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Relevant Laws

Title：Supplementary Provisions to the Taiwan Stock Exchange Corporation Rules for Review of Securities Listings (2023.09.05)
Article 9     The phrase "material labor dispute sufficient to affect normal financial and business operations of the company" as used in Article 9, paragraph 1, subparagraph 3 of the Rules refers to any one of the following circumstances:
  1. The occurrence of a material labor dispute.
  2. The occurrence of a material workplace accident due to inadequate safety or sanitation facilities, or a disposition issued with respect to violation of the Occupational Safety and Health 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.
  3. Failure to make payment for labor insurance premiums and default penalties following initiation of a lawsuit for the same.
    The phrase "material pollution of environment 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ordered the company to stop work, suspend operations, or terminate operations or the relevant pollution permits have been revoked.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 material 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 land of the company designated by the competent authority of the Soil and Groundwater Pollution Remediation Act as a controlled site or a pollution remediation site due to soil or underground water pollution, unless the pollution control plan or survey and assessment plan has been approved by the environmental protection authority, the remediation fee has been entered in accordance with generally accepted accounting principles and no material impact has been caused to the operation.
  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 "has not made improvement" 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 TWSE.
    With respect to a material environmental pollution incident as referred to in Subparagraph 2 of the Paragraph 2, 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 3 months of issuing the report.
Article 10     The term "material non-arms-length transaction" as used in Article 9, paragraph 1, subparagraph 4 of the Rules 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 Regulations Governing the 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 5 years, as determined by the signing date of any such transaction:
    1. A real estate purchase from a related party in which the price of the purchase is higher than the assessed value obtained in accordance with the methods given under Article 16 of the Regulations Governing the Acquisition and Disposal of Assets by Public Companies, and which does not comply with Article 17 of the Regulations Governing the Acquisition and Disposal of Assets by Public Companies.
    2. A sale of real estate to a related party in which the price of the sale is lower than the assessed value obtained in accordance with the methods given under Article 16 of the Regulations Governing the Acquisition and Disposal of Assets by Public Companies.
    3. Terms of payment in a purchase or sale of real estate with a related party 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 a related party, 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 a related party in the final quarters of the most recent 5 fiscal years exceeds 20 percent of yearly operating revenues, and where no legitimate reason exists for the excess.
    6. Purchase or sale of real estate to a non-related party 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 massive funds are lent to others for purposes other than the financing necessary for business transactions between companies.
  5. When, for other trades with related parties and transactions of financial business, of which the necessity and the legality of the decision-making process, and the reasonableness of the price or the payment or receipt of funds cannot be reasonably verified.
    The provisions regarding the purchase or sale of real estate involving a related party under subparagraph 3 of the preceding paragraph shall also apply where either of the two previous owners had the status of related party, provided that there may be exemption from application if the period from the date on which the trading counterpart was to acquire the property under the contract to the date of execution of the present contract exceeds 5 years.
    The term “related party” as referred to in the preceding two paragraphs shall have the same definition of the term in Article 18 of the Regulations Governing the Preparation of Financial Reports by Securities Issuers, and shall include circumstances in the following subparagraph, except where an applicant company can prove it has no control, joint control or material impact:
  1. A shareholder holding more than 10% shares in the applicant company and its affiliated enterprise as defined under Chapter VI-1 of the Company Act (the “affiliated enterprise”).
  2. An individual related to the the director, supervisor or manager of the applicant company in any of the following ways:
    1. A relative within the second degree of kinship with the aforementioned persons or their spouse (including domestic partner treated as spouse, which shall apply hereinafter in this paragraph).
    2. Where the aforementioned persons are legal entities, their parent company, subsidiary or a company controlled by the same company or individual shareholder having control over these corporations.
  3. An individual related to a shareholder holding more than 10% shares in the applicant company or the director, supervisor and manager of and a shareholder holding more than 10% shares in the affiliated enterprise in any of the following ways:
    1. Spouses.
    2. Relatives within the second degree of kindship with the aforementioned persons or their spouse.
    3. Where the aforementioned persons are legal entities, their parent company, subsidiary or a company controlled by the same company or individual shareholder having control over these corporations.
