1. Amendment to "Company Act"
On 6 July 2018, the Legislative Yuan passed the third reading of an amendment to the "Company Act" (Amendment), which is subject to the official announcement by the President. The enforcement date will be further decided by the Executive Yuan after the President's announcement. We summarize major changes below. For other changes, please also refer to our Alert Sheet of "Amendment to the Company Act" issued on 10 July 2018:
(1) The Amendment abolishes the recognition system in respect of foreign companies. A foreign juristic person will have the identical legal capacity as an R.O.C. company, subject to the restriction of laws; if it would like to do business in Taiwan, it only needs to apply for the branch office registration. (Articles 4 and 370~386)
(2) The liabilities of de facto directors and shadow directors will also apply to a non-public company. (Article 8)
(3) The limitation on the re-investment amount for non-public companies is removed. (Articles 13)
(4) A company is required to report information of its shareholders holding more than 10% shares, directors, supervisors and managers regularly on an annual basis by means of electronic transmission to the e-platform established by the competent authority. A report within fifteen (15) days is also required for any changes. (Article 22-1)
(5) A company established or held by the government or a single juristic person may choose to have only one (1) or two (2) directors, without having a board of directors, or any supervisor, provided that for a non-public company, the supervisor is still required while it may choose to have only one (1) or two (2) directors without a board of directors. (Articles 128-1 and 192)
(6) The meeting notice period for a board meeting of a non-public company is shortened from seven (7) full days to three (3) full days. A non-public company may also specify in its articles of incorporation to allow written board resolutions, with no need to hold any physical meeting, if agreed by all directors. (Articles 204 and 205)
(7) If so specified in its articles of incorporation, a company may declare dividends or make up losses at the end of every quarter or half fiscal year (which means that dividends can be declared up to four (4) times a year). (Articles 228-1)
Reported by: Mike Lu / Angela Lin
2. Amendment to Regulations Governing Company Registration and Recognition
On 14 June 2018, the Ministry of Economic Affairs (MOEA) amended the "Regulations Governing Corporate Registration and Recognition" to simplify the corporate registration procedures. We summarize the key points below:
(1) The signature of a responsible person has the same legal effect as seals of the company and its responsible person, and thus can be used instead.
(2) In the relevant corporate registration applications, the comparison table of articles of incorporation, attendance sheet for the board of director, designation or resignation letter, power of attorney in favor of CPA are no longer required.
(3) Chinese translation of a document in a foreign language is no longer required if such foreign version is identifiable.
Reported by: Mike Lu / Will Chen
3. Foundation Act
On 27 June 2018, the Legislative Yuan passed the third reading of the "Foundation Act" (FA), which however does not apply to religious foundations. The Ministry of Interior will further contemplate the relevant corresponding measures. We summarize the key points below:
(1) Regulations against illegality and conflict of interest (Articles 14, 15 and 16): A foundation shall not, by mutual conspiracy, fraud or other improper manners, transfer its properties to or have the same utilized for the benefits of any donator, his/her/its related parties, or any profit-seeking enterprise whose responsible person, director, supervisor or manager is a donator or his/her/its related parties. Where any director, supervisor, chief executive officer or any person with the equivalent position has any conflict of interest when performing the duties, he/she shall abstain himself/herself, and shall not use the power, opportunities or methods under such position(s) to seek any benefit for himself/herself or his/her related parties.
(2) Restrictions for utilization of properties (Articles 19, 20, 21 and 22): The custody and utilization of the properties of a foundation shall be conducted in the name of the foundation and supervised by the competent authorities. The fund of a foundation shall not be safe-kept by or lent to any director, supervisor, other individual or non-financial institution. A foundation must utilize its funds in compliance with applicable laws, and shall not act as a guarantor, nor a shareholder of the unlimited liability company, a general partner of the limited partnership or a partner of the partnership. There are restrictions on the percentage or amount of the sponsorship or donation to a group or an individual. A foundation is prohibited from distributing residual assets.
