Lexgroup Newsletter (Issue No. 298)

Date: Jul 2018

Labor

1. Draft Amendment to Labor Standards Act

On 1 June 2018, in order to fulfill the gist of the Convention of the Rights of Persons with Disabilities, the Executive Yuan passed the amendment to the Labor Standards Act and submitted the draft to the Legislative Yuan for review, under which relevant discriminative wordings on disabled people are modified.  

Reported by: David Tsai / Zachary Peng

Securities

2. Rulings of Securities Firms Reinvest in Venture Capital and Private Equity Fund

On 1 June 2018, the Financial Supervisory Commission (FSC) issued three rulings to amend the previous rulings for investment by a securities firm in domestic enterprises, foreign enterprises, and non-securities and futures enterprises in the China area. The major amendments are to allow a securities firm to invest in private equity funds, provided that it can only act as a limited partner of such funds.  If a securities firm desires to act as a general partner, it can only act indirectly via its subsidiary(ies) with limited liabilities.  The same restrictions also apply to investment by a securities firm in venture capital enterprises.  The aforesaid investment must be approved by the FSC in advance.  Furthermore, a subsidiary acting as a general partner shall also be subject to the FSC’s further requirements on qualifications and conditions, including but not limited to the requirement for prevention of conflict of interest.  

Reported by: Jeffrey Liu / Eliza Lee

Securities Service Enterprises

3. FEC Ruling for Allocation by Securities Service Enterprises of Appropriate Human Resource

On 8 June 2018, the FSC issues a ruling to stipulate the appropriate human resource required to be allocated by a securities service enterprise under Articles 36-2 and 37 of the Regulations Governing the Establishment of Internal Control Systems by Service Enterprises in Securities and Futures Markets.  We summarize the key points as follows:

(1) For a securities firm, futures firm, securities financial enterprise, securities investment trust enterprise, securities investment consulting enterprise engaging in discretionary investments mandates, or credit rating agency, whose paid-in capital has reached 20 billion or above, a dedicated information security unit shall be established with a dedicated manager and at least two professional staff. 

(2) For those whose paid-in capital has reached 10 billion but is less than 20 billion, each shall have one information security manager and at least two professional staff.  For those whose paid-in capital has reached 4 billion but is less than 10 billion, each shall have one information security manager and at least one professional staff.  For those whose paid-in capital is less than 4 billion, each shall have at least one professional staff.  While said information security manager and staff may concurrently engage in information-related business, they shall not concurrently operate in any business which has a conflict of interest with their duties.

Reported by: Jeffrey Liu / Jack Tai

Financial

4. Draft Amendments to Mandatory Provisions of Standard Form Contract for the Business of Electronic Payment Institutions and Standard Form Contract for the Business of Electronic Payment Institutions

On 5 June 2018, the FSC announced the draft amendment to the "Mandatory Provisions of Standard Form Contract for the Business of Electronic Payment Institutions" and the "Standard Form Contract for the Business of Electronic Payment Institutions" for public consultation.  We summarize the key points below:

(1) To add the definitions of "payment linked to the agreed depositary account" and "integration and delivery of receipt/payment information of the receiving user".

(2) To add that electronic payment institutions shall agree with their users on the daily quota, each transaction quota, and the use conditions when an automatic top-up is provided via a credit card or is linked to a bank account. 

(3) To add that if the user has been verified to constitute any of the events under Article 4 of the "Guidelines for Anti-Money Laundering and Countering Terrorism Financing for Electronic Payment Institutions" (such as being suspected of using a fake name, creating a paper company, or refusing to provide identity documents for verification, holding a counterfeited (altered) identity document or providing unclear documents), such a user will not be allowed to apply for electronic payment services or transactions. 

(4) To add that only NTD can be used for deposits on the credit card, and the deposit shall not be used for transfers or withdrawals among the electronic payment accounts.