  4. An invested company and its subsidiary in which the director, supervisor and manager of and a shareholder holding more than 10% shares in the applicant company, its parent company and key subsidiary, individually holds, or together with their spouse or a person related in the ways as described in the above two subparagraphs hold, directly or indirectly, more than one-half of the total number of voting shares or the total capital.
    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.
Article 11     With respect to the phrase "has not made improvement" as used in Article 9, paragraph 1, subparagraph 4 of the Rules, improvement is determined to have been made if any one of the following circumstances exists:
  1. Where a person other than the applicant company obtains benefit from the non-arms-length transaction, and the person obtaining benefit has returned the benefit to the person entitled to it.
  2. Where a law enforcement or judicial agency has determined that the activity involving the non-arms-length transaction does not constitute a criminal offense.
  3. The non-arms-length transaction has already been restored to its original condition.
Article 13     The term "has failed 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 Rules shall mean any of the following:
  1. The financial report is not prepared in accordance with relevant laws and regulations and generally accepted accounting principles, and a certified public accountant issues an adverse opinion or a disclaimer of opinion, or a certified public accountant issues an audit report with a qualified opinion, thereby affecting fair presentation of the financial report.
  2. Failure by a company to make correction in its financial report after being instructed to do so by the competent authority in a letter.
  3. The audit working papers of the certified public accountant are reviewed by the TWSE and found to contain a significant deficiency such that it cannot be ascertained whether fair presentation is achieved in the financial report.
    The term "has failed to effectively implement its written accounting system, internal control system, or internal audit 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 accounting system, internal control system, or internal audit system in writing in accordance with the regulations issued by the competent authority to govern the preparation of financial reports for the relevant industry or the laws and regulations relating to internal control systems.
  2. Where the TWSE finds, through on-site audit, that the company fails to operate in reasonable accordance with its written accounting system.
Article 14     The term "serious deterioration" as used in Article 9, paragraph 1, subparagraph 7 of the Rules shall mean any of the following circumstances, provided that these circumstances shall not apply when, for the most recent fiscal year, the ratio of the net operating income and profit before tax to share capital of the company applying for stock listing is not lower than 12 percent:
  1. Operating revenue and net operating income for the most recent fiscal year or the fiscal year in which the application for listing is filed show a marked deterioration relative to other enterprises in the same industry.
  2. Profit before tax for the most recent fiscal year or the fiscal year in which the application for listing is filed show a marked deterioration relative to other enterprises in the same industry.
  3. There is continuing negative growth in operating revenues and net operating income for each of the 3 most recent fiscal years.
  4. There is continuing negative growth in profit before tax for each of the 3 most recent fiscal years.
  5. The company's products or technology are outdated, and it has no plan for improvement.
    The subparagraphs of the preceding paragraph may not apply if the company applying for stock listing in accordance with paragraphs 2 or 3 of Article 4 or Article 5 of the Rules has submitted the explanation of fairness.
    For the "other enterprises in the same industry" in paragraph 1, subparagraphs 1 and 2, the securities underwriter shall evaluate and explain the reasonableness of the enterprises sampled for comparison.
    The provisions of subparagraphs 3 and 4 of paragraph 1 do not apply to a company already having a concrete improvement plan that is producing positive effects.
Article 15     The term "conduct any activities in violation of the principle of good faith" as used in Article 9, paragraph 1, subparagraph 8 of the Rules 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. However, this shall not apply if 3 years has already passed since repayment was completed.
    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 2 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, general manager, or de facto responsible person:
    1. Any of the circumstances set forth in subparagraphs 1-5 of the preceding paragraph, provided that those subparagraphs shall not apply in the case of delinquency in the repayment of a loan to a financial institution when the delinquency is not of a material nature or when there is a reasonable cause for the delinquency.
