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Relevant Laws

Title：Taiwan Securities Association Rules Governing Underwriting and Resale of Securities by Securities Firms (2016.04.12)
Article 6     In the underwriting cases prior to an initial listing on a stock exchange or an OTC market involving previously issued shares or cash capital increase through a new share issue (except for cases involving conversion of OTC (or exchange) listed stocks into exchange (or OTC) listed stocks), and in the underwriting of a cash capital increase by a company already listed on a 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 this provision does not apply to a public enterprise or to any other party that applies for an initial listing of shares on a stock exchange or an OTC market in accordance with the provisions of Articles 6 and 6-1 of the Taiwan Stock Exchange Corporation Rules for Review of Securities Listings, or in accordance with the provisions of the Taipei Exchange Supplemental Provisions for Applications by Private Institutions Participating in Public Infrastructure Projects for Over-the-Counter Listing, or in accordance with other acts or regulations.
    In the underwriting of convertible corporate bonds or corporate bonds with warrants, and in a secondary distribution carried out in accordance with the provisions of Article 22 paragraph 3 of the Securities and Exchange Act (hereinafter, "secondary distribution"), the securities may be offered through competitive auction.
Article 7     In the underwriting of securities issued through competitive auction as prescribed in the preceding article, except where the issuer is a government-owned enterprise or another party for which there are other acts or regulations that provide otherwise, underwriting of that portion of the offering put up for public sale to outside parties shall be handled in accordance with the following provisions:
  1. In an underwriting case involving an initial listing of shares on a stock exchange or an OTC market, the shares may be offered either entirely through competitive auction, or through a combination of competitive auction and public subscription. However, the portion allocated through public subscription shall not exceed 20 percent of the total number of shares underwritten.
  2. In the underwriting of an offering of convertible bonds, or of warrants that have been detached from preferred shares with detachable warrants or warrants that have been detached from corporate bonds with detachable warrants, or in the underwriting of a cash capital increase by a company already listed on a stock exchange or an OTC market in which all units are put up for underwritten distribution, all units shall be offered through competitive auction.
  3. In an underwriting case involving the offering of corporate bonds with warrants or an underwriting case involving a secondary distribution, the units may be offered either entirely through competitive auction, or through a combination of competitive auction and public subscription.
Article 21     In the underwriting of an initial listing on a stock exchange or an OTC market involving previously issued shares or cash capital increase through a new share issue, if the shares are not underwritten through competitive auction, then they shall be underwritten through simultaneous book building and public subscription procedures in compliance with the provisions of Article 21-1. However, the portion offered through public subscription shall not exceed 20 percent of the total number of shares underwritten; provided, that this provision does not apply to a public enterprise, nor does it apply to any other party that applies for an initial listing of shares on a stock exchange or an OTC market in accordance with the provisions of Articles 6 and 6-1 of the Taiwan Stock Exchange Corporation Rules for Review of Securities Listings, or in accordance with the provisions of the Taipei Exchange Supplemental Provisions for Applications by Private Institutions Participating in Public Infrastructure Projects for Over-the-Counter Listing, or in accordance with other acts or regulations.
Article 21-1     In the underwriting of an initial listing on a stock exchange or an OTC market involving previously issued shares or cash capital increase through a new share issue, if the shares are underwritten through simultaneous book building and public subscription procedures, 10 percent of the number of shares that are required under TWSE or TPEx rules to be publicly sold (less the portion of the shares that are required under applicable laws or regulations to be set aside for subscription by employees of the issuer, and not including any overallotment) shall first be put up for public subscription, and the volume allocated for public subscription shall be adjusted according to the subscription volume.
