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Article NO. Content

Title:

Regulations Governing the Offering and Issuance of Securities by Securities Issuers  CH

Amended Date: 2015.11.12 
Article 8     Where an issuer conducts an offering and issuance of securities as contemplated under Article 6, paragraph 2, the FSC may reject the registration upon the occurrence of any one of the following events:
  1. Fifty percent of the original directors have changed during the year of registration or during the previous 2 years, and a shareholder has obtained its shares in violation of the provisions of Article 43-1 of the Act. However, this provision does not apply where corrections have been made prior to the registration date.
  2. Any one of the events set forth under Article 156 of the Act applies to an exchange-listed or OTC-listed company. However, this restriction does not apply to any company upon which restrictions have been imposed, in accordance with the provisions of Article 139, paragraph 2 of the Act, with respect to the trading of its shares on a stock exchange.
  3. The present offering and issuance plan is unfeasible, unnecessary, or unreasonable.
  4. Any one of the following events has occurred in the implementation of a previous plan for the offering and issuance, or private placement, of securities, and the situation has not been improved:
    1. The process of implementation is seriously delayed without legitimate reason and the implementation has not been completed yet.
    2. The plan has undergone substantial change without due reasons and such change has not been completed. However, this provision does not apply where more than 3 years have passed between the registration date and the actual completion date of the plan.
    3. The offering and issuance plan has undergone material change, but said change has not yet been reported to a shareholders' meeting for approval.
    4. The company has failed in the most recent year to observe the provisions of Article 9, paragraph 1, subparagraphs 4 through 9, or provisions set out in Article 11 of the Regulations Governing the Offering and Issuance of Overseas Securities by Issuers.
    5. The company has failed to faithfully disclose information in accordance with the Directions for Public Companies Conducting Private Placements of Securities, where the circumstances are serious.
    6. No reasonable benefit is derived from the plan and no legitimate reason is provided. However, in the event more than 3 years have passed since the completion date of the plan till the registration date, such restriction does not apply.
  5. An important part of the plan for the present offering and issuance of securities (such as methods of issuance, source of funds, particulars of the plan, implementation schedule, and expected returns) has not been placed on the agenda of a board meeting or shareholders meeting in accordance with the Company Act and the issuer's articles of incorporation, or has not been adopted by resolution at such a meeting.
  6. The company which has lent a substantial amount of money to other parties for purposes other than financing needs arising from business transactions with other companies or business firms, and which has not yet rectified the situation, submits for registration to conduct a cash capital increase or issue corporate bonds.
  7. The company has entered into an irregular transaction of material significance, and has not yet rectified the situation.
  8. The company files for registration to conduct a cash capital increase or issue corporate bonds, but holds financial assets distinguished as current, idle assets, or investment property with no plan to actively dispose of or develop such holdings, and their total value is equivalent to either: (1) 40 percent or more of the equity attributable to owners of the parent in the most recent financial reports audited and attested (or reviewed) by a CPA, or (2) 60 percent of the total amount of funds to be raised through the cash capital increase or corporate bond issuance. However, this provision does not apply when the funds to be raised will be used to purchase property, plant and equipment and there is a concrete plan to evidence the need to raise the funds.
  9. Proceeds from the cash capital increase or corporate bond issuance are to be used to invest in a company engaged primarily in the trading of securities, or to establish a securities firm or a securities service enterprise.
  10. The company has failed to prepare its financial statements in accordance with relevant acts or regulations, or with generally accepted accounting principles, and such violations are of material significance.
  11. The company has violated the provisions of Article 5, paragraph 2.
  12. The internal control system is seriously deficient in design or implementation.
  13. The company's share price fluctuated abnormally during the month prior to the date of registration.
  14. Any one of the following descriptions applies to the shareholdings of the entire body of the company's directors or supervisors:
    1. The percentage of their equity stake is in violation of Article 26 of the Act and they have been notified to make up for the shortfall but they have not yet done so.
    2. The percentage of their equity stake still does not meet the required equity stake set forth under Article 26 of the Act even after accounting for the share issue that the company is now registering; provided, however, that this does not apply where the entire body of the company's directors or supervisors pledges to make up for the shortfall upon completion of the offering.
    3. During the fiscal year in which the registration filing is made, or during the preceding fiscal year, the entire body of the company's directors or supervisors did not honor a promise to make up for a shortfall in their equity stake.
  15. The issuer or its current chairperson or general manager, or a de facto responsible person has received a fixed sentence or a more severe punishment from a court in the past 3 years due to violation of laws governing business and industry such as the Act, the Company Act, Banking Act, Financial Holding Company Act, or Business Accounting Act, or due to a crime involving breach of faith such as corruption, malfeasance, fraud, breach of fiduciary duty, or embezzlement.
