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Article 10
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An application for initial listing of stock filed by an issuing company shall not be approved unless and until shares representing at least 50 percent of the number of shares held by each of the following persons of the issuing company specified in the application for listing (with the total number of such shares being not less than the ratio specified in Paragraph 2 of this Article), along with the remaining shares representing all other shares after deducting those required for the public offering, have been placed in central custody with a central securities depository enterprise incorporated with the approval of the Competent Authority; provided however, that if the total number of shares held by directors and supervisors is less than the total number thereof held by them at the time when they were elected as directors and supervisors, then the total number of shares at the time when they were elected shall be the basis for counting the number of shares under this Article. If the number of shares
represented by shares placed in central custody pursuant to the above is less than the ratio specifies in Paragraph 2 of this Article, the shortage shall be made up by other shareholders:
1. Where the application for listing is filed in accordance with the provisions of Article 4 or Article 6 of these Regulations, its directors, supervisors and the shareholders holding 10 percent or greater of the total number of issued shares of the issuing company.
2. Where the application for listing is filed in accordance with the provisions of Article 5 of these Regulations or where the applicant is an information software enterprise, its directors, supervisors, shareholders holding 5 percent or greater of the total number of issued shares, and/or shareholders whose equity investment is made in the form of patent rights or technical know-how, and who are working for the issuing company and hold 0.5 percent or greater of the total number of shares or 100,000 or more shares as of the date on which the application for listing is filed. However, this restriction shall not apply where shareholding of a recommending securities firm during the period of registration as emerging stock exceeds 5 percent of the total issued shares of said issuing company as a result of subscription or trading of operating securities during the emerging stock trading period.
The total number of shares with respect to the shares to be placed in central custody by the issuing company under the preceding paragraph refers to the aggregate sum of common shares and preferred shares that have already been issued, as stated on the listing application documents, plus shares subscribable or convertible through corporate bonds with warrants and convertible corporate bonds; the total ratio of shares to be placed in central custody by the issuing company shall be calculated as set forth below, provided, the number of shares to be placed in central custody by the issuing company shall not exceed a maximum of 50 percent of its total number of issued shares, and shares placed in central custody shall be confined to shares of publicly offered and issued common stock:
1. Where the total number of shares is 30 million or less, shares representing 25 percent thereof shall be placed in central custody.
2. Where the total number of shares is more than 30 million but 100 million or less, shares representing 20 percent of the portion of shares in excess of 30 million shares shall be placed in central custody in addition to those required under the preceding item.
3. Where the total number of shares is more than 100 million but 200 million or less, shares representing 10 percent of the portion of shares in excess of 100 million shall be placed in central custody in addition to those required under the preceding item.
4. Where the total number of shares is more than 200 million, shares representing 5 percent of the portion of shares in excess of 200 million shall be placed in central custody in addition to those required under the preceding item.
The remaining shares after deducting those required for the public offering, as referred to in paragraph 1, include the following:
1. From the date of application for initial listing to the listing date, all new shares obtained through capital increase for which amendment registration has been completed with the Ministry of Economic Affairs, as well as any shares that have come to be held for any other reason; for any shares that have not yet been obtained by the listing date, an undertaking shall be made to place the shares in central custody after obtaining them.
2. From among the old shares provided by directors and supervisors of the issuer for an overallotment (greenshoe) option for the securities underwriter, any shares that were not actually sold in exercise of the overallotment option and that have been returned by the securities underwriter.
Shares placed in central custody by directors, supervisors and shareholders pursuant to the provisions of Paragraph 1 of this Article shall be withdrawn from custody in compliance with the following provisions:
1. One-fifth of the portion thereof comprising not less than 50 percent of the shares held by the respective person with the total number of shares being not less than the ratio specified in Paragraph 2 of this Article may be withdrawn only after the lapse of two full years from the listing date thereof; thereafter, one-fifth thereof may be withdrawn once every six months. However, during the period beginning from the time two years has elapsed after the date listed trading of the issuer's shares has commenced until the expiration of the custody period, the directors, supervisors, and shareholders may withdraw in full their shares in central custody if the following conditions are met:
(1) There has been no breach of any commitment made when applying for listing.
