| Title： |
Supplementary Provisions to the Taiwan Stock Exchange Corporation Regulations for Review of Securities Listings(2004.12.13) |
| Date： |
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Article 7
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(deleted)
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Article 8
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The term "financial or business affairs are not separate and independent from those of another person" as used in Article 9, paragraph 1, subparagraph 2 of the Regulations shall mean any of the circumstances below:
1. More than one-half of the directors or supervisors of the applicant company are representatives, directors, supervisors, or shareholders with more than a 10% stake in the outstanding shares of the specified company or institution, and are [therefore] associated persons of the specified company or institution.
2. The applicant company has not yet drafted concrete written regulations to govern the its financial and operational affairs with the specified company or institution and its affiliated companies, or such regulations have not been approved by its board of directors or concretely and effectively implemented by the applicant company; or the applicant company has not yet issued an undertaking and a declaration stating that all financial and operational interaction between them takes place on an arms-length basis.
3. There are serious irregularities when the applicant company's financial condition and the aforesaid regulations are compared with those for other companies in the same industry.
4. Operating revenues derived from the specified company or institution and its affiliates during the fiscal year in which application is made and the preceding fiscal year exceed 50%.
5. Principal materials or products or total procurement amounts from the specified company or institution and its affiliates during the fiscal year in which application is made and the preceding fiscal year exceed 70%, with the possible risk of a high degree of concentration in sourcing for procurement.
6. Sources of capital are heavily concentrated in non-financial institutions.
7. The applicant company has entered into contracts that severely limit its operations or that are patently unreasonable such that it creates an adverse influence on the company.
8. The applicant company jointly shares a line of credit with another person in which its own credit utilization cannot be distinguished.
The term "specified company or institution" as used in the preceding paragraph means that any one of the following circumstances occurred in the fiscal years during and just preceding the year of application:
1. The company held 20% or more and 50% or less of the total outstanding shares in the applicant company.
2. The total shares held by the company and its directors, supervisors, and shareholders holding more than a 10% share equals 30% or more of the total outstanding shares, and there is a record of financial or operational transactions between the two companies.
Calculation of the shareholdings of the above persons shall include shares held by their spouses, minor children, and shares held for their benefit under the names of others.
3. 30% or more of the operating revenues of the applicant company are derived from the given company and its affiliates.
4. More than 50% of the total volume or total cost of procurement of principal materials (materials representing 30% or more of total procurement costs and essential in product manufacturing) and principal products (representing 30% or more of total operating revenues) is derived from the given company and its affiliates.
Subparagraphs 1, 4, and 5 of Paragraph 1 shall not apply to companies in a parent-subsidiary relationship; subparagraphs 4 and 5 shall not apply where the circumstances set forth therein occur due to unique industry characteristics, supply and demand conditions on the market, government policies, or other reasonable factors.
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Article 9
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The phrase "serious labor disputes sufficient to affect normal financial and business operations of the company" as used in Article 9, paragraph 1, subparagraph 3 of the Regulations refers to any one of the following circumstances:
1. The occurrence of a serious labor dispute.
2. Failure to make allocations to the employee welfare fund, to organize an employee welfare committee, or to make monthly allocations to the special account holding labor pension funds in accordance with the law.
3. The occurrence of a serious workplace accident due to inadequate safety or sanitation facilities, or a disposition issued with respect to violation of the Labor Safety and Sanitation Law requiring suspension of part or all of operations, or dangerous machinery or facilities have been installed without passing inspection, provided that where approval is obtained after an application for re-inspection, the above shall not apply.
4. Failure to make payment for labor insurance premiums and default penalties following initiation of a lawsuit for the same.
The phrase "serious environmental pollution sufficient to affect normal financial and business operations of the company" as used in the same subparagraph means any of the following circumstances with respect to the company or venues for its activities:
1. Failure to obtain permits required by law for [pollution] discharge or installation or operation [of pollution control equipment].
2. A pollution incident in which the environmental protection authority has imposed penalties accruing on a daily basis, or failure to make rectification within a specified period of time where rectification has been ordered.
3. Involvement in a public nuisance incident where the company has no effective pollution control facilities, or failure to provide records of normal operation and regular maintenance of pollution prevention equipment.
4. A pollution incident in which the competent authority has ordered the company to stop work, suspend operations, or terminate operations or the relevant pollution permits have been revoked.
