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Article 5
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A public company may make endorsements/guarantees for the following companies:
- A company with which it does business.
- A company in which the public company directly and indirectly holds more than 50 percent of the voting shares.
- 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.
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Article 12
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A public company shall specify the following matters in its Operational Procedures for Endorsements/Guarantees, and shall comply with those Operational Procedures when making endorsements/guarantees:
- Entities for which the company may make endorsements/guarantees.
- 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.
- 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.
- Procedures for making endorsements/guarantees.
- Detailed review procedures, including:
- The necessity of and reasonableness of endorsements/guarantees.
- Credit status and risk assessment of the entity for which the endorsement/guarantee is made.
- The impact on the company's business operations, financial condition, and shareholders' equity.
- Whether collateral must be obtained and appraisal of the value thereof.
- Procedures for controlling and managing endorsements/guarantees by subsidiaries.
- Procedures for use and custody of corporate chops.
- Hierarchy of decision-making authority and delegation thereof.
- Announcing and reporting procedures.
- Penalty for violation of these Regulations or the company's Operational Procedures for Endorsements/Guarantees by managers and personnel in charge.
- 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.
- 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.
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