(3) Voluntary disclosure of foundations' information (Articles 25 and 26): A foundation shall voluntarily disclose the information submitted to the regulator for recordation, the lists of the sponsored and sponsoring persons, and the sponsored and donation amounts in the manners designated by the competent authorities.
(4) Non-applicable to religious foundations (Article 75): Religious foundations shall be governed by another law to be further legislated. Before the legislation of such law is, the Civil Code or other relevant laws shall govern. The scope of the religious foundation shall be determined by the central competent authority.
(5) Grace period (Article 76): The FA shall be enforced upon the elapse of 6 months after its promulgation.
Reported by: Kang-Shen Liu
4. Amendments to Enforcement Rules of Income Tax Act
On 29 June 2018, the Ministry of Finance announced the amendment to the "Enforcement Rules of Income Tax Act", so as to be in line with the Income Tax Act. We summarize the key points below:
(1) Following the abolishment of the imputation system under integrated income tax system, a profit-seeking enterprise is no longer required to separate the "net amount" and "gross amount" since the dividend or earning does not contain deductible taxes anymore.
(2) In light of the new policy on personal dividend income tax, a taxpayer may now choose either to incorporate the dividend income into the gross consolidated income for taxation with a deductible amount, or to separate such income for a fixed tax rate but make the filing on a consolidated basis.
(3) To add that an offshore insurance unit (OIU) may apply for sharing common expenses with its operating unit having the same business address.
(4) To revise the scope of entities exempt from the profit-seeking enterprise income tax, including venture capital enterprises under Article 23-1 of the Industrial Innovation Statute as well as OSUs and offshore insurance units under the Offshore Banking Act.
Reported by: Stacy Lo/ Jack Tai
5. Regulation Governing Guidance and Assistance of Financial Technology Development
On 2 July 2018, the Financial Supervisory Commission (FSC) issued the "Regulation Governing Guidance and Assistance of Financial Technology Development" pursuant to Article 18 of the Financial Technology Development and Innovative Experimentation Act. We summarize the key points below:
(1) The FSC may establish a physical cluster for financial technology development, provide appropriate office space or rent deductions to a financial technology enterprises (Enterprises), and assist in establishing financial technology innovation labs.
(2) The FSC shall hold roadshows to guide the Enterprises to assess the necessity of applying for innovative experiments.
(3) An application under (2) above shall not be used for marketing purpose as an evidence of matters stated in the application or a guarantee for the value of the innovation experiments.
(4) The FSC shall establish a financial technology innovation part and coordinate with execution agencies for implementation details.
Reported by: Stacy Lo/ Eliza Lee
6. Draft Amendment to Regulations Governing Identity Verification Mechanism and Transaction Limits for Users of Electronic Payment Institutions
On 4 July 2018, the FSC announced the draft amendment to the "Regulations Governing Identity Verification Mechanism and Transaction Limits for Users of Electronic Payment Institutions" for public consultation, in order to facilitate flexibility and convenience of electronic payment accounts. We summarize the key points below:
(1) The value storing function for the type 1 e-payment account without identity verification is relaxed.
(2) The requests for identification documents for governments, public schools, government owned enterprises, and institutions and foundations whose representatives are appointed by public sectors are simplified.
(3) An e-payment institution may, after assessing the risk undertaking ability and actual need of the user, increase the monthly transaction amount limit of the user while the annual transaction limit shall remain the same.
Reported by: Stacy Lo / Evelyn Shih
7. Amendment to Corporate Governance Doctrine for Insurance Companies
On 20 June 2018, the FSC announced the amendment to the "Corporate Governance Doctrine for Insurance Companies", which mainly refers to relevant provisions stated in the Corporate Governance Doctrine for Banks. The amendments include, but are not limited to, requiring executive management to undertake the ultimate responsibilities for the internal control system, establishment of an audit department under the board or directors, establishment and announcement of whistleblowing mechanisms available for internal and external staff, and establishment of a protective system for whistle-blowers.
