1. Draft Amendments to Statute for Investment by Foreign Nationals and Statute for Investment by Overseas Chinese
On 9 January 2019, the Executive Yuan passed the amendments to the drafts of Statute for Investment by Foreign Nationals and Statute for Investment by Overseas Chinese (the Amendments), which will be transferred to the Legislative Yuan for further review. The key points are as follows:
(1) To add that foreign nationals and overseas Chinese controlling the sole proprietorships, partnerships, limited partnerships or companies of Taiwan, and to merge Taiwanese companies through agreements or other means are also investments.
(2) To change the “prior-approval mechanism” to “post-reporting mechanism as a principle with prior-approval mechanism as an exception.” The Amendments also identify certain specific types of cases where the investors shall apply for investment approvals beforehand.
(3) To set forth the review process, periods, standards and post-management authority of the IC.
(4) To require that foreign nationals and overseas Chinese having no domicile, residence or place of business in Taiwan shall designate a lawyer or accountant with a domicile, residence or place of business in Taiwan.
(5) To require that where an investor intends to amend the investment plan after the approval or reporting of the investment, he/she shall apply or report to IC first.
(6) To set forth that where an obligator violates relevant regulations, the IC may impose an appropriate penalty depending on the degree of the infringement, including an administrative fine, an order to correct within the period of time, to cease or withdraw the investment, and other sanctions; where the violator does not correct the violation, the IC may punish further from time to time.
Reported by: Mike Lu / Evelyn Shih
2. Restriction on excising veto right of special shares
On 4 January 2019, the Ministry of Economic Affair (MOEA) issued a ruling that where a non-public company issues special shares with veto right over specific matter(s) under Subparagraph 4, Paragraph 1 and Paragraph 3, Article 157 of the newly amended Company Act, the exercising of veto right is limited to matter(s) that can be resolved by a shareholders' meeting rather than those must be resolved in a board meeting. In addition, the result of election of directors and supervisors cannot be vetoed in order to maintain the operation of a company. Such veto right shall be exercised when the subject matter is being discussed in the shareholders' meeting. Notwithstanding that the exercise of the veto right can be made after the shareholders meeting as set forth in the issuance condition of the special shares, it can only be exercised within a reasonable time period after the shareholders' meeting so that the legal status can be ascertained as soon as possible.
Reported by: Mike Lu / Angela Lin
3. Securities transaction tax shall not be imposed on redemption of exchange traded notes
On 2 January 2019, the Ministry of Finance explained that as the exchange traded note (ETN) is categorized as the "securities" under Article 6 of the Securities Exchange Act and also falls under "other securities offered to the public with government approval" in accordance with Article 1 of the Securities Transaction Tax Act, securities transaction tax in 1‰ shall be imposed on the purchase and sale of ETNs. However, in the event of early redemption or redemption upon expiry, since the redeemed ETNs will be cancelled and will no longer be available on the securities market, the redemption therefore will not be regarded as purchase or sale of securities, and hence the securities transaction tax will not be imposed.
Reported by: Stacy Lo / Jack Tai
4. Draft Amendment to the Regulations Governing the Banks and OBU Applying for Concurrently Operating Underwriting and Proprietary Trading of Bonds, Beneficiary Certificates, and Asset Backed Securities
On 3 January 2019, the Financial Supervisory Commission (FSC) announced for public consultation the draft amendment to the "Regulations Governing the Banks and OBU Applying for Concurrently Operating Underwriting and Proprietary Trading of Bonds, Beneficiary Certificates, and Asset Backed Securities." We summarize the key points below:
(1) OBUs are also regulated by the draft amendment.
(2) The limitation to the banks and OBUs holding a single bond without equities due to proprietary trading and not due to underwriting will be amended from the current limit of 20% working capital to 10% of the bank's calculation basis (the bank's NAV deducting the reinvestment amount). Before the bank operates such business, it shall establish an internal control system for risk management policies and product suitability as approved by the board of directors.
(3) The positions held by the bank and OBU due to proprietary trading shall be calculated together with the balance of securities invested by the bank.
(4) The banks may handle the underwriting of the bonds sold to professional investors on the date of obtaining where the bonds are obtained due to underwriting of bonds issued by the affiliated companies, or acting as the financial advisors to the securities firms. Such business will not be subject to the restriction on banks investing in the bonds issued by the affiliates; provided that the banks shall establish the trading procedures, risk management and auditing procedures.
