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Article 4-1
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In the underwriting of securities on a firm commitment basis, except where prescribed by other laws and regulations (for example, the GreTai Securities Market Regulations Governing the Requirement to Engage a Recommending Securities Firm to Carry Out Underwriting and the Ratio of Subscriptions for its Own Account for Applications by Public Companies for OTC Stock Trading), an underwriter shall act as prescribed by the following provisions with respect to the proportion of securities held for its own account; provided, however, that for any shares purchased for its own account that remain unsubscribed at the closure of the underwriting period, these restrictions shall not apply:
1. In the underwriting of an initial public offering (IPO) carried out by a public company on the stock exchange or an over-the-counter (OTC) market, the underwriter shall hold for its own account between 10 percent and 25 percent of the total number of shares underwritten; provided, however, that this provision shall not apply to the underwriting of an IPO carried out by a state-owned enterprise or a technology-based enterprise as set forth under the provisions of the Taiwan Stock Exchange Corporation Criteria for Review of Securities Listings;
2. In the underwriting of cash capital increase, convertible corporate bonds, ordinary corporate bonds not by negotiated sale, financial bonds not by negotiated sales, and Taiwan Depositary Receipts for listed or OTC-traded companies, the underwriter shall hold for its own account from 5 percent to 15 percent of the total number of units underwritten;
3. In the underwriting of cash capital increase for companies that are neither listed nor OTC-traded, the underwriter may hold for its own account a proportion not to exceed 15 percent of the total number of units underwritten; and
4. In the underwriting of preferred shares, preferred shares with warrants, and corporate bonds with warrants for public companies, the underwriter may hold for its own account a proportion not to exceed 15 percent of the total number of units underwritten.
5. Where a public placement of beneficiary certificates by a trustee institution or a public offering of asset-backed securities by a special purpose company is not undertaken through negotiated sale, purchases on own account shall not exceed fifteen percent of the total amount underwritten.
For issues undertaken entirely by book building, each underwriter shall hold for its own account not more than 10 percent of the total number of units underwritten.
Where a public company carrying out a cash capital increase encounters waiver of subscription rights by an existing shareholder in accordance with the provisions of Article 267, paragraph 3 of the Company Act, and the authority with jurisdiction over such existing shareholder consents to incorporation of [the corresponding units] into the public underwriting, the portion thus incorporated into the public underwriting shall be excluded when calculating the "total number of units underwritten" set out in paragraph 1, subparagraph 2.
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Article 5-1
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An underwriter [intending to] underwrite securities shall publish an underwriting notice for two consecutive days in daily newspapers, and [in so doing] shall act in accordance with the Chinese Securities Association Guidelines Governing the Particulars to be Recorded by Securities Underwriters in Securities Underwriting Announcements.
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Article 6
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In the underwriting of an IPO on the stock exchange or an OTC market (other than the GreTai Securities Market's second board [Tiger Board]) involving issued shares or cash capital increase through a new share issue, and in the underwriting of a cash capital increase by a company already listed on the stock exchange or an OTC market in which all shares are put up for underwritten distribution, where underwriting is not carried out using the book building method, the shares shall be offered through competitive auction; provided, however, that in the underwriting of an IPO on the stock exchange or an OTC market where the total number of shares is less than 3 million, shares put up for public sale may be allocated entirely through public subscription.
In the underwriting of convertible corporate bonds or corporate bonds with warrants, and in public placement offerings carried out in accordance with the provisions of Article 22 paragraph 3 of the Securities and Exchange Act (hereinafter, "public placement offerings"), the securities may be offered through competitive auction.
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Article 7
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In the underwriting of securities issued through competitive auction as prescribed in the preceding article, except where the issuer is a government-owned enterprise, underwriting of that portion of the offering put up for public sale shall be handled in accordance with the following provisions:
1. In the underwriting of an IPO on the stock exchange or an OTC market (other than the GreTai Securities Market's second board [Tiger Board]), 50 percent shall be offered through competitive auction, and the remainder shall be offered through public subscription.