Reported by: Stacy Lo / Jack Tai

5. Draft Amendment to Regulations Governing Qualification Requirements and Concurrent Serving Restrictions and Matters for Compliance by the Responsible Persons of Banks and Regulations Governing Qualification Requirements for the Promoter or Responsible Persons of Financial Holding Companies and Concurrent Serving Restrictions and Matters for Compliance by the Responsible Persons of a Financial Holding Company

On 6 June 2018, the FSC announced the draft amendment to the "Regulations Governing Qualification Requirements and Concurrent Serving Restrictions and Matters for Compliance by the Responsible Persons of Banks" and "Regulations Governing Qualification Requirements for the Promoter or Responsible Persons of Financial Holding Companies and Concurrent Serving Restrictions and Matters for Compliance by the Responsible Persons of a Financial Holding Company" for public consultation.  We summarize the key points below:  

(1) The responsible persons of a bank (or a financial holding company) must have good character.

(2) It is presumed that a conflict of interest exists if an individual or a juristic person concurrently holds a directorship (or supervisorship) in a bank (or a financial holding company) and another financial institution (or a financial holding company).  However, this restriction does not apply to a bank (or a financial holding company) wholly owned, directly or indirectly, by the government.

(3) The professional directors of a bank (financial holding company) shall not be the government, legal entity or their representatives, provided that this restriction does not apply to the subsidiary bank of a financial holding company nor a bank (or a financial holding company) wholly owned by the government.  In addition, for a bank (or a financial holding company) with assets of NTD one trillion or more, the ratio of the professional directors shall be increased.

Reported by: Stacy Lo / Hsiyen Hsu

Company Act

6. Ruling Regarding Legal Reserve under Article 237 of Company Act

On 22 May 2018, the Ministry of Economic Affairs (MOEA) issued a ruling to interpreting the proviso of Article 237 of the Company Act "companies are not required to set aside legal reserve where the legal reserve amounts to the total authorized capital".  The MOEA interprets that this proviso means when the legal reserve of a company amounts to the paid-in capital, this company is not required to set aside legal reserve.  However, a company is not prohibited from further setting aside legal reserve.  If the articles of incorporation of the company have requirement for setting aside legal reserve in the event where the legal reserve has amounted to the paid-in capital, the company shall still comply with its articles of incorporation.

Reported by: Mike Lu / Angela Lin

7. Determination of Whether Trust Enterprises Obtains Status of Controlling Company

On 23 May 2018, the MOEA issued a ruling interpreting that, in principle, the existing controlling relationship will not be changed due to the trust of controlling stocks to trust enterprises since a trust enterprise is not entrusted with management control.  Whether or not the trust is a self-benefit trust or other interest oriented trust is not to be the sole criteria to determine controlling power.  Whether or not a trust enterprise has obtained the controlling power in a company as a result of the trust shall be determined based on the actual control attached to the stocks entrusted.

Reported by: Mike Lu / Max Lu

Taxation

8. Announcement of Regulations Governing Deduction of Income Tax of Individual Investment in Innovative Startups

On 6 June 2018, the MOEA announced the "Regulations Governing Deduction of Income Tax of Individual Investment in Innovative Startups".  We summarize the major points as follows:

(1) Definition of high-risk innovative startups:  A company which has been incorporated for less than 2 years and satisfies the following conditions:

(a) The technology, originality or business model has innovation and development capability;

(b) It can provide the target market resolution or create demands; and

(c) The products or services have the potential to be marketed. 

(2) Qualifications:  Where an individual invests at least NT$1 million in cash in one year in domestic innovative startups which have been incorporated for less than 2 years and identified as high-risk innovative startups, and the individual acquires and holds the new shares issued by the company for at least 2 years, up to 50% of the investment may be excluded from the individual’s consolidated income for the year in which the second anniversary of such shareholding falls. The aggregate amount excludable from an individual’s consolidated income each year shall not exceed NT$3 million.

Reported by: Stacy Lo / Eliza Lee

Infrastructure

9. Amendment to Act for Promotion of Private Participation in Infrastructure Projects

On 8 June 2018, the Ministry of Finance (MOF) announced the amendment to the “Act for Promotion of Private Participation in Infrastructure Projects”. We summarize the key points below:

(1) To amend the definition of sewerage facilities; 

(2) To amend the applicable scope of sanitation and medical facilities;

(3) To enlist “long-term care service institutions and facilities established and approved in accordance with relevant laws” in the scope of the social welfare facilities;

(4) To amend the definition of cultural and educational facilities;

(5) To amend the definition of power facilities;

(6) To amend the definition of public gas and fuel supply facilities; and

(7) To amend that the construction sites of large shopping centers shall not be limited to offshore islands area.