    2. Any commission of a crime under a commercial law such as the Company Act, Banking Act, Insurance Act, Financial Holding Company Act, Securities and Exchange Act, Futures Trading Act, Business Entity Accounting Act, Act Governing Bills Finance Business, or commission of a crime of corruption, malfeasance in office, fraud, breach of fiduciary duty, or embezzlement, for which a sentence of imprisonment for a fixed period or a more severe criminal penalty was handed down by a court judgment.
    3. Improper acts such as unlawful termination of business of, or material violation of the principle of corporate governance of, another company they are operating.
    4. Other serious violations of laws or regulations or the principles of good faith.
Article 17     The phrase "the board of directors is unable to independently exercise their functions" as used in Article 9, paragraph 1, subparagraph 9 of the Rules means none of the following circumstances may be present:
  1. A person serving as an independent director of the applicant company fails to satisfy any prerequisite set forth in the Regulations Governing Appointment of Independent Directors and Compliance Matters for Public Companies.
  2. Where a person serving as independent director of the applicant company has failed, from the year the company executes an advisory agreement, to receive training of at least 3 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 Article 6, subparagraphs 1, 2, and 4 of the Rules Governing Implementation of Continuing Education for Directors and Supervisors of TWSE Listed and TPEx Listed Companies.
  3. Where more than one-half of the directors of the applicant company are mutually related in any of the following ways:
    1. Spouses.
    2. Relatives within the second degree of kinship.
    3. Representatives of the same juristic person.
    The provisions of subparagraph 3 of the preceding paragraph shall also apply to the natural person who, when the government or a juristic person is the shareholder, and in its capacity as government or juristic person is elected as director, and designates a natural person as representative to exercise those functions on its behalf, and shall also apply to the government's or juristic person's representative who is elected to serve as director.
    The provisions of subparagraph 3 of paragraph 1 shall not apply when the relationship set out in item 3 of that subparagraph exists between more than half of the directors and with the approval of the competent authority for the relevant industry.
Article 26     As used in Article 28-8, paragraph 1, subparagraph 3 of the Rules, " material non arms-length transaction" means that any of the following circumstances applies to a foreign issuer or a company controlled by it that is applying for a primary listing:
  1. The purpose, price, terms and conditions, or the handling procedures for a purchase or sale of goods are at variance with those of an ordinary transaction or are obviously unreasonable.
  2. When, for various trades with related parties and transactions of financial business, there is no verification of reasonable necessity for the trade, or of the legality of the decision-making process for the trade, or the reasonableness of the price or the payment or receipt of funds.
    With respect to “has not been rectified” in the same subparagraph, rectification as so determined means one of the following subparagraphs has been met:
  1. Where a person other than the applicant company profits from non-arms-length transactions, the person receiving the profits has returned the profits to another person who should have received the profits.
  2. The non-arms-length transactions have been found as not involving criminal activities by the prosecutors, investigators or judicial authorities of the jurisdiction where the company is incorporated, the jurisdiction where its main business activities are taking place, and the Republic of China.
  3. The non-arms-length transactions have terminated and the legal relationship has been restored to status quo ante.
    The term “related party” as referred to in the first paragraph shall have the same definition of the term in Article 18 of the Regulations Governing the Preparation of Financial Reports by Securities Issuers, and shall cover what is described in the following subparagraph, except where an applicant company can prove it has no control, joint control or material impact:
  1. A shareholder holding more than 10% shares in the applicant company and a company having a controlling or subordinate relationship with the applicant company or a company between which the applicant company has cross-investment.
  2. An individual related to the director, supervisor or manager of the applicant company in any of the following ways:
    1. A relative within the second degree of kinship with the aforementioned persons or their spouse (including domestic partner treated as spouse, which shall apply hereinafter in this paragraph).
    2. Where the aforementioned persons are legal entities, their parent company, subsidiary or a company controlled by the same company or individual shareholder having control over these corporations.
  3. An individual related to a shareholder holding more than 10% shares in the applicant company or the director, supervisor and manager of and a shareholder holding more than 10% shares in a company having a controlling or subordinate relationship with the applicant company or a company between which the applicant company has cross-investment in any of the following ways:
    1. Spouses.
    2. Relatives within the second degree of kindship with the aforementioned persons or their spouse.
    3. Where the aforementioned persons are legal entities, their parent company, subsidiary or a company controlled by the same company or individual shareholder having control over these corporations.
