Taiwan Stock Exchange - Rules & Regulations Directory
Article NO. Content
XI.Distribution of profits
- Restrictions on the setting aside and use of reserves:
Reser ves as devided into two kinds: legal reserves and capital reserves. Reserves are set aside for the purposes of capital maintenance and solidifying the asset base of the company to protect is creditors. To strengthen the capital structure of an issuer, the Securities and Exchange Act sets forth provisions in Article 41 on the setting aside and use of reserves that are even more stringent than those of the Company Act:
- Mandatory special reseerve
Where the FSC deems it necessary, it may order an issuer to set aside a certain proportion of its earnings as special reserve in addition to the allocation for legal reserve required by law. The purpose is to control the distribution of profits to stabilize stock prices (Securities and Exchange Act §41I).
- Restrictions on the capitalization of reserve
An issuer issuing securities pursuant to the Securities and Exchange Act may not capitalize its reserve until after making up its deficit, otr it will be deemed in violation of law. To enable a sound capital structure of the company, a cap of certain percentage shall be provided in the event capitalization is to be realized from capital reserve. Securities and Exchange Act §41II. As regards the term "certain percentage," pursuant to Article 72-1 of the Regulations Governing the Offering and Issuance of Securities by Securities Issuers, when capital reserve is capitalized in accordance with Article 41, Paragraph 2 of the Securities and Exchange Act, the combined amount of any portions capitalized in any one year in accordance with Article 241, Paragraph 1, Subparagraph 1 or 2 of the Company Act may not exceed 10% of paid-in capital. However, where a company undergoes an organizational change (such as a merger, acquisition, or reorganization) that results in the capitalization of undistributed earnings after the organizational change, this restriction does not apply (I). An amount transferred to capital reserve in accordance with Article 241, Paragraph 1, Subparagraph 1 of the Company Act may not be capitalized until the fiscal year after the competent authority for company registrations approves registration of the capital increase or whatever other matter generated that portion of capital reserve (II).
- Public announcement of ex-rights or ex-dividend trading (Operating Rules §46):
- Where a listed company closes the books on changes to the shareholders register in accordance with Article 165 of the Company Act, it shall, before the last date the shareholders register may be changed and within the time period required by the TWSE, publicly announce on the website reporting system designated by the TWSE the reason for the suspension, date of suspension, amount of dividends and bonuses to be distributed, and allocation of rights. However, in special circumstances, where the reasons are stated, the company may simply publicly announce in advance the reasons for convening a shareholders meeting and the date of the meeting. In such cases, it shall follow up, at least 40 days prior to the date of the shareholders meeting, with a public announcement on the above-mentioned website designated by the TWSE of the amount of dividends and bonuses to be distributed or rights to be allocated.
- If there is subsequently any change in information publicly announced by a listed company under the preceding paragraph, or the public announcement is not made by the listed company within the time period specified by the TWSE, then the listed company shall bear full liability for any resultant trade dispute or damage suffered by a party to a trade
- The provisions governing listed companies shall apply mutatis mutandis for the book closure period during which the shareholders list, beneficiaries list, and foreign bond holders list may not be changed due to the distribution of stock dividends, bond interest, bonus, or other interests in accordance with the laws of its country, in respect of stocks or bonds issued by a foreign issuer or its agent institution or foreign securities represented by Taiwan Depositary Receipts issued by a foreign issuer or its depositary institution.