5. Careless disposal of waste materials, or failure to store, clean up, or process such materials in accordance with regulations, or a serious pollution incident occurring during processing of such materials, resulting in death, serious bodily harm, or endangerment of health leading to illness.
6. Designation of the company's land as a controlled site or a pollution remediation site due to soil or underground water pollution.
7. Manufacturing, processing, or importation by a juristic person of banned or counterfeited agricultural chemicals, resulting in a conclusive judgment against the responsible person.
The phrase "failure to make rectification" in the same subparagraph shall mean the existence of any of the above circumstances after receipt of the company's application for listing by the TSEC, provided that with respect to a serious environmental pollution incident as referred to in Subparagraph 2 of the preceding paragraph, the standard for determining whether rectification has been made shall be that the company has requested inspection and testing by an agency authorized by the competent environmental authority, that such agency has prepared a report on the inspection, and that the report is the basis for a report to the environmental authority on completion of rectification procedures, and further, that the company has received no additional penalty within three months of issuing the report.
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Article 10
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The term "major trading irregularity" as used in Article 9, paragraph 1, subparagraph 4 of the Regulations shall mean the occurrence of any of the following circumstances with respect to the applicant company, provided that publicly-owned enterprises operated under the relevant accounting laws shall not be subject to this restriction:
1. Where the purpose, terms, or price of purchase or sale of goods, or where the occurrence of a transaction, or its form or substantive nature or the procedure involved, are at variance with those of a normal transaction or are obviously unreasonable.
2. Where, in regard to transactions for acquisition or disposal of assets that require public announcement and reporting in accordance with the competent authority's Guidelines for Handling Acquisition and Disposal of Assets by Public Companies, the company fails to reasonably demonstrate the legality of its internal decision-making process, the necessity of the transaction, ample disclosure of related financial statements, or reasonable price and payment terms and conditions.
3. Occurrence of any of the following circumstances with regard to real estate transactions during the most recent five years, as determined by the signing date of any such transaction:
(1) A real estate purchase from an associated person involves any circumstances set forth in the Standards for Determining the Existence of Irregularities in Real Estate Transactions promulgated by the competent authority.
(2) A sale of real estate to an associated person in which the price of the sale is lower than the pre-calculated or assessed values obtained in accordance with the methods given under the standards for determining the existence of irregularities in real estate transactions under the Guidelines for Purchase of Real Estate by Public Companies.
(3) Terms of payment in a purchase or sale of real estate with an associated person obviously different from those of ordinary real estate transactions, and for which there is no legitimate reason.
(4) The applicant company purchases or sells land at approximately the same time in an area adjacent to land purchased or sold by an associated person, where there is an obvious difference in price, and where there is no legitimate reason for such difference.
(5) The revenues from sales of products or leasing of real estate to an associated person in the final quarters of the most recent five fiscal years exceeds 20% of yearly operating revenues, and where no legitimate reason exists for the excess.
(6) Purchase or sale of real estate to a non-associated person where other evidence exists to show that the transaction is obviously at variance with normal transactions, and where there no legitimate reason exists for the difference.
4. Where loans are extended to another person for purposes other than the financing necessary for business transactions between companies.
The provisions regarding the purchase or sale of real estate involving an associated person under subparagraph 3 of the preceding paragraph shall also apply where either of the two previous owners had the status of associated person, provided that there may be exemption from application of the competent authority's Standards for Determining the Existence of Irregularities in Real Estate Transactions where the period from the date on which the trading counterpart was to acquire the property under the contract to the date of the date of execution of the present contract exceeds five years.
Where an applicant company profits from any of the circumstance set forth under paragraph 1, it shall meet the listing criteria for profitability after deduction of those profits.
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Article 11
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The phrase "failure to make rectification" as used in Article 9, paragraph 1, subparagraph 4 of the Regulations shall mean any one of the following circumstances:
1. Where a person other than the applicant company obtains benefit from an irregular trade, and the person obtaining benefit has returned such benefits to the person entitled to it.
2. Where the investigating or judicial agency has determined that an act irregular trade does not constitute a criminal offense.
3. The irregular trade has already been restored to normal conditions.
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Article 12
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The phrase "already conducted" as used in Article 9, paragraph 1, subparagraph 5 of the Regulations shall mean that the company has already obtained a letter from the Ministry of Economic Affairs approving the amendment of its company registration, as determined on the basis of the date of the letter of approval. The term "currently being conducted" [as used in the same subparagraph] shall mean that the company has already applied to the competent authority in charge of securities and the application has been accepted for processing but the company has not yet obtained a letter of approval for amendment [of its company registration], and shall also apply to any cash capital increase connected with a public sale conducted prior to the [application for] a listing on a stock exchange. The term "capital increase through a new share issue" [as used in the same subparagraph] is a general reference to any issue of new stock for the purposes of a cash capital increase, a capital increase in connection with
merger, capital increase out of unappropriated earnings, and capital increase out of capital reserves.
