter into force from 1 January 2005.
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