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Article 6
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The audit report issued by a CPA for certification of fully paid capital shall indicate the types of the contributions (cash, monetary claims, technologies, stock certificates, other types of property, earnings, capital reserve, merger, demerger, acquisition or share exchange), the issuing prices, the number of shares being issued, and the capital amount, as well as the total number of shares issued and the capital amount before and after the capital increase. Where capital are contributed for incorporation, the CPA shall also indicate in the audit report the sufficiency of the capital for covering direct expenses occurred as of the audit report date.
In the event of capital contributions in cash, the status of contributions shall be examined; where the payments have been deposited in a bank, the deposit certificates shall be verified; where the payments are made by bills, whether these bills have been honored shall be verified; where the payments are made by monetary claims against the company, whether the reasons for incurrence of such claims is truthful shall be verified; where any contributions have been utilized, a statement shall be prepared explaining the purpose of utilization and the relevant certificates shall be verified; and where the contributions have been deposited as time deposits, the CPA's audit report shall indicate whether there is any pledges, cancellation of contract, or assignment.
Where contributions are made through technologies, stock certificates, or other types of property, the names of the shareholders, the types, quantities, prices or criteria for appraising the prices of the property, and the shares or certificates allotted by the company shall be verified.
Where contributions are made through technologies, the technologies developed by the company on its own shall not be used as contributions from employees or shareholders. Moreover, except for companies invested by foreigners or overseas Chinese, the CPA shall obtain opinions of the institutions, organizations or experts concerned on the appraised prices, and indicate the adopted expert opinion in his/her working paper for the audit.
Where contributions are made through share certificates of another company, the CPA shall also indicate in the audit report the appraisal criteria as well as the fairness of the criteria. Share issued by a company limited by shares,Over-the-Counter or Emerging Stock that those have yet to be listed on the Taiwan Stock Exchange may be appraised based on the net worth of the company on the date of evaluation; shares issued by a company that is listed on the Taiwan Stock Exchange , Over-the-Counter or Emerging Stock may be appraised based on the closing price of such shares on the date of evaluation. Where there is no transaction price of such shares on the date of evaluation, the price shall be appraised based on the closing price on the last transaction day before the date of evaluation; in the event of severe fluctuation of the price of such shares, the price shall be appraised based on the average of the closing prices the 30 days before the date of evaluation. The date of evaluation shall fall within the four months prior to the recordation date.
In the event of capitalization of earnings, whether the appropriation of earnings meets the applicable provisions under the Company Law shall be verified against the Articles of Incorporation, the financial statements and the proposal for appropriation of earnings ratified by the shareholders' meeting (or consented by the shareholders). In the event of any inconsistency between the ending balance set forth in the statement of appropriation of earning and the amount listed on the balance sheet as of the recordation date, the reasons for such discrepancy shall be stated in the audit report.
In the event of capitalization of capital reserve, whether the type, source and contents thereof comply with the applicable provisions of the Company Law and whether the calculation of the appropriated amounts is consistent with the amounts charged over the years shall be verified. In the event that the balance of the capital reserve after appropriation is inconsistent with the amount listed on the balance sheet as of the recordation date, the reasons for such discrepancy shall be stated in the audit report.
In case of a merger, the CPA shall state in the audit report whether the accounting of the issuances of new shares for the merger is handled in accordance with the Business Accounting Law, the Guidelines for Handling Business Accounting, the generally accepted accounting principles and related regulations.
The CPA shall also check the names of shareholders, the respective number of shares issued and related matters according to the resolutions of the shareholders' meeting(s) and the board of directors meeting(s) (or the consent of the shareholders) and the merger agreement. In case that goodwill of the merged companies is recognized, the CPA shall first verify the calculation of the relevant figures, so as to ascertain whether the identifiable assets acquired and the liabilities assumed by the surviving company or the newly established company from the merger are evaluated at fair values. The CPA shall then compare the fair value of the acquired identifiable net assets with the acquisition cost, and if the acquisition cost exceeds the fair value of the acquired identifiable net assets, the difference shall be recognized as goodwill.
In case that new shares are to be issued in demerger, the CPA shall check the names of shareholders , the respective number of shares to be issued and related matters according to the resolution of the shareholders' meeting(s) and the demerger plan. The CPA shall also state in the audit report the book value or fair value of the demerged part of the demerged company and the total number of new shares to be issued by the surviving company or the newly established company to the demerged company or its shareholders and related matters.
In case that new shares are to be issued in acquisition, the CPA shall check the names of shareholders, the respective number of shares to be issued and related matters according to the resolution of the shareholders' meeting(s) and the acquisition plan. The CPA shall also state in the audit report the book value or fair value of the acquired part and the total number of new shares to be issued by the acquirer company to the acquiree company or its shareholders and related matters.
In case that new shares are to be issued in share exchange, the CPA shall check the names of shareholders, the respective number of shares to be issued and related matters according to the resolution of the shareholders' meeting(s) and the share exchange plan. The CPA shall also state in the audit report the book value or fair value of the conveyance company and the total number of new shares to be issued by the surviving company or the newly established company to the conveyance company or its shareholders and related matters.
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