(2) The profitability requirements set out in the forepart of Article 4, paragraph 1, subparagraph 3, item 1 herein are met; provided that if stricter profitability requirements were in place at the time of the listing application, such requirements shall govern.
(3) Where the issuer has already publicly disclosed and filed a quarterly or semi-annual financial report for the current year in accordance with applicable regulations, the issuer's imputed profitability for the year as reported in the quarterly or semi-annual report shall also meet the profitability requirements in the preceding subparagraph. Imputed profitability for the year shall be calculated with reference to the company's financial reports from the same period in the two preceding years, taking the average value of the profit of those periods in proportion to the respective whole years and applying that ratio to the current year.
2. The shares other than those referred to in the preceding subparagraph and those for public offering may be withdrawn in full after the lapse of one full year from the listing date thereof.
For an issuing company that applies for listing under the provisions of Article 4, where the total number of its shares required to be placed in central custody for two years and in central custody for one year is confirmed to exceed 50 percent of the issued shares of the issuing company, and the issuing company has paid-in capital of at least NT$30 billion, if the portion of the number of shares required to be placed in central custody exceeding the above-stated 50 percent of issued shares has been pledged to a financial institution by the director, supervisor, or shareholder of the issuing company who holds the shares for purposes of guaranteeing financing for the company or for him/herself, evidentiary documents furnished by the financial institution may be substituted for shares required to be placed in central custody for one year; provided, if the pledge is released during the custody period, the director, supervisor, or major shareholder shall deposit the same amount of shares into central custody;
or, if the subject of the pledge is disposed by the financial institution, the issuing company shall contact other directors, supervisors, or major shareholders to deposit the same amount of shares into central custody.
Directors, supervisors, and shareholders shall not rescind the custodial agreement during the term thereof. Shares and certificates in central custody shall not be transferred or pledged. The validity of central custody shall not be affected by a change of the identity of the holders of shares in central custody; provided that, however, if the holder's identity changes during the custody period, and all the circumstances in the below subparagraphs are complied with, shares representing the same amount of shares may be withdrawn from custody:
1. During the period from the date of listing for trading until one day before two years have elapsed, the holder has negotiated with directors and/or supervisors who took office at the time of the initial application for listing to cover the withdrawal by placing the same number of shares in central custody.
2. During the period from two years after the date of listing for trading until the expiry of the central custody period, the holder has negotiated with directors and/or supervisors who took office at the time of the initial application for listing, or current directors and/or supervisors, to cover the withdrawal by placing the same number of shares in central custody.
The provisions of Paragraph 1 of this Article shall not apply to directors, supervisors and shareholders of government authorities, government-owned enterprises, or which have obtained an approval from the authority in charge of the enterprise concerned for the sale of the shares held by them and have been determined to be inappropriate to place such shares in central custody.
The total ratio of shares to be placed in central custody as specified in Paragraph 2 of this Article shall not apply to government-owned enterprises.
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Article 10-2
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Where a company is applying for listing and its stock is already listed and traded on the GreTai Securities Market in accordance with Article 3 of the GreTai Securities Market Regulations Governing Review of Securities Traded on Over-the-Counter Markets, personnel of the company that conform to Article 10 or Article 10-1 shall still be required to place shares in central custody in accordance with the provisions of those articles. However, the proviso to Article 10, paragraph 4, subparagraph 1 shall not apply to personnel that conform to Article 10-1.
If the total shareholding of personnel of an applicant company under the preceding paragraph who are required to place shares in central custody in accordance with Article 10, paragraph 1, is lower than the total ratio calculated by the method specified in Article 10, paragraph 2, they shall coordinate with other shareholders to make up the difference and place it in central custody, and the shares may be withdrawn from custody in full only after one full year has elapsed from the date that listed trading begins.
Where the stock of an applicant company under paragraph 1 has already been traded over the counter for three years or more, if, upon comparing its personnel who are required to place shares in central custody under these Regulations with the names registered in the register three full years prior to the date of the application for listing -- or, where it has been traded over the counter for less than three years, upon comparing its personnel who are required to place shares in central custody under these Regulations with those who placed shares in central custody for the OTC listing application -- if the total changes do not exceed one-third of the personnel, those personnel who have not changed may discount in full the amount of time that their shares have been in central custody since the time they were originally placed in central custody for the OTC listing from the two-year waiting period from the date that listed trading begins until the time they may begin withdrawing their shares in installments
under Article 10, paragraph 3, or from the three-year waiting period from the date that listed trading begins until the time they may begin withdrawing their shares in installments under Article 10-1, paragraph 2, and may discount by half the total ratio calculated under Article 10, paragraph 2, or Article 10-1, paragraph 1.