2. In the underwriting of an offering of convertible bonds, and in the underwriting of a cash capital increase by a company already listed on the stock exchange or an OTC market in which all shares are put up for underwritten distribution, all units shall be offered through competitive auction.
3. In the underwriting of offering of corporate bonds with warrants and public placements, the units may be offered either entirely through competitive auction, or through a combination of competitive auction and public subscription.
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Article 8
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In the underwriting of securities offered through competitive auction, the lead underwriter shall first prepare documentation determining the particulars listed in the subparagraphs below. After being signed or sealed by the lead underwriter and co-underwriters and the issuer of the securities, said documentation shall be reported to the Chinese Securities Association:
1. the total number of underwritten units, number of units held by the underwriter for its own account as prescribed by Article 4-1, the number of units offered by competitive auction, and minimum bidding unit;
2. the minimum offering price as resolved by negotiation with the issuer;
3. the firm-commitment fee or best-efforts underwriting fee, as resolved by negotiation with the issuer;
4. the unit size of lots offered through public subscription;
5. the names of the members of the underwriting syndicate, and the amount of securities apportioned to each, as specified by Article 7;
6. the method of allocating among the members of the underwriting syndicate any units that remain unsubscribed after conclusion of competitive auction; and
7. the date(s) of competitive auction and the time(s) for submitting and opening bids, as agreed in consultation with the Chinese Securities Association.
The upper limit for the minimum offering price in subparagraph 2 of the preceding paragraph shall, in the case of an IPO on the stock exchange or an OTC market, be the theoretical price established using "pricing formulae commonly employed in the market" as set forth in the Guidelines for the Use of Financial Information in the Pricing of Securities for Underwriting, excepting convertible corporate bonds and corporate bonds with warrants; in the underwriting of a cash capital increase by a company already listed on the stock exchange or an OTC market in which all shares are put up for underwritten distribution, [it] shall not be lower than 90 percent of (1) the closing common share price on the business day prior to the offer through competitive auction, or (2) the simple average of closing common share prices over either the three or five business days prior to the offer through competitive auction, factoring out bonus shares issued as stock dividend (or treasury shares canceled in connection with a
capital reduction).
In the underwriting of convertible corporate bonds and corporate bonds with warrants by competitive auction, the minimum offering price, as negotiated pursuant to paragraph 1 subparagraph 2, shall not exceed the par value of said securities.
In the event that unsubscribed units as specified in paragraph 1 subparagraph 6 are allocated by the underwriting syndicate to a specified party through negotiated sale, only the parties listed in Article 35 shall participate in said placement, and those listed in Article 36 shall not participate.
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Article 9
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A lead underwriter of securities shall make public announcement for two consecutive days in daily newspapers on the first and second days on which public bids are accepted. The content of said announcement shall be reported to the Chinese Securities Association, and shall include the items in the following subparagraphs:
1. name of the security;
2. name, address, and telephone number of the underwriters;
3. method, time period, and site of the bidding;
4. date, time, and site of the opening of the bids;
5. minimum offering price and minimum bidding unit;
6. total quantity of securities to be put up for underwritten distribution; total number of units retained for their own accounts by the underwriters; the total number of units being offered for competitive auction, and the amount of the tender guarantee (the amount of the tender guarantee shall not be less than 20 percent of the amount of the tender);
7. the maximum quantity of securities that shall be allocated to an individual bidder;
8. any statutory restrictions upon holding percentages as may be set forth in other laws or regulations with respect to the industry to which the issuer belongs (please list these on the bid form); and
9. other supplemental items that must be disclosed in order to safeguard the public interest and investors.
The maximum quantity that each participant shall receive, as referred to in subparagraph 7 of the preceding paragraph, shall not exceed 3 percent of the portion of the offering put up for public sale; provided, however, that where convertible corporate bonds or corporate bonds with warrants are underwritten through competitive auction, this restriction shall not apply to banks, insurance companies, securities investment trust funds managed by securities investment trust enterprises, Qualified Foreign Institutional Investors (QFIIs), or any party listed under Article 35 subparagraph 5, in which cases the allocation shall not exceed ten percent of the portion of the offering put up for public sale.