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Article 13
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The term "failure to prepare financial reports in accordance with relevant laws and regulations and generally accepted accounting principles" as used in Article 9, paragraph 1, subparagraph 6 of the Regulations shall mean any of the following:
1. The financial report is not prepared in accordance with relevant laws and regulations and generally accepted accounting principals, and a certified public accountant issues a negative opinion or is unable to issue an opinion, or a certified public accountant issues an audit report with a qualified opinion, thereby affecting sufficient disclosure in the financial statement.
2. Failure by a company to make correction in its financial report after being instructed to do so by the competent authority.
3. An audit of the company's working papers performed by a certified public accountant and subsequent review by the TSEC which finds material omissions such that it cannot be ascertained whether sufficient disclosure is achieved in the financial report.
The term "not yet able to effectively implement an accounting system, an internal control system, or an internal auditing system" in the same subparagraph shall mean the occurrence of any of the following circumstances:
1. During the year in which it applies for market listing, the applicant company fails to establish a sound written accounting system in accordance with the Criteria Governing the Preparation of Financial Reports by Securities Firms and the Criteria Governing the Preparation of Financial Reports by Issuers.
2. Where the TSEC finds, through on-site inspection, that the company fails to operate in reasonable accordance with its written accounting system.
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Article 14
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The term "serious deterioration" as used in Article 9, paragraph 1, subparagraph 7 of the Regulations shall mean any of the following circumstances:
1. Operating revenues and operating profits for the most recent fiscal year or the fiscal year during which application is made show a marked deterioration relative to other enterprises in the same industry.
2. Net pre-tax profits for the most recent fiscal year or the fiscal year during which application is made show a marked deterioration relative to other enterprises in the same industry.
3. There is continuing negative growth in operating revenues and operating profits for each of the three most recent fiscal years.
4. There is continuing negative growth in net pre-tax profits for each of the three most recent fiscal years.
5. Aggregate capital increases for the three most recent fiscal years equal NT$1 billion or more, or are equal to 200% of the company's capital stock at the closing date of the fourth fiscal year prior to that period, and growth in operating revenues, comparing the most recent fiscal year with the fourth prior fiscal year, falls below 100% or NT$500 million, and the profit per share has been declining in each of the previous three years, provided that capital increases in accordance with mandatory government laws and regulations shall not be subject to these limitations.
6. The company's products or technology are outdated, and it has no plan for improvement.
The provisions of the preceding paragraph do not apply where, as prescribed for companies applying for market listing under Article 4 of the Regulations, the ratio of paid-in capital to operating revenues and net pre-tax profit in the most recent fiscal year are not lower than 12%.
The provisions of subparagraphs 3 and 4 of paragraph 1 do not apply where, due to economic conditions prevailing in the industry, similar enterprises also exhibit deterioration.
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Article 15
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The term "acting in violation of the principle of good faith" as used in Article 9, paragraph 1, subparagraph 8 of the Regulations shall mean any of the following circumstances:
1. With respect to the company:
(1) The bills clearing house announces that a checking account opened by the company applying for listing has been declined, or that checks or negotiable instruments issued by the company with a financial institution as its paying agent were dishonored due to insufficient funds and the records thereof have not yet been cancelled.
(2) The company has been delinquent in the repayment of any loan extended to it by a financial institution.
(3) A criminal sanction has been imposed on the company by a final judgment of violation of the Labor Standards Law, provided that where, within the most recent two years, an examination agency has found through re-inspection that the violation has been corrected.
(4) A final judgment has found the company in violation of the Tax Collection Law.
(5) The company breaches the warranties and representations made in its application for listing.
(6) The company has made materially false and misleading representations, violated the law, or lost creditworthiness resulting in injury to the company's interests or the rights and interests of the shareholders or the public.
2. With respect to the directors, supervisors, general manager, or de facto responsible person:
(1) Any of the circumstances set forth in subparagraphs 1-5 of the preceding paragraph.
(2) Commission of breach of faith, for which a fixed sentence or more severe criminal penalty was delivered.
(3) Other acts in serious violation of laws and regulations or the principle of good faith.