  4. An invested company or its subsidiary in which the director, supervisor and manager of and a shareholder holding more than 10% shares in the applicant company, its parent company and key subsidiary, individually holds, or together with their spouse or a person related in the ways as described in the above two subparagraphs hold, directly or indirectly, more than one-half of the total number of voting shares or the total capital.
    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.
Article 27     As used in Article 27-2, subparagraph 2 and Article 28-8, subparagraph 4 of the Rules, "acted in violation of the principle of good faith" means that any of the following circumstances applies to an applicant company or a company controlled by a foreign issuer applying for TWSE primary listing, or to an incumbent director, supervisor, general manager, or de facto responsible person of the applicant company or controlled company, and the circumstances are material and without reasonable cause:
  1. Being in arrears in the repayment of any loan extended to it by a financial institution.
  2. Any commission of a crime under commercial, financial, securities, or tax laws, or commission of a crime of corruption, malfeasance in office, fraud, breach of fiduciary duty, or embezzlement, for which a sentence of imprisonment for a fixed period or a more severe penalty was handed down by a court judgment.
  3. Having violated the matters declared in the declaration it submitted at the time of application.
  4. Improper acts such as unlawful termination of business of, or material violation of the principle of corporate governance of, another company they are operating.
  5. Having been involved in misrepresentation or suffered a loss of credit, causing damage to the interests of the company, the rights and interests of its shareholders, or the public interest.
Article 28     The term "serious deterioration" as used in Article 28-8, subparagraph 5 of the Rules shall mean any of the following circumstances, provided that these circumstances shall not apply if the profit before tax of the company applying for stock listing for the most recent fiscal year is not lower than NT$240 million:
  1. Operating revenue and net operating income for the most recent fiscal year or the fiscal year in which the application for listing is filed show a marked deterioration relative to other enterprises in the same industry.
  2. Profit before tax for the most recent fiscal year or the fiscal year in which the application for listing is filed show a marked deterioration relative to other enterprises in the same industry.
  3. There is continuing negative growth in operating revenues and net operating income for each of the 3 most recent fiscal years.
  4. There is continuing negative growth in profit before tax for each of the 3 most recent fiscal years.
  5. The company's products or technology are outdated, and it has no plan for improvement.
    The subparagraphs of the preceding paragraph may not apply if the company applying for stock listing in accordance with Article 28-1, paragraphs 2, 5 and 6 of the Rules has submitted the explanation of fairness.
    For the "other enterprises in the same industry" in paragraph 1, subparagraphs 1 and 2, the securities underwriter shall evaluate and explain the reasonableness of such enterprises sampled for comparison.
    The provisions of paragraph 1, subparagraphs 3 and 4 do not apply to a company already having a concrete improvement plan that is producing positive effects.
Article 29     The phrase "any of the applicant company's board of directors is unable to independently exercise their functions" as used in Article 28-8, subparagraph 6 of the Rules means that none of the following circumstances may be present:
  1. A person serving as an independent director of the applicant company fails to satisfy any prerequisite set forth in the Regulations Governing Appointment of Independent Directors and Compliance Matters for Public Companies.
  2. Where a person serving as independent director of the applicant company has failed, from the year the company executes an advisory agreement, to receive training of at least 3 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 Article 6, subparagraphs 1, 2, and 4 of the Rules Governing Implementation of Continuing Education for Directors and Supervisors of TWSE Listed and TPEx Listed Companies.
  3. Where more than one-half of the directors of the applicant company are mutually related in any of the following ways:
    1. Spouses.
    2. Relatives within the second degree of kinship.
    3. Representatives of the same juristic person.
  4. The provisions of the preceding subparagraph shall also apply to the natural person who, when the government or a juristic person is the shareholder, and in its capacity as government or juristic person is elected as director, and designates a natural person as representative to exercise those functions on its behalf; and shall also apply to the government's or juristic person's representative who is elected to serve as director.