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Article 15
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After closure of the tender period, the Taiwan Stock Exchange shall open the bids on the prescribed opening date.
Except for underwriting through competitive auction of an IPO on the stock exchange or an OTC market involving cash capital increase through a new share issue, or of additional offerings on the stock exchange or an OTC market involving a cash capital increase (such offerings must be handled in accordance with the provisions of Article 17-1), securities shall be awarded on the basis of bid price in descending order. Identical bids shall be awarded in random order, generated by computer, until the entire offering has been awarded.
No individual bidder may be allocated a greater proportion of the tender than as prescribed by Article 9 paragraph 2. If the awarded quantity of securities exceeds said proportion, and the lots are cleared at a uniform price, the surplus lots are removed in random order generated by computer. If the lots are cleared at two or more different prices, lots of equal size are removed from either end of the price spectrum, until the prescribed proportion is reached. In the event that one lot remains after the above process, said lot shall be removed from the upper end of the price spectrum.
In addition to complying with paragraph 3 of this Article, the underwriter shall also handle the results of the opening of bids in compliance with all other relevant laws and regulations, and shall provide all relevant data as prescribed by the Taiwan Stock Exchange and the Chinese Securities Association.
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Article 16
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With the exception of public offerings and cash capital increase by a listed or OTC company, when the underwriting of securities is undertaken entirely by competitive auction and the total number of securities awarded by tender reaches the full amount available for allocation, the price at which the security opens on its first day of listing and the price paid by the underwriter for units retained for its own account shall be computed as the weighted average of the bid price of all successful bids. Decimals beyond cents shall be rounded up or down.
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Article 17
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With the exception of an IPO on the stock exchange or an OTC market involving cash capital increase through a new share issue, in the underwriting of securities undertaken partly by competitive auction and partly by public subscription, when the total number of securities awarded by competitive auction reaches the full amount available for allocation, the price of those units allocated by public subscription and those retained by the underwriter for its own account shall be determined by one of the following methods:
1. When not all tenders are awarded at a price greater than a specified multiple of the minimum offering price, as prescribed by Article 8 paragraph 1 subparagraph 2, it shall be computed as the weighted average price of all tenders awarded at a price within a specified multiple of the minimum offering price. Decimals beyond cents shall be rounded up or down; and
2. When all tenders are awarded at a price greater than a specified multiple of the minimum offering price, as prescribed by Article 8 paragraph 1 subparagraph 2, it shall be computed as a specified multiple of the minimum offering price. Decimals beyond cents shall be rounded up or down.
The specified multiple of the minimum offering price referred to in the preceding paragraph shall be resolved by negotiations between the underwriting syndicate and the issuing company, but shall not exceed a multiple of 1.3.
Except for a public placement, an IPO on the stock exchange, or an OTC market involving cash capital increase through a new share issue, or where otherwise provided under law, the price at which the security opens on its first day of listing shall be the price underwritten for public subscription as determined in the preceding paragraph.
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Article 17-1
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Underwriting through competitive auction of an IPO on the stock exchange or an OTC market involving cash capital increase through a new share issue, or of additional offerings by listed or OTC companies involving a cash capital increase, shall be handled through uniform price clearing, whereby the Taiwan Stock Exchange, in opening the bids, adds up the cumulative total of the bid quantities, starting with the highest-priced bid and working its way down until the entire offering has been cleared, with the lowest price necessary to sell all securities offered through competitive auction taken as the uniform clearing price. If the total number of securities bid for in valid bids is insufficient to cover the all the securities offered through competitive auction, then the minimum offering price, as prescribed by Article 8 paragraph 1 subparagraph 2, shall serve as the uniform clearing price.
Those bidding at or above the uniform clearing price are awardees, and in all cases their bids will be cleared at the uniform clearing price.