Reported by: Stacy Lo/ Eliza Lee
Financial Asset and Real Estate Securitization
5. Draft Amendment to Regulations Governing Issuance of Beneficial Securities by Trustee Institution and Issuance of Asset-Backed Securities by Special Purpose Company and Regulations Governing Public Offering or Private Placement of Beneficiary Securities of Real Estate Investment Trust or Asset Trust by Trustee Institution
On 3 January 2019, the FSC issued a press release to announce the draft amendment to the "Regulations Governing Issuance of Beneficial Securities by Trustee Institution and Issuance of Asset-Backed Securities by Special Purpose Company" and the "Regulations Governing Public Offering or Private Placement of Beneficiary Securities of Real Estate Investment Trust or Asset Trust by Trustee Institution" for public consultation. We summarize the key points below:
(1) Regulations Governing Issuance of Beneficial Securities by Trustee Institution and Issuance of Asset-Backed Securities by Special Purpose Company:
(a) The scheduled issuance period shall not exceed 5 years if the trustee institution and the special purpose company adopt shelf method to issue beneficial securities and asset-backed securities.
(b) In the interests of time for the securitization, the applicable scope for financial asset securitization cases where application shall be made is limited.
(c) Trustee institutions or special purpose companies carrying out the private placement of beneficiary securities or asset-backed securities with shelf method which shall report to the competent authority after completion of each private placement.
(d) The reason for termination of the issuance with shelf method is provided.
(e) Where the beneficiary securities or asset-backed securities privately placed meet certain requirements, an application with the competent authority for change to public offering may be made.
(2) Regulations Governing Public Offering or Private Placement of Beneficiary Securities of Real Estate Investment Trust or Asset Trust by Trustee Institution:
Where the privately placed beneficiary securities meet certain requirements, an application with the competent authority for change to public offering may be made.
Reported by: Stacy Lo / Will Chen
6. Amendment to Guidelines for Insurance Company Operating Electronic Commerce
On 11 January 2019, the FSC announced the amendment to the Guidelines for Insurance Company Operating Electronic Commerce. We summarize the key points below:
(1) Raise the maximum insurance amount of travel insurance for new customers to NTD 12 million (around USD 0.4 million).
(2) When the insurance company conducts the online insurance, with the consent of the customer, the procedure of registration and identity verification can be processed with by the online banking account of the subsidiary of the same financial holding company (limited to which applied over the counter).
(3) Add new types of insurance products, such as micro-insurance, long-term care insurance, in-kind benefit insurance, health management insurance, mountaineering insurance, and driver injury insurance for third party liability insurance for self-use vehicles.
(4) If the proposer is the existing policyholder of the property insurance product who completes the purchase on the internet before the expiry with the insurance content and insurance amount same as which in the previous year, the procedure of the telephone visit may be exempted.
(5) Simplify the notice procedures of accidents for travel insurance.
Reported by: David Tsai / Aaron Lai
7. Draft amendment to Industry of Labor Standard Law Article 36 Paragraph 4
On 08 January 2019, the Ministry of Labor announced the press release that the transport industry will be included in the special-working-time industry under which the employee of this industry shall not continuously work for 9 consecutive days. In addition, the working hours of 11 hours per day shall not exceed 3 consecutive days.
Reported by: David Tsai / Albert Chia
8. Designation of workers of Article 84-1 of Labor Standard Act
On 3 January 2019,the Ministry of Labor announce the draft of "Designation of the Supervisory and Administrative Workers Hired by a Business with Monthly Salary Exceeding NT200,000 Dollars Who Meet the Provision of Subparagraph 1, Article50-1 of Enforcement Rules of the Labor Standards Act as Workers of Article 84-1 of Labor Standard Act" for public consultation.
Reported by: David Tsai / Paul Hsu
9. Amendment to Incentive Plan for Offshore fund
The FSC issued a ruling on 4 January 2019 to amend the ''Incentive Plan for Offshore fund'' so as to reflect that the favorable treatment in relation to the China investment for the offshore fund under the incentive plan is relaxed from 30% to 40% of the NAV of a fund.
Reported by: Jeffrey Liu / Caitlyn Kao
10. Amendment to Article 29 of Act for the Establishment and Management of Free Trade Zones
On 27 December 2018, the Legislative Yuan passed its third reading of the amendment to Article 29 of the Act for the Establishment and Management of Free Trade Zones, which expands the scope of exemption from business income tax of sale of products to the profit-seeking business who "procures, imports, storages and/or transports by itself or delegates free-trade-zone enterprises to do so."
Reported by: Kangshen Liu / Paul Hsu