4 June, 2019
Legislative Yuan passed the amendments to the Securities Exchange Act
The Legislative Yuan passed the amendments to the Securities Exchange Act (“SEC”) on 26 March 2019. Highlights of the amendments include: (1) “Semi-annual financial report,” a matter specified in Paragraph 1(10) of Article 14-5 that requires approval by the audit committee, is amended to “Q2 financial report certified by CPA”; (2) “shareholders of more than 10% of the company’s shares” are added to Article 28-2 of SEC as persons who may not sell their own shares during a buyback period; (3) the “10-days” declaration period under the Article 43-1 of SEC for acquirers, either individually or jointly with other persons, of more than 10% of a the total issued shares of public company is deleted, the length of the period now is authorized to competent authority’s discretion; (4) a rule is added that, the competent authority may order correction within a prescribed period, or take other necessary measures against securities firms in violation of provisions under the SEC and relevant regulations. (Alex Cheng)
Finiancial Supervisory Commission (“FSC”) amended the scope of application of the regulation that requires insurance agents and brokers to establish internal control, auditing and business solicitation systems
On March 4, 2019, the FSC amended Article 2 of the “Regulations Governing the Implementation of Internal Control. Auditing and Business Solicitation Systems of Insurance Agