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Amendments

Title：

Regulations Governing Loaning of Funds and Making of Endorsements/Guarantees by Public Companies  CH

Amended Date： 2019.03.07 
Article Content Chapter Content Search Article No. Search Legal Basis Amended Article Legislative History Chinese

Title： Regulations Governing Loaning of Funds and Making of Endorsements/Guarantees by Public Companies(2012.07.06)
Date：
Article 1     These Regulations are promulgated pursuant to Article 36-1 of the Securities and Exchange Act ("the Act").
Article 2     A public company shall comply with these Regulations when making loans to and endorsements/guarantees for others; provided that where another act or regulation provides otherwise, the provisions of such act shall prevail.
Article 3     Under Article 15 of the Company Act, a public company shall not loan funds to any of its shareholders or any other person except under the following circumstances:
  1. Where an inter-company or inter-firm business transaction calls for a loan arrangement; or
  2. Where an inter-company or inter-firm short-term financing facility is necessary, provided that such financing amount shall not exceed 40 percent of the lender's net worth.
    The term "short-term" as used in the preceding paragraph means one year, or where the company's operating cycle exceeds one year, one operating cycle.
    The term "financing amount" as used in paragraph 1, sub-paragraph 2 of this Article means the cumulative balance of the public company's short-term financing.    The restriction in paragraph 1, subparagraph 2 shall not apply to inter-company loans of funds between foreign companies in which the public company holds, directly or indirectly, 100% of the voting shares. However, the provisions of Article 9, subparagraphs 3 and 4 concerning the setting of the amount limits and the durations of loans shall still apply.
Article 5     A public company may make endorsements/guarantees for the following companies:
  1. A company with which it does business.
  2. A company in which the public company directly and indirectly holds more than 50 percent of the voting shares.
  3. A company that directly and indirectly holds more than 50 percent of the voting shares in the public company.
    Companies in which the public company holds, directly or indirectly, 90% or more of the voting shares may make endorsements/guarantees for each other, and the amount of endorsements/guarantees may not exceed 10% of the net worth of the public company, provided that this restriction shall not apply to endorsements/guarantees made between companies in which the public company holds, directly or indirectly, 100% of the voting shares.
    Where a public company fulfills its contractual obligations by providing mutual endorsements/guarantees for another company in the same industry or for joint builders for purposes of undertaking a construction project, or where all capital contributing shareholders make endorsements/ guarantees for their jointly invested company in proportion to their shareholding percentages, or where companies in the same industry provide among themselves joint and several security for a performance guarantee of a sales contract for pre-construction homes pursuant to the Consumer Protection Act for each other, such endorsements/guarantees may be made free of the restriction of the preceding two paragraphs.    Capital contribution referred to in the preceding paragraph shall mean capital contribution directly by the public company, or through a company in which the public company holds 100% of the voting shares.
Article 6     "Subsidiary" and "parent company" as referred to in these Regulations shall be as determined under the Regulations Governing the Preparation of Financial Reports by Securities Issuers.
    Where a public company’s financial reports are prepared according to the International Financial Reporting Standards, "net worth" in these Regulations means the balance sheet equity attributable to the owners of the parent company under the Regulations Governing the Preparation of Financial Reports by Securities Issuers.
Article 7     The term "announce and report" as used in these Regulations means the process of entering data to the information reporting website designated by the Financial Supervisory Commission (FSC).
    “Date of occurrence” in these Regulations means the date of contract signing, date of payment, dates of boards of directors resolutions, or other date that can confirm the counterparty and monetary amount of the transaction, whichever date is earlier.
Article 12     A public company shall specify the following matters in its Operational Procedures for Endorsements/Guarantees:
  1. Entities for which the company may make endorsements/guarantees.
  2. Where an endorsement/guarantee is made due to needs arising from business dealings, evaluation standards shall be specified for determining whether the amount of an endorsement/guarantee is commensurate the total amount of trading between the two companies.
  3. The ceilings on the amounts a public company is permitted to make in endorsements/guarantees, including on the public company’s aggregate endorsement/guarantee amount and the amount of its endorsements/guarantees for any single entity, as well as on the aggregate endorsement/guarantee amount, and the amount of endorsements/guarantees for any single entity, that the public company and its subsidiaries as a whole are permitted to make. If the aggregate amount of endorsements/guarantees that is set as the ceiling for the public company and its subsidiaries as a whole reaches 50% or more of the net worth of the public company, an explanation of the necessity and reasonableness thereof shall be given at the shareholders meeting.
  4. Procedures for making endorsements/guarantees.
  5. Detailed review procedures, including:
    1. The necessity of and reasonableness of endorsements/guarantees.
    2. Credit status and risk assessment of the entity for which the endorsement/guarantee is made.
    3. The impact on the company's business operations, financial condition, and shareholders' equity.
    4. Whether collateral must be obtained and appraisal of the value thereof.
  6. Procedures for controlling and managing endorsements/guarantees by subsidiaries.
  7. Procedures for use and custody of corporate chops.
  8. Hierarchy of decision-making authority and delegation thereof.
  9. Announcing and reporting procedures.
  10. Penalty for violation of these Regulations or the company's Operational Procedures for Endorsements/Guarantees by managers and personnel in charge.
  11. For circumstances in which an entity for which the company makes any endorsement/guarantee is a subsidiary whose net worth is lower than half of its paid-in capital, relevant follow-up monitoring and control measures shall be expressly prescribed.
  12. Other particulars required by the FSC.
    In the case of a subsidiary with shares having no par value or a par value other than NT$10, for the paid-in capital in the calculation under subparagraph 11 of the preceding paragraph, the sum of the share capital plus paid-in capital in excess of par shall be substituted.
Article 22     A public company whose loans of funds reach one of the following levels shall announce and report such event within two days commencing immediately from the date of occurrence:
  1. The aggregate balance of loans to others by the public company and its subsidiaries reaches 20 percent or more of the public company's net worth as stated in its latest financial statement.
  2. The balance of loans by the public company and its subsidiaries to a single enterprise reaches 10 percent or more of the public company's net worth as stated in its latest financial statement.
  3. The amount of new loans of funds by the public company or its subsidiaries reaches NT$10 million or more, and reaches 2 percent or more of the public company's net worth as stated in its latest financial statement.
    The public company shall announce and report on behalf of any subsidiary thereof that is not a public company of the Republic of China any matters that such subsidiary is required to announce and report pursuant to subparagraph 3 of the preceding paragraph.
Article 23     A public company shall evaluate the status of its loans of funds and reserve sufficient allowance for bad debts, and shall adequately disclose relevant information in its financial reports and provide certified public accountants with relevant information for implementation of necessary auditing procedures.
Article 25     A public company whose balance of endorsements/guarantees reaches one of the following levels shall announce and report such event within two days commencing immediately from the date of occurrence:
  1. The aggregate balance of endorsements/guarantees by the public company and its subsidiaries reaches 50 percent or more of the public company's net worth as stated in its latest financial statement.
  2. The balance of endorsements/guarantees by the public company and its subsidiaries for a single enterprise reaches 20 percent or more of the public company's net worth as stated in its latest financial statement.
  3. The balance of endorsements/guarantees by the public company and its subsidiaries for a single enterprise reaches NT$10 millions or more and the aggregate amount of all endorsements/guarantees for, investment of a long-term nature in, and balance of loans to, such enterprise reaches 30 percent or more of public company's net worth as stated in its latest financial statement.
  4. The amount of new endorsements/guarantees made by the public company or its subsidiaries reaches NT$30 million or more, and reaches 5 percent or more of the public company's net worth as stated in its latest financial statement.
    The public company shall announce and report on behalf of any subsidiary thereof that is not a public company of the Republic of China any matters that such subsidiary is required to announce and report pursuant to subparagraph 4 of the preceding paragraph.
Article 26     A public company shall evaluate or record the contingent loss for endorsements/guarantees, and shall adequately disclose information on endorsements/guarantees in its financial reports and provide certified public accountants with relevant information for implementation of necessary audit procedures.
Article 26-1     A foreign company as specified under Article 165-1 of the Act ("foreign company") shall comply mutatis mutandis with these Regulations when making loans to, and endorsements or guarantees for, others.
    If the foreign company does not have corporate chops, it may be exempted from application of the provisions of Article 12, paragraph 1, subparagraph 7, and Article 17, paragraph 4.
    Net worth of a foreign company as calculated under these Regulations means the balance sheet equity attributable to the owners of the parent company.