Investing Taiwan (Issue 2)

Date: Aug 2013

Anti-Trust

  • FTC approved the application of Yuanta Financial Holdingto acquire New York Life on August 7

The Fair Trade Commission (the "FTC") has in its No.1135 resolution affirmed that it is not prohibited for the Yuanta Financial Holding Co., Ltd. ("Yuanta") to acquire New York Life Insurance Taiwan Corp., (the "NYLife"). FTC asserted that since NYLife has low market share comparing to those major insurance companies and the insurance market has not been highly concentrated, the acquisition will lead no adverse effect to the competition in local life insurance market such as increased premium rate or barriers for new business to enter the market.

After the acquisition,Yuanta will own 100% shares of NTLife. In accordance with Item 2, Paragraph 1, Article 6 of the Fair Trade Act,FTC, however, considered that this acquisition will not cause restrictions of competition and will results in more economic interests.

Banking

  • Draft amendment to the Regulations Governing Bank Handing of Accounts with Suspicious or Unusual Transactions

On August 13,2013, Financial Supervisory Commission (the “FSC”) announced the draft amendment to Article 13 of the “Regulations Governing Bank Handing of Accounts with Suspicious or Unusual Transactions” (the “Regulation”) for the policy of encouraging electronic transactions. The draft amendment involves the measures of checking clients’ identification when a deposit account application on internet is submitted to banks, and renaming the regulations as “Regulations Governing Deposit Accounts and Accounts with Suspicious or Unusual Transactions” due to bank being obligated to exercise the due care of a good faith administration with respect to managing deposit account application progressing.

FSC stated that in order to forge the cooperation between banks and third-party payment platforms so that internet paying accounts service can be provided to the public, it asked the Bank Association to work together for inspecting and revising related regulations including “The Operating Template of Procedures Inspecting New Accounts Opening in Financial Institute and Risk Management in Unusual Accounts”, “The Templates of Guidelines of Prevention of Bank Money Laundry” and “The Templates of Guidelines of Prevention of Dummy Accounts”. The amendments is expected to be finalized and made effective by the end of this August.

Banking / Securities

  • Guidelines of including financial businesses into Free Economic Demonstration Zone.

The FSC issued a press release on August 13, 2013 regarding its policy of including financial businesses in the Free Economic Demonstration Zones (the “FEDZs”). The FSC expressed that under the concept of virtual offshore, it agrees that financial businesses may provide various financial commodities and services for non-residences and local professional investors trough Offshore Banking Unit (OBU) and Offshore Securities Unit (OSU).

The FSC plans to remove restrictions on OBU business substantially. As the customers of OBU are non-residences, the financial commodities and services without NT dollars involved will not be subject to current restrictions. For example, trusts in such FEDZs will not be subject to the restrictions of investment subjects and scope under current regulations. Furthermore, to satisfy the local professional investors’ demands on fixed-income commodities and strengthen the incentive of trading professionals to work in Taiwan, it plans to allow the bank DBU to handle the manager services of offshore fixed-income commodities. As to the offshore securities businesses of securities firms, the restrictions on structured products,commodity-based derivatives and credit-based derivatives will be substantially lifted.

Corporate

  • The judgment regardingthe resignation of a director

Taiwan High Court Kaohsiung Branch made a judgment regarding the resignation of a director to the company. According to such judgment, a director may legally and effectively terminate his/her contract with the company at any time. If he or she terminate the contract in a period which is unfavorable to the company, the termination will still be valid except for the director may be responsible for the company’s damages.

Futures

  • Amendment toArticle 6 of the Enforcement Rules of Futures Trading Actregarding accommodation trading.

On August 20, 2013, the Financial Supervisory Commission announced the amendment to Article 6 of the Enforcement Rules of Futures Trading Act to define the term “Accommodation Trading” of Article 108 of Futures Trading Act.

According to the amendment, “Accommodation Trading” set forth in Item 4, Paragraph 2, Article 108 of the Futures Trading Act refers to the futures trading activity by 2 futures firms or any other entitieswho coordinate with each other for the trading without open bid or, block trading allowed by Taiwan Futures Exchange.

Securities

  • Drafted amendment to the Regulations Governing Securities Investment Trust Funds

To meet the market needs and increase the operation flexibility of the fund, the Financial Supervisory Commission (the "FSC") announced the draft amendment to the Regulations Governing Securities Investment Trust Funds on August 22,2013.

This draft amendment mostly aims at the release from operational restraints of the funds, such as (i) releasing the upper limit of a fund to invest in other funds; (ii) releasing the upper and lower limits of a balanced fund to invest in stocks; (iii) releasing the restriction of a bond fund to invest in convertible bonds, equity warrant bonds and exchangeable bond; and (iv) releasing the restriction of a private index fund to invest in the securities issued by a company which has conflict of interest with the firm issuing such private index fund. In addition, with the purpose to maximize the cash flow, funds will be allowed to apply for short-term loans under certain conditions.

Furthermore, to achieve the economies of scales, the requirements of fund merging will be eased according to the draft amendment as well.

Tax

  • The waiver of preemptive right may constitute “giving property” subject to gift tax

The Supreme Administrative Court announced its decision of 102 Pan No. 434 on July 12, 2013 clarifying the issue of whether the waiver of preemptive right stipulated in Article 267 of the Company Act shall constitute “giving property” subject to gift tax.

According to Paragraph 1 to 3, Article 267 of the Company Act, when a company issues new share, except for some percent of such new shares reserved for subscription by employees of the company, a company shall make public announcement and advise its original shareholders to exercise their preemptive right of subscribing for the new shares, and the new shares left unsubscribed by original shareholders may be open for subscription by specific person through negotiation.

In this decision, the Court held that when the original shareholder waives or fails to exercise the aforesaid preemptive right and the new shares are open for subscription by specific person, if (1) there is a significant price gap between the subscription price and the market value, and (2) such original shareholder arranges his appointed person to be the specific person for subscription by his control over the directors’ meeting, such waiver or failure of exercising the preemptive right shall be deemed as a substantial economic benefit (namely the price gap between the subscription price and the market value) given by the original shareholder to his appointed person and the act constitutes “giving property” subject to gift tax, even if such appointed person subscribes the new shares by his own capital.

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