If the applicant company under paragraph 1 is an investment holding company or a financial holding company, it shall comply with this Corporation's Regulations for the Review of Stock Listing Applications by Investment Holding Companies or Regulations for the Review of Stock Listing Applications by Financial Holding Companies, and, in addition, the provisions of the preceding paragraph shall apply mutatis mutandis to discounting of the period for central custody of its stock.
The personnel who have not changed as referred to in paragraph 3 shall still be required to place in full in central custody all stock they hold that they have not yet placed in central custody, and may withdraw it in full only after one full year has elapsed from the date that listed trading begins.
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Article 11
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Where an issuing company applies for initial listing of its common stock or various preferred stock, it shall allocate a percentage, as specified by this Corporation, of the total number of shares it intends for listing and retain a securities underwriter to offer in full such shares for sale to the public before the shares are listed, by means of a cash capital increase through a new share issue in accordance with the provisions of Article 71, paragraph 1, of the Securities and Exchange Act concerning underwriting of securities on a firm commitment basis. Provided, that a state-owned enterprise or an applicant under Article 6 or Article 6-1 may carry out underwriting with stock already publicly offered and issued by the company.
The total number of shares intended for listing to be allocated by the issuing company for public sale under the preceding paragraph shall be calculated by the method specified in Article 10, paragraph 2, and shares added during the period from the time of the application for listing until the time of listing shall be included in the calculation; provided, share certificates allocated for public sale shall be confined to share certificates of publicly offered and issued common stock.
The provisions of paragraph 1 concerning retaining a securities underwriter to carry out public sale before listing do not apply to a company applying for listing whose stock is already traded over the counter on the GreTai Securities Market in accordance with Article 3 of the GreTai Securities Market Regulations Governing Review of Securities Traded on Over-the-Counter Markets.
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Article 19
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Where a subsidiary, other than a government-owned enterprise, applies for the listing of its stock but does not meet the following requirements, this Corporation may disagree to the listing if the listing of its stock is deemed to be inappropriate by this Corporation, notwithstanding the fact that its application meets the criteria set forth in these Regulations:
1. A consolidated financial statement of the parent company and all of its subsidiaries which is prepared in accordance with the accounting principles of the home country of its parent company and an audit opinion issued by a certified public accountant in the Republic of China stating the differences between the accounting principles applicable in the Republic of China and the accounting principles applicable in the home country of the parent company and the impact of such differences on such financial statement shall be submitted along with the application.
2. According to the consolidated financial statement submitted pursuant to the preceding paragraph, the total amount of shareholders' equity shall be NT$1 billion or more in the most recent fiscal year and the operating profit and before-tax net profit shall each represent 3 percent or greater of the total amount of shareholders' equity in each of the most recent two fiscal years; provided, if the applicant company is applying for listing pursuant to Article 5, Article 6, or Article 6-1, or if the amount of its purchase/sale transactions with its parent company in the fiscal year of the application for listing and in the most recent fiscal year is less than 10 percent of its total amount of purchases/sales, it will not be subject to the above-stated profitability ratio.
3. The total number of shares of the company applying for listing held by its parent company, affiliated companies and its directors, supervisors, representatives and shareholders who hold 10 percent or greater of the total number of its issued shares and its related persons shall not exceed 70 percent of the total number of its issued shares. If this 70 percent limit is exceeded, the company applying for listing shall conduct a pre-listing initial public offering to reduce the percentage of shares held by the aforesaid persons to 70 percent or lesser.
4. It shall have at least three independent directors, and at least two independent supervisors.
5. Its operating revenue derived from its parent company in the fiscal year of the application for listing and in the most recent fiscal year shall not exceed 50 percent of its operating revenue; its principal raw materials or principal products or total amount of purchases [obtained from its parent company] during such periods shall not exceed 70 percent of its purchases. However, this restriction shall not apply where the cause is characteristics of its business, market demand and supply conditions, government policy, or any other reasonable causes.
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