Q&A: Conducting Public M&A Transactions in Taiwan

Complete the deal

Hostile transactions

What are the special considerations for unsolicited transactions for public companies?

Hostile takeovers of state-owned companies are rare in Taiwan because regulators are very concerned about such deals. Although regulators may not proactively stop such a transaction, it may raise many concerns during the regulatory filing process, which may prolong the approval process or even cause the transaction to fail.

In addition, regarding the merger filing, the Taiwan Fair Trade Act stipulates that the Taiwan Fair Trade Commission must provide sufficient information to the target company in a hostile transaction and give the target company an opportunity to express its perspective on the transaction. This process may also lengthen the timing of the deal and cause the deal to fail if completed through a tender offer.

Breakage fees – frustration of additional bidders

What types of severance and reverse severance indemnities are permitted? What are the limits of a public company’s ability to protect bids from third-party bidders?

The deal protection mechanisms we’ve seen in Taiwan include break fees and major shareholders signing a side agreement pledging to back the deal at the shareholder meeting (and offer shares if the deal is structured as a tender offer). There is no legal restriction for a listed company to pay a break fee or a reverse break fee, and such an arrangement has been seen in Taiwan’s public company transactions in recent years.

Where a listed company redeems its shares to create difficulty for third party bidders to acquire shares on the open market, the redemption transaction is subject to the following restrictions:

  • the number of shares repurchased cannot exceed 10% of the total number of issued and outstanding shares of the company; and
  • the total amount of shares repurchased may not exceed the amount of retained earnings plus the capital gain plus the realized capital reserve.

Government influence

Outside of applicable competition regulations, or in specific industries where business combinations or acquisitions are regulated, can government agencies influence or restrict the completion of such transactions, including for security reasons? national?

All foreign investment in Taiwan is subject to the approval of the Investment Commission of the Ministry of Economic Affairs. As long as a foreign investment is not in one of the industries in which foreign investment is restricted, the Investment Commission will grant its approval. However, if the market capitalization of the target company is in the top 100 companies listed on the Taiwanese market, the transaction would be subject to more rigorous scrutiny by government agencies.

However, in the case of a Chinese investor, in accordance with the measures for granting investment permits to mainland residents, the Investment Commission will refuse an application if the investor is invested by the Communist Party, the military Chinese government, administration or other political entities. or organizations, and may refuse an application if the proposed investment:

  • is in a company with monopolistic or oligopolistic economic power;
  • is sensitive in terms of politics, society and culture or national security;
  • may have a negative impact on local economic development or financial stability.

Conditional offers

What are the terms of a takeover bid, exchange offer, merger, plan or arrangement or other form of business combination? In a cash transaction, can the financing be conditional? Can the opening of a public purchase or exchange offer on a public company be subject to conditions?

An acquirer may suspend a public offer for the following reasons:

  • there is a material adverse change in the financial or commercial conditions of the target, and this change has been proven by the acquirer;
  • the purchaser is declared bankrupt, deceased or placed under guardianship or, in the case of a company, is placed in receivership; and
  • in any of the other situations announced by the Financial Supervisory Commission.

In a tender offer, an acquirer may fix the minimum number of shares to be acquired, and will be required to close the transaction when the number of shares tendered reaches the minimum number of shares and the approval, consent or authorization, or report to the competent authorities, if applicable, has been obtained or completed. Unless an acquirer fails to acquire the minimum number of shares to be acquired or to obtain the required government approval, it cannot refuse to close the tender offer. When initiating a tender offer, an acquirer must present evidence showing that it is financially able to pay the consideration for the tender offer, which generally takes the form of a bank guarantee.

In a merger, spin-off or share exchange, the parties may stipulate conditions precedent, including but not limited to regulatory approvals and financing conditions, upon closing in the transaction documents, which will need to be approved by the board of directors or shareholders’ meeting, as the case may be.


If a buyer needs to obtain financing for a transaction involving a public company, how is this handled in the transaction documents? What are typical seller obligations to help finance the buyer?

If a buyer needs to obtain financing for a transaction, in practice the seller will usually ask the buyer to obtain a letter of commitment from the lender (eg a financial institution) when signing the documents transaction if the buyer has not signed a loan. agreement with the lender. Additionally, the parties may agree that Closing will be conditional on Buyer financing in full and that Buyer may be liable for damages if Closing does not occur due to Buyer’s inability to to obtain funding.

In addition, if a buyer creates a mortgage, pledge or other encumbrance on the assets of the target company to secure its financing after closing, the seller will generally assist the buyer and the lender in the pre-valuation of the assets of the target company. target company.

Withdrawal of minorities

Can minority shareholders of a public company be ousted? If so, what steps need to be taken and what is the processing time?

A majority shareholder can oust minority shareholders by way of a merger or a stock exchange, the consideration for which must be in the form of cash.

A merger or exchange of shares will be approved at a meeting of the board of directors if the major shareholder owns 90% or more of the shares of the company, and at a meeting of shareholders if the major shareholder owns less than 90% of the shares of the company. Notice of a meeting of the board of directors must be sent to the board of directors seven days before the meeting, and notice of a meeting of shareholders must be sent to shareholders 30 days (for an annual meeting ) or 15 days (for an extraordinary general meeting) before the general meeting. In addition, the shareholders entitled to attend the general meeting will be determined on the basis of the list of shareholders 60 days (for an annual meeting) or 30 days (for an extraordinary meeting) before the general meeting.

Waiting or notification periods

Apart from those provided by competition laws, what are the relevant waiting or notification periods for the completion of business combinations or acquisitions involving public companies?

If a foreign entity is involved in a merger and acquisition transaction and Board of Investments approval is required, it will generally take approximately two to three months for the Board of Investments to review an application if the transaction is not involved in a sensitive sector. However, if a Chinese investor is involved and approval from the Board of Investments is required, it will usually take around three months or more for the Board of Investments to review an application. The actual time required will depend on the complexity of the transaction.

If a public company is to cease listing on the Taiwan Stock Exchange or the Taipei Stock Exchange due to an M&A transaction, it will need to submit an application to the Taiwan Stock Exchange or the Taipei Stock Exchange at least 30 working days before the deregistration date.

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April 28, 2020.

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