(4) Other serious violations of laws or regulations or the principles of good faith.
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Article 16
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The term "transfer of shares by directors, supervisors, and shareholders holding more than 10% of the issued and outstanding shares" as used in Article 9, paragraph 1, subparagraph 9 of the Regulations shall be taken to include shares transferred during the given period by persons of the aforesaid status, their spouses, minor children, and those holding shares for the benefit of the aforesaid persons, provided that the above shall not include shares transferred after loss of the position of director or supervisor, or when a particular person's shareholding, due to transfer of shares, no longer exceeds 10% of the outstanding shares.
The term "share transfer" as used in the same subparagraph shall mean any transfer by means of sale, gift, or waiver of pre-emptive rights to new shares in a capital increase in favor of subscription by other specific persons.
The term "large number" of shares as used in the same subparagraph shall mean that the total of the shares transferred by the persons specified above exceeds 10% of the total shares of the company issued and outstanding at the time when application for listing is filed.
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Article 17
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The term "the board of directors or supervisors cannot independently perform their functions" as used in Article 9, paragraph 1, subparagraph 10 of the Regulations shall mean the occurrence of any of the following circumstances:
1. Any of the following conditions during the year to date on the part of persons acting as an independent director or independent supervisor of the company applying for listing that compromise their independence:
(1) Being an employee of the company applying for listing or a director, supervisor, or employee of an affiliated enterprise of the applicant company, except where the position of independent director or supervisor in the applicant company is held concurrently by the independent director or independent supervisor of its parent company or subsidiary.
(2) Directly or indirectly holding 1% or more of the total outstanding shares of the applicant company, or being one of the top ten natural person shareholders of the applicant company.
(3) Being a spouse or direct relation within the second degree of kinship of any of the persons in the preceding two subparagraphs.
(4) Being a director, supervisor, or employee of a juridical person shareholder that directly holds 5% or more of the total outstanding shares of the applicant company or being a director, supervisor, or employee of one of the top five juridical person shareholders.
(5) Being a director, supervisor, manager, or shareholder holding 5% or more of the shares of a specific company or institution that has financial or operational interactions with the applicant company.
(6) Being a professional, an independent contributor, a partner, or a company, or an executive director, partner, director, or manager of an institutional consortium or the spouse of same that provides financial, business, or legal or consulting services to the applicant company or an affiliated enterprise of same.
(7) Concurrently serving as an independent director or independent supervisor for a combined total of five or more other enterprises.
2. Where a person serving as independent director or independent supervisor of the applicant company has less than five years of the work experience required for the commercial, financial, legal, or corporate operations areas.
3. Where a person serving as independent director or independent supervisor of the applicant company has failed to receive training of three [course] hours per year to acquire professional knowledge in the areas of law, finance, or accounting and obtain relevant certification documents issued from any of the continuing education systems under (i), (ii), and (iv) of 3.(4) of the Exemplification of Directions Governing Implementation of Continuing Education for Directors and Supervisors of Listed and OTC Companies.
4. Where more than one-half of the total number of directors of the applicant company are mutually related as lineal relations of the first degree; or where more than two-thirds of the total number of directors of the applicant company are mutually related in any of the ways listed below, or where all of the supervisors of the applicant company are mutually related in any of the ways listed below or share with any one director such a relationship:
(1) Spouse
(2) Lineal relations within the second degree of kinship
(3) Collateral relations within the third degree of kinship
(4) Representatives of the same juristic person
(5) Associated person The provisions of subparagraph 4 of paragraph 1 shall also apply where the government or a juristic person is the shareholder, and in their capacity as government or juristic person are elected as director or supervisor and designate a natural person as representative to exercise those functions on their behalf, and shall also apply to their representatives who, in that capacity, are elected to serve as director or supervisor.
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Article 17-1
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The term "allocation ratio" as used in Article 11, paragraph 1 of the Regulations shall mean:
1. The first time a public company applies to list its stock on a stock exchange, it shall allocate to an underwriter for public sale at least 10% of the shares it is planning to list, provided that where this would require the allocation of 20 million shares or more for underwriting, the company may allocate a minimum of 20 million shares for public sale.
2. Where a public company has traded its stock on OTC markets as emerging stock for less than two years, the number of shares it provided for subscription by the recommending securities firm for such emerging stock may be deducted from the number of shares it provides for underwriting hereunder, provided that the deduction shall not exceed 30% of the shares provided for underwriting hereunder.
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