Reported by: Stacy Lo / Evelyn Shih

Medical Related

10. Draft Enforcement Rules of Patient Right to Autonomy Act

As the "Patient Right to Autonomy Act" will be enforced from January 2019, on 1 June, the Ministry of Health and Welfare (MHW) announced the draft "Enforcement Rules of the Patient Right to Autonomy Act" for public consultation.  According to the "Patient Right to Autonomy Act, patients may make advanced medical decisions to accept or reject the life-sustaining treatment or artificial nutrition and hydration performed by hospitals.  This draft of the Enforcement Rules is to clearly define the circumstances where an advanced medical decision under the "Patient Right to Autonomy Act" can be made and to specify the relevant procedures in details.

Reported by: Jolene Wang / Chenchi Wang

Food and Drug Administration

11. Draft Amendment to Regulations Governing the Application or Use of Specific Medical Techniques or Examinations, or Medical Devices

On 8 June 2018, the MHW announced the draft amendment to the “Regulations Governing the Application or Use of Specific Medical Techniques or Examinations, or Medical Devices" for public consultation.  We summarize the key points below:

(1) Fecal microbiota transplantation therapy and certain cell therapies are allowed.

(a) To perform fecal microbiota transplantation therapy or cell therapies, a medical institution must:

(A) Prepare a plan and apply for approval with the central competent authority. 

(B) Have or entrust an operational laboratory complying with good tissue practice (GTP) if cell culture or storage is involved.

(C) In addition to medical records, prepare another record and keep for 10 years; notify the competent authority within 7 days if a serious adverse reaction occurs.

(D) Annually report the execution results to the central competent authority (the central competent authority may terminate the approval if patients’ rights and safety are compromised, or there is obvious abnormality in the number or severity of adverse events).

(b) The following cell therapies are allowed:

(A) CD34 selection/CD45RA depletion autologous peripheral blood stem cell transplantation, for hematological malignancies, chronic ischemic stroke, or severe lower limb ischemia.

(B) Autologous immune cell therapy, for stage IV solid tumor.

(C) Autologous adipose stem cell transplantation, for chronic or difficult wounds, extensive burn wounds or skin damages, or subcutaneous soft tissue defects.

(D) Autologous fibroblast transplantation, for skin defects, surface wounds, etc.

(E) Autologous mesenchymal stem cell transplantation, for skin defects, surface wounds, degenerative arthritis, knee articular cartilage defects, etc.

(F) Autologous chondrocyte transplantation, for degenerative arthritis, or knee articular cartilage defects.

(2) To enhance governance on specific aesthetic medical surgeries.

(a) Specific aesthetic medical surgeries include but are not limited to eye shaping, rhinoplasty, ear shaping, breast shaping, hair transplantation, bone cutting, skin lift, etc. 

(b) To perform specific aesthetic medical surgeries, a medical institution must comply with the following:  

(A) Anesthesiologists or trained physicians are required to perform anesthesia.

(B) A letter of consent from the patient is required. 

(C) Stricter qualifications for physicians performing certain high risk aesthetic medical surgeries are required. 

(D) If certain high risk aesthetic medical surgeries are to be performed in a medical institution with 99 or fewer hospital beds, there must be an emergency referral plan.

Reported by: Jolene Wang / Crick Liang

Intellectual Property

12. Amendments to Enforcement Rules of Trademark Act

On 7 June 2018, the MOEA announced the amendments to Article 19 of the Enforcement Rules of the Trademark Act, effective as of the same date.  Accordingly, the Schedule listing the classes of goods and services has been removed from Article 19 and the trademark agent may directly announce the classes of goods and services according to the updated international Nice Classification.  Please refer to Item 11 of Issue No. 292 of the Lexgroup Newsletter for details.

Reported by: Jolene Wang / Linda Cheng

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