If the total number of securities bid for in valid bids exceeds the number of securities offered through competitive auction, then those submitting bids at the uniform clearing price shall be awarded securities in random order, generated by computer, until all securities offered through competitive auction have been awarded.
The quantity of securities awarded to any single bidder shall not exceed the proportion set forth under Article 9 paragraph 2. Where an award does exceed this proportion, the quantity in excess shall be select at random by computer and subtracted from the award.
The uniform clearing price shall serve as: the offering price for those units of said security retained by the underwriter for its own account, for units that remain unsubscribed after conclusion of competitive auction; the subscription price for those units allocated through public subscription; and the price at which a security opens on its first day of listing in the case of underwriting through competitive auction of an IPO on the stock exchange or an OTC market involving cash capital increase through a new share issue.
In addition to complying with paragraph 4 of this Article, the underwriter shall also handle the results of the opening of bids in compliance with all other relevant laws and regulations, and shall provide all relevant data as prescribed by the Taiwan Stock Exchange and the Chinese Securities Association.
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Article 18
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In the underwriting of securities by competitive auction, if the total number of securities bid for is insufficient to cover the number of securities offered through competitive auction, then the minimum offering price, as prescribed by Article 8 paragraph 1 subparagraph 2, shall serve as the offering price for those securities that remain unallocated after competitive auction and those securities retained by the underwriter for its own account, and as the subscription price for those securities allocated through public subscription. Units that remain unsubscribed after conclusion of competitive auction shall be allocated as prescribed by Article 8 paragraph 1 subparagraph 6.
Except for the underwriting of a public placement or of additional offerings by listed or OTC companies involving a cash capital increase, the price at which the security opens on its first day of listing shall be the offering price set forth under the preceding paragraph.
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Article 21
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In the underwriting of an IPO on the stock exchange or an OTC market (other than the GreTai Securities Market's second board [Tiger Board]) involving issued shares or cash capital increase through a new share issue, where the shares are not offered through competitive auction, the shares shall be underwritten using the book building method. The underwriting syndicate shall use the book building method to underwrite 50% of the shares put up for public sale, and the members of the underwriting syndicate shall offer the remainder through public subscription; provided, however, that where the total number of shares is less than 3 million, shares put up for public sale may be allocated entirely through public subscription.
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Article 22
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In the following types of securities underwriting cases, the part put up for public sale may be undertaken entirely by book building or partly by book building and partly by public subscription:
1. (deleted);
2. offerings of corporate bonds and financial bonds;
3. offerings of Taiwan Depositary Receipts; and
4. public placements.
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Article 22-1
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Where either of the following types of underwriting cases are undertaken through the use of book building, the part put up for public sale shall be underwritten entirely by book building:
1. underwriting of a public offering by a company already listed on the stock exchange or an OTC market in which the offering involves a cash capital increase through the issue of new shares and the entire offering is put up for underwritten distribution; or
2. underwriting of a public placement of beneficial securities by a trustee institution, or underwriting of a public placement of asset-backed securities by a special-purpose company.
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Article 24
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In the underwriting of securities by book building, the underwriter shall make a public book building announcement in daily newspapers for two consecutive days on the first and second days on which book-building bids are accepted. The content of said announcement shall be reported to the Chinese Securities Association, and shall include the items in the following subparagraphs:
1. name of the security;
2. total number of underwritten securities, number of securities retained by the underwriters for their own accounts, the number of securities for public sale, and the number of securities for allocation by book building as a proportion of the total number of securities put up for public sale;
3. where underwriters collect a book-building bid deposit in accordance with the provisions of Article 40 or Article 42: the collection method, who is required to pay it, the amount, and conditions under which the deposit may be confiscated;
4. name, address, and telephone number of the underwriters;
5. the probable range of the offering price;
6. object of subscription, and the method, time period, and site for undertaking subscription; and
7. other supplemental items that must be disclosed in order to safeguard the public interest and investors.