    If the underwritten subscription volume (defined as the final confirmed total volume of subscriptions that brokers have transmitted to the TWSE by the public subscription deadline) falls short of the volume allocated for public subscription as referred to in the preceding paragraph, the shortfall may be added to the volume to be underwritten through book building, and allocated in that manner. If the subscription volume exceeds by a certain multiple the volume allocated for public subscription, the volume allocated for public subscription shall be adjusted upward in accordance with the following provisions:
  1. If the subscription multiple is at least 10 times but less than 20 times, the amount allocated for public subscription shall be adjusted to 15 percent.
  2. If the subscription multiple is at least 20 times but less than 30 times, the amount allocated for public subscription shall be adjusted to 20 percent.
  3. If the subscription multiple is at least 30 times but less than 40 times, the amount allocated for public subscription shall be adjusted to 25 percent.
  4. If the subscription multiple is 40 times but less than 50 times, the amount allocated for public subscription shall be adjusted to 30 percent.
  5. If the subscription multiple is at least 50 times but less than 60 times, the amount allocated for public subscription shall be adjusted to 35 percent.
  6. If the subscription multiple is at least 60 times but less than 70 times, the amount allocated for public subscription shall be adjusted to 40 percent.
  7. If the subscription multiple is at least 70 times but less than 80 times, the amount allocated for public subscription shall be adjusted to 45 percent.
  8. If the subscription multiple is at least 80 times but less than 90 times, the amount allocated for public subscription shall be adjusted to 50 percent.
  9. If the subscription multiple is at least 90 times but less than 100 times, the amount allocated for public subscription shall be adjusted to 55 percent.10. If the subscription multiple is 100 times or greater, the amount allocated for public subscription shall be adjusted to 60 percent.
    Any remainder, or any preliminary overallotment, shall be underwritten through book building.
    If the post-adjustment volume allocated for public subscription as calculated per any of the subparagraphs of paragraph 2 is not a whole number, the number shall be rounded up to the nearest whole number.
Article 22     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. cash capital increase through an issue of preferred shares by a company already listed on a stock exchange or an OTC market;
  2. preferred shares with detachable warrants;
  3. corporate bonds with detachable warrants;
  4. offerings of corporate bonds and financial bonds;
  5. offerings of Taiwan depositary receipts;
  6. secondary distributions.
    In underwriting cases under subparagraphs 1 through 4 and subparagraph 6 of the preceding paragraph where part of the securities are allocated by book building and part by public subscription, if the book building and public subscription procedures are carried out simultaneously, the timetable for the procedures shall be subject to mutatis mutandis application of Article 42-1. However, if subscription volume exceeds by a specified multiple the number of units earmarked for public subscription, there is no need to upwardly adjust the public subscription volume or to observe the requirements of Article 42-1, paragraph 1, subparagraph 4, item 2.
Article 22-1     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 a stock exchange or an OTC market in which the offering involves a cash capital increase through the issue of common shares and the entire offering is put up for underwritten distribution;
  2. underwriting of an offering of beneficial interest securities by a trustee institution, or underwriting of an offering of asset-backed securities by a special-purpose company;
  3. real estate asset trust beneficial interest securities.
Article 22-3     In an initial offering of Taiwan Depositary Receipts in which part are placed by book building and part by public subscription, the book building and public subscription procedures shall be carried out simultaneously, and 10 percent of the volume that is to be publicly sold shall first be put up for public subscription, and the volume allocated for public subscription shall be adjusted according to the subscription volume.
    If the underwritten subscription volume (defined as the final confirmed total volume of subscriptions that brokers have transmitted to the TWSE by the public subscription deadline) falls short of the volume allocated for public subscription as referred to in the preceding paragraph, the shortfall may be added to the volume to be underwritten through book building, and allocated in that manner. If the subscription volume exceeds by a certain multiple the volume allocated for public subscription, the volume allocated for public subscription shall be adjusted upward in accordance with the following provisions:
  1. If the subscription multiple is at least 15 times but less than 20 times, the amount allocated for public subscription shall be adjusted to 15 percent.
  2. If the subscription multiple is at least 20 times but less than 25 times, the amount allocated for public subscription shall be adjusted to 20 percent.