Reported by: David Tsai / Angela Chang
8. Amendments to Calculation Methods and Exchange Basis on Aggregated Evaluation for Product Structure for Life Insurance Companies
On 29 June 2018, the FSC announced the amendment to the "Calculation Methods and Exchange Basis on Aggregated Evaluation for Product Structure for Life Insurance Companies". An insurance company meeting the criteria may raise the foreign investment quota according to Paragraph 9 of Article 15 of Regulations Governing Foreign Investments by Insurance Companies.
Reported by: David Tsai / Angela Chang
9. Exchange Traded Note (ETN) being added as Securities under the Securities and Exchange Act.
On 2 July 2018, the FSC announced a ruling to add exchange traded note (ETN) issued by securities firms as the securities defined under Paragraph 1, Article 6 of the Securities and Exchange Act.
Reported by: Jeffrey Liu / Jack Tai
10. Amendment to Interpretation of Paragraph1, Article 10 of Regulations Governing Securities Investment Trust Funds
On 9 July 2018, the Securities and Futures Bureau issued a ruling to amend the Interpretation of Paragraph1, Article 10 of the Regulations Governing Securities Investment Trust Funds. We summarize the key points below:
(1) A securities investment trust enterprise (SITE) is permitted to provide securities as margin collateral when engaging in transactions of securities related products on domestic or foreign exchanges or over-the-counter markets;
(2) The SITEs are not permitted to agree with its trading counterparty to utilize such securities pledged as margin collateral; and
(3) The SITEs are required to understand and abide by the market regulations of domestic and foreign exchanges and over-the-counter markets.
Reported by: Jeffrey Liu/ Evelyn Shih
11. Definition of Multi-national Enterprise under Employment Service Act
Under Sub-paragraph 3, Article 5 of the "Qualifications and Criteria Standards for Foreigners Undertaking Jobs Specified Under Subparagraphs 1 to 6, Paragraph 1, Article 46 of the Employment Service Act" ("Standards"), a foreigner who has worked for a multi-national enterprise for one (1) year or more may apply for work permit with the competent authority to engage in the professional/technical work in Taiwan. However, the Standards are silent on the definition of "multi-national enterprise".
On 2 July 2018, the Ministry of Labor issued a ruling stating that the "multi-national enterprise" under in the Standards shall refer to: "An economic entity which has subsidiaries or branches in more than 2 countries where such subsidiaries or branches are effectively controlled by the parent company or headquarters to engage in cross-border production, or an economic entity of which the parent company or headquarters is established in a foreign jurisdiction, Hong Kong or Macao with a subsidiary or a branch in Taiwan, or an economic entity of which the parent company or headquarter is established in Taiwan, in each case, meeting the following criteria:
(1) Having assets worldwide of US$2 billion or more in the previous year of the filing.
(2) Having obtained from the Industrial Development Bureau of the MOEA a certificate of operating region of headquarter.
(3) Having100 or more domestic employees, and at least 50 of them must have diplomas of junior college or higher education.
(4) Having the net annual domestic income of NT$1 billion or more.
(5) Having the net annual regional income of NT$1.5 billion or more.
(6) Others with special approvals granted by the central competent authorities."
Reported by: David Tsai/ Paul Hsu
12. Directions of 2019 Labor Inspection
On 29 June 2018, the MOL announced the "Directions of Labor Inspection for 2019". We summarize the key points below:
(1) To expand the inspection scope and to increase the ratio that at least 25% (the previous ration is 20%) of enterprises shall be those having never been inspected or not receiving labor inspection within five (5) years;
(2) To add inspections on source management of machines, facilities and equipment in specific inspection items; and
(3) For entities adopting flexible working-hour scheme under the new Labor Standards Act, to strengthen the inspection on whether the employer has complied with the relevant laws and regulations.
Reported by: David Tsai / Naiju Kuan