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Article 33
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When the portion [of an offering] that is put up for public sale is not entirely underwritten by competitive bidding, after registering the underwriting contract with the Chinese Securities Association, the underwriter shall carry out the following:
1. Day One: Make public announcement of award (announcement of public subscription underwriting shall be concurrently made at this time), and begin mailing notifications of award and payment notices (to be formatted per Attachment 3);
2. Day Four: Refund bid deposits (per Article 12 paragraph 2) to unsuccessful and disqualified bidders;
3. Delivery of company prospectuses and matters relevant to payment shall be undertaken simultaneously with the public subscription.
Matters relevant to payment in subparagraph 3 of the preceding paragraph above shall be undertaken by the method designated by the underwriter. The deadline for payment shall be identical to that by which awardees in public subscription, as specified by Article 53 paragraph 1 subparagraph 7, must make payment for subscribed securities to the designated bank.
If either of the dates set forth in paragraph 1 subparagraphs 1 and 2 falls on a weekend, regular holiday, or bank holiday, it shall be moved forward by one day next following the given day, and the dates that follow shall be moved forward accordingly.
The dates specified under paragraph 1 may be changed if necessary by applying for approval with the Chinese Securities Association.
The payment referred to in paragraph 1 subparagraph 3 shall be the purchase price for the securities, less the bid deposit as prescribed in Article 12 paragraph 2. In the event that the awardee fails to fulfill his payment obligation within the specified time period, the underwriter may confiscate the bid deposit, and shall subscribe on its own account, at the price offered to said awardee, to the units that were to have been allocated to said awardee.
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Article 34
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When the portion [of an offering] that is put up for public sale to outside parties is entirely underwritten by competitive bidding, after registering the underwriting contract with the Chinese Securities Association, the underwriter shall carry out the following:
1. Day One: Make public announcement of award, make public underwriting announcement, and begin mailing notifications of award, prospectuses, and payment due notices;
2. Day Four: Begin refunding bid deposits (per Article 12 paragraph 2) to unsuccessful and disqualified subscribers; payment period commences;
3. Day Seven: Payment deadline;
4. Day Eight: Complete compilation of related registers; issuer applies to Taiwan Stock Exchange or GreTai Securities Market for a securities listing on the stock exchange or an OTC market;
5. Day Nine: Announcement of securities listing on the stock exchange or an OTC market.
6. Day Ten: Securities are issued and listed on the stock exchange or an OTC market.
In the underwriting of securities offered through public placement, the procedures set forth in subparagraphs 4, 5, and 6 under the preceding paragraph, which are connected with application for listing of securities on the stock exchange or an OTC market, need not be carried out.
Where any of the dates set forth in the preceding paragraph falls on a weekend, regular holiday, or bank holiday, it shall be moved forward by one day next following the given day, and the dates that follow shall be moved forward accordingly.
The dates specified under paragraph 1 may be changed if necessary by applying for approval with the Chinese Securities Association.
The payment referred to in paragraph 1 subparagraph 3 shall be the purchase price for the securities, less the bid deposit as prescribed by Article 12 paragraph 2. In the event that the awardee fails to fulfill his payment obligation within the specified time period, the underwriter may confiscate the bid deposit, and shall subscribe on its own account, at the price offered to said awardee, to the units that were to have been allocated to said awardee.
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Article 39
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The underwriter shall keep information relating to ordinary bids for a period of thirty days after the public announcement of award. Bidding materials for disqualified bids and awardees shall be stored for a period of one year. However, if the SFC or the Chinese Securities Association deems it necessary, it may request an extension of the storage period.