  16. The court has decided that the issuer has an obligation for damages under the Act and the issuer has not met that obligation yet.
  17. Collateral has been provided for a loan of any third party in violation of Article 5 of the Regulations Governing Loaning of Funds and Making of Endorsements/Guarantees by Public Companies, the circumstances are serious, and there has been no improvement.
  18. There is an issuance of new shares in connection with a merger, or an issuance of new shares in connection with receiving transfer of shares of another company, or an issuance of new shares in connection with an acquisition or demerger conducted in accordance with related laws, and any one of the following descriptions presents:
    1. There has been a material violation of the provisions of Chapter 2, Section 5 of the Regulations Governing the Acquisition and Disposal of Assets by Public Companies.
    2. The received or acquired shares are not the newly issued shares of another company, non-current equity investment, or previously issued shares held by the shareholders of another company.
    3. The ownership rights over the received shares or the acquired business or assets are encumbered or limited in such a way that restrictions on the trading rights are imposed.
    4. There has been a violation of Article 167, paragraph 3 or 4 of the Company Act.
    5. An audit report with unqualified opinion was not issued by a CPA for financial reports of an absorbed company for the most recent fiscal year; provided, that this provision does not apply where an audit report with qualified opinion was issued together with an unqualified opinion on the balance sheet.
  19. An event prescribed in Article 13, paragraph 1, subparagraph 2, item 6 occurs, and any of the following circumstances is present:
    1. A filing for issuance of new shares for cash, and any director or supervisor, or shareholder who holds shares over 10 percent of the total issued shares of the issuer, fails to undertake to place a certain percentage of their shares under the custody of a centralized securities depository enterprise.
    2. A filing for issuance of convertible corporate bonds or corporate bonds with warrants, for which the issuance rules do not specify that the offerees are required, from the issuance date of the corporate bonds, to place the corporate bonds and any subsequently converted or subscribed shares under the custody of the centralized securities depository enterprise for one year.
  20. The securities underwriter, at the time the issuer files for registration, has received cumulatively 10 demerit points in the most recent year from the FSC, TWSE, TPEx, and Taiwan Securities Association, and three months have not elapsed since the date when the demerit points cumulatively reached 10 points. However, this restriction does not apply to a cash issue by an emerging stock company of new shares that are to be sold in the public sale prior to an initial listing on the stock exchange or OTC market.
  21. The FSC deems it necessary, in order to protect the public interest, to reject or disapprove the issuer's application.
    The term "company engaged primarily in the trading of securities" as referred to in subparagraph 9 of the preceding paragraph shall mean a company in which the issuer has directly invested, or in which a subsidiary of the said issuer has invested under the equity method, provided that its cash, together with cash equivalents, financial assets listed under current assets, and securities issued by the issuer account for 50 percent or more of the total assets value of such company, and the revenue or profit/loss respectively from trading or holding of the aforesaid assets account for 50 percent or more of the revenue or profit/loss of such company.
    Where an issuer conducts an offering and issuance of securities as contemplated under Article 6, paragraph 2, subparagraph 2, or where either an OTC-listed company applying to transfer its listing to a stock exchange or an exchange-listed company applying to transfer its listing to an OTC market carries out a cash capital increase in order to achieve compliance with standards governing dispersion of equity ownership, if the underwriter evaluation report clearly explains the feasibility of the capital allocations and the reasonableness of the expected benefits of the present offering and issuance plan, then provisions regarding the necessity of the plan, as set out in subparagraph 5 of the preceding article and in paragraph 1, subparagraph 3 of this article, need not apply.
    If the issuer is a securities, futures, or financial enterprise, it is not required to include investments in financial assets distinguished as current in its calculations when totaling the value of the assets set forth under paragraph 1, subparagraph 8. The provisions paragraph 1, subparagraph 9 need not apply if the issuer is an insurance enterprise, or it is an emerging stock company conducting a cash capital increase through a new share issue in accordance with the provisions of Article 6, paragraph 2, subparagraph 2, or it is either an OTC-listed company applying to transfer its listing to a stock exchange or an exchange-listed company applying to transfer its listing to an OTC market that intends to carry out a cash capital increase in order to achieve compliance with standards governing dispersion of equity ownership.
    The provisions prescribed in paragraph 1, subparagraph 8 need not apply where an issuer, for the purpose of enjoying tax incentives, conducts a cash capital increase to raise funds not greater in amount than the upper limit set by the competent authority or NT$100 million.
    With respect to the issuance of new shares in connection with merger, issuance of new shares in connection with receiving transfer of shares of another company, or issuance of new shares in connection with an acquisition or demerger conducted in accordance with the law, the following parts of paragraph 1 need not apply: subparagraph 1, those provisions of subparagraph 4 that relate to implementation of a previous plan for cash capital increase or corporate bonds, and subparagraphs 13, 15, and 19.