  3. If the subscription multiple is at least 25 times but less than 30 times, the amount allocated for public subscription shall be adjusted to 25 percent.
  4. If the subscription multiple is at least 30 times but less than 35 times, the amount allocated for public subscription shall be adjusted to 30 percent.
  5. If the subscription ratio is at least 35 times but less than 40 times, the amount allocated for public subscription shall be adjusted to 35 percent.
  6. If the subscription multiple is at least 40 times but less than 45 times, the amount allocated for public subscription shall be adjusted to 40 percent.
  7. If the subscription multiple is at least 45 times but less than 50 times, the amount allocated for public subscription shall be adjusted to 45 percent.
  8. If the subscription multiple is 50 times or more, the amount allocated for public subscription shall be adjusted to 50 percent.
    If the post-adjustment volume allocated for public subscription as calculated per any of the subparagraphs of paragraph 2 is not a whole number, the number shall be rounded up to the nearest whole number.
    In an initial offering of Taiwan Depositary Receipts in which part are placed by book building and part by public subscription, the book building and public subscription procedures shall be carried out simultaneously. The relevant procedures shall be subject mutatis mutandis to the provisions of Article 42-1.
Article 31     An underwriting case involving the offering of ordinary corporate bonds, financial bonds not involving stock equity, corporate bonds from which the detachable warrants have been detached, real estate asset trust beneficial interest securities; the secondary distribution of beneficial interest securities by a trustee institution; or the secondary distribution of asset-backed securities by a special-purpose company, may be undertaken entirely or partly by negotiated sale. The offering price shall be determined as prescribed by Article 30.
    The underwriting of call (put) warrants shall be undertaken entirely by negotiated sale.
    An underwriting case involving a secondary distribution by a public enterprise may be undertaken entirely or partly by negotiated sale if units are released to the general public. The method of allocation shall be determined by negotiations between the securities underwriter and the government agency that regulates the government-owned enterprise in question.
    In an underwriting case involving an initial listing of shares in common stock on a stock exchange or OTC market through competitive auction, if an overallotment is exercised, those shares allocated via overallotment shall be sold by means of negotiated sale at an offering price determined in accordance with the provisions of Article 16, 17, or 18.
    In an underwriting case involving a public enterprise (or any other party acting in accordance with the provisions of Articles 6 and 6-1 of the Taiwan Stock Exchange Corporation Rules for Review of Securities Listings, or in accordance with the provisions of the Taipei Exchange Supplemental Provisions for Applications by Private Institutions Participating in Public Infrastructure Projects for Over-the-Counter Listing) that conducts an initial offering of shares in common stock on a stock exchange or an OTC market and allocates the entire amount of said shares through public subscription, if an overallotment is exercised, the overallotment may be handled by means of negotiated sale. The offering price shall be the same as that applying to shares allocated through public subscription.
Article 52     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 3, or Article 31, or in the underwriting of a cash capital increase by a company listed on a 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;
  5. an initial offering on a stock exchange or an OTC market (conducted by a public enterprise, or by any other party acting in accordance with other acts or regulations), in which: (1) a public sale to outside parties conducted in connection therewith as required under Article 6 is not undertaken by competitive auction; or (2) a book building process is employed as prescribed under Article 21.
  6. in an underwriting case involving a public enterprise (or any other party acting in accordance with the provisions of Articles 6 and 6-1 of the Taiwan Stock Exchange Corporation Rules for Review of Securities Listings, or in accordance with the provisions of the Taipei Exchange Supplemental Provisions for Applications by Private Institutions Participating in Public Infrastructure Projects for Over-the-Counter Listing) that conducts an initial offering of shares on a stock exchange or an OTC market, where the entire amount of said shares are allocated through public subscription: those shares allocated via overallotment, if not allocated by means of negotiated sale, must be allocated through public subscription.