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Article 40
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Where a company listed on the stock exchange or an OTC market carries out a cash capital increase in which all shares are put up for underwritten distribution, and all shares put up for public sale are allocated through the book building method, after the price has been set and the underwriting contract has been registered with the Chinese Securities Association, the following matters shall be carried out:
1. Day One: Publicly release an underwriting announcement and begin mailing subscription notices, prospectuses, and notices of payment due (to be formatted per Attachment 4);
2. Day Four: Payment period commences, and book-building bid deposits not corresponding to allocated shares are returned to unsuccessful bidders;
3. Day Seven: Payment deadline;
4. Day Eight: Shareholders' register is completed; issuer applies to the Taiwan Stock Exchange or the GreTai Securities Market to list certificates of payment for shares on the stock exchange or an OTC market;
5. Day Nine: Issue public announcement concerning listing of certificates of payment for shares on the stock exchange or an OTC market;
6. Day Ten: Certificates of payment for shares are issued and listed on the stock exchange or an OTC market; and
7. (deleted)
If any of the dates set forth in the preceding paragraph falls on a weekend, regular holiday, or bank holiday, it shall be moved forward by one day next following the given day, and the dates that follow shall be moved forward accordingly.
The dates set forth under paragraph 1 may be changed if necessary by applying for approval with the Chinese Securities Association.
Where a company listed on the stock exchange or an OTC market carrying out a cash capital increase uses the book building method to allocate all shares (other than those securities set aside for subscription by the company's employees) that are put up for underwritten distribution and public sale, those shares allocated to the company's employees may be handled in accordance with the provisions of paragraph 1, provided that said employees can comply with the payment period specified in paragraph 1.
Where matters are undertaken in the manner set forth under paragraph 1, shares may be allocated on a priority basis to existing shareholders; provided, however, that the restrictions listed in Articles 27 and 36 shall still apply.
When a bidder submits a book-building bid form, the securities underwriter may collect a bid deposit from the bidder of not more than 20 percent of the value of the securities bid for.
The book-building bid deposits not corresponding to allocated shares as referred to in the above paragraph 1 subparagraph 2 means the book-building bid deposits paid by unsuccessful bidders, and bid deposits paid by awardees in excess of the amount required for securities actually allocated to them.
The payment to be made by the bidder as referred to in paragraph 1 subparagraph 2 above shall be the price of the securities subscribed less any book-building bid deposit remaining after the bidder has received (or not received) a refund in accordance with the provisions of the preceding paragraph. In the event a bidder does not fulfill his payment obligation within the allotted time, the securities underwriter may confiscate the book-building bid deposit and shall retain for its own account said securities at the price offered to the bidder.
An underwriter that collects book-building bid deposits as prescribed by paragraph 6 above shall do so as prescribed by Article 12 paragraph 4.
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Article 41
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Where an underwriting case is handled as prescribed by Article 22 and Article 22-1 subparagraph 2, and all shares are offered using book building, after the price has been set and the underwriting contract has been registered with the Chinese Securities Association, the following matters shall be carried out:
1. Day One: Publicly release an underwriting announcement and begin mailing subscription notices, prospectuses, related subscription notices, and notices of payment due;
2. Day Four: Payment period commences;
3. Day Seven: Payment deadline;
4. Day Eight: Complete compilation of related registers; issuer applies to Taiwan Stock Exchange or GreTai Securities Market for a securities listing on the stock exchange or an OTC market;
5. Day Nine: Announcement of securities listing on the stock exchange or an OTC market.
6. Day Fifteen: Securities are issued and listed on the stock exchange or an OTC market.
In an underwriting carried out as set forth under Article 22 subparagraph 4, the requirements set forth in subparagraphs 4, 5, and 6 above (concerning application to the Taiwan Stock Exchange or the GreTai Securities Exchange for a listing on the stock exchange or an OTC market) shall not apply.
If a date set forth in any of the subparagraphs under paragraph 1 falls on a weekend, regular holiday, or bank holiday, it shall be moved forward by one day next following the given day, and the dates that follow shall be moved forward accordingly.
The dates set forth under paragraph 1 may be changed if necessary by applying for approval with the Chinese Securities Association.
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Article 42
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If the portion of an offering put up for public sale is underwritten partly by book building and partly by public subscription as prescribed by Articles 21 and Article 22 (excepting underwriting as prescribed by the preceding Article), after the underwriting contract has been registered with the Chinese Securities Association, the following matters shall be carried out:
1. Day One: Publicly release a book-building allocation announcement (announcement of public subscription underwriting shall be concurrently made at this time) and begin mailing subscription notifies, prospectuses, and notices of payment due (formatted per Attachment 4), or subscription forms and notices of payment due (formatted per Attachments 5, 5-1, and 5-2 respectively), or Taiwan Depositary Receipt notices of payment due (formatted per Attachment 6); and
2. Payment period: The payment deadline shall be identical to that applying to public subscription lottery winners with respect to the forwarding of subscription payment to their bank, as set forth under Article 53 paragraph 1 subparagraph 7.
If any of the dates set forth under the preceding paragraph falls on a weekend, regular holiday, or bank holiday, it shall be moved forward by one day next following the given day, and the dates that follow shall be moved forward accordingly.
The dates specified under paragraph 1 may be changed if necessary by applying for approval with the Chinese Securities Association.
Between the time a bidder commits to the purchase of securities and the commencement of the payment period as set forth in paragraph 1 subparagraph 2, the underwriter may request that the subscriber pay a book-building bid deposit of the full amount or part of the amount of the purchase price of said securities. The payment to be made by the bidder as referred to in paragraph 1 subparagraph 2 above shall be the price of the securities subscribed less the book-building bid deposit. In the event a bidder does not fulfill his payment obligation within the allotted time, the securities underwriter may confiscate the book-building bid deposit.
When the underwriter referred to in the preceding paragraph accepts a book-building bid deposit from a subscriber, it shall follow the requirements as prescribed by Article 12 paragraph 4.
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Article 43
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The provisions of Articles 35 and 36 shall apply mutatis mutandis with respect to the types of bidders from whom an underwriter is allowed to accept bids in a book building process; provided, however, that for underwriting undertaken as prescribed by Article 22 or Article 22-1 subparagraph 2, the types of bidders from whom an underwriter is allowed to accept bids shall not be subject to the limitations prescribed under Article 36 subparagraphs 1 through 7.
For securities allocated by an underwriter but not paid for by the subscribers and reallocated to new subscribers by negotiated sales, the provisions in the preceding paragraph shall apply mutatis mutandis to the new subscribers.
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Article 52
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The following offerings shall be undertaken by public subscription:
1. in the underwriting of an offering carried out other than as prescribed in Article 6 paragraph 2, Article 22, Article 22-1 subparagraph 2, or Article 31, or in the underwriting of a cash capital increase by a company listed on the stock exchange or an OTC market in which not all shares are put up for underwritten distribution: the portion put up for public sale that must be offered entirely by public subscription;
2. in the underwriting of an offering as prescribed in Article 7, where the portion put up for public sale is offered partly by competitive auction: any remaining portion that must be offered by public subscription;
3. in the underwriting of an offering as prescribed in Articles 21 and 22, where the portion put up for public sale is offered partly by book building: any remaining portion that must be offered by public subscription;
4. in the underwriting of an offering as prescribed in Article 31 paragraph 1, where a part is offered by negotiated sale: any remaining portion that must be undertaken by public subscription; and
5. in the underwriting of an IPO on the stock exchange or an OTC market: any offering in which fewer than 3 million shares are underwritten, and (1) any offering that is not undertaken by competitive auction or (2) any offering where a book building process is employed as prescribed under Article 21.
In an underwriting where the shares are offered by public subscription, the total number of shares underwritten by any given underwriter for allocation by public subscription may not be less than 500 lots for a best efforts offering and 300 lots for a firm commitment offering; provided, however, that this restriction shall not apply where the total number undertaken by public subscription is less than 1,000 lots for a best efforts offering and 600 lots for a firm commitment offering.
Where the total number of shares in an offering for public subscription is less than 3 million shares, each lot shall be restricted to 1,000 shares.
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Article 53
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For an offering by public subscription, the underwriter shall, after registering the underwriting contract with the Chinese Securities Association, observe the following schedule in working together with the broker to handle matters relating to subscription, lottery, and the withholding of lottery winner payments:
1. Day One: Publicly release an underwriting announcement and commence subscription;
2. Day Four: Subscription period closes. Deadline for payment of subscription fee to correspondent bank;
3. Day Five: Date of withholding of subscription processing fee. Broker's bank undertakes matters regarding withholding of subscribers' subscription processing fees;
4. Day Six: Date of settlement of subscription processing fee;
5. Day Seven: Date of public lottery drawing. The Taiwan Stock Exchange Corporation (TSEC) undertakes drawing. Lead underwriter announces list of winners. TSEC produces and sends report of winner information to each broker. TSEC compiles and reports the information to the lead underwriter for provision to subscribers for their review;
6. Day Eight: Underwriter shall issue, within two days by registered post, a lottery winner notification slip, prospectus (or subscription form), and subscription waiver declaration (formatted as in Attachment 7) to each lottery winner;
7. Day Fourteen: Deadline for reception of any subscription waivers from lottery winners. Deadline for payment by lottery winner to its bank of the subscription payment and the cost of mailing the lottery winner notification slip and related materials (hereinafter, the "lottery winner notification fee") as set forth under subparagraph 6;
8. Day Fifteen: Subscription payment and lottery winner notification fee deducted [from lottery winners' bank accounts]; and
9. Day Sixteen: Date of settlement of the subscription payment and lottery winner notification fee.
The subscriber shall, on any given day during the subscription period between 09:00 and 14:00, fill-in a subscription form (formatted as in Attachment 8) at the business premises of the broker or entrust the broker by phone to fill in such a form, or shall, during the subscription period before 14:00 on the day of the deadline, fill in and submit a subscription form by fax or Internet.
Every day during the subscription period until the deadline, the broker shall compile up until the previous day and place the subscription information in the trading room as a reference for subscribers or for voice or computer query.
If any of the dates set forth in paragraph 1 subparagraphs 2, 3, 4, 5, 6, 7, 8, and 9 falls on a weekend, regular holiday, or bank holiday, it shall be moved forward by one day next following the given day, and the dates that follow shall be moved forward accordingly.
The dates specified under paragraph 1 may be changed if necessary by applying for approval with the Chinese Securities Association.
The meaning of the document reception deadline for the subscription waiver declaration in paragraph 1 subparagraph 7 is that the lottery winner may, by 14:00 on the day of the deadline, fill in and submit the said declaration to the original recipient broker in person, by mail, fax, or Internet.
A lottery winner who does not have sufficient funds to allow his bank is to deduct the subscription payment and lottery winner notification fee as prescribed in paragraph 1 subparagraph 8 shall be deemed to have waived his subscription, and the processing fee deducted as prescribed by subparagraph 3 of the same paragraph shall not be refunded.
Where a lottery winner does not have sufficient funds in his bank account or waives his subscription, as set forth in the preceding paragraph, deduction of the lottery winner notification fee shall be deducted with precedence.
The Chinese Securities Association shall prescribe the standard for the lottery winner notification fee. A securities firm shall be responsible for compensation for any loss to the lottery winner resulting from problems in service of the lottery winner announcement; provided, however, that this provision shall not apply where the securities firm was not negligent.
The procedures related to the allocation of securities by public subscription by securities firms as prescribed by paragraph 1 shall be separately prescribed by the Chinese Securities Association. If the number of shares subscribed does not exceed the number of shares to be sold, all qualified subscribers shall be deemed lottery winners, and a public lottery shall be unnecessary.
After the subscriber has commissioned subscription with a broker, the subscription form shall not be withdrawn or changed.
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Article 60
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Where subscription volume exceeds the number of securities to be sold, the TSEC shall undertake a computerized public lottery among qualified subscriptions. The TSEC shall invite representatives of the Chinese Securities Association, related groups, and the issuer to jointly monitor the lottery.
When undertaking the public lottery, the TSEC shall ask the monitors to draw the lots.
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Article 72
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For an offering by negotiated sale, the underwriter shall complete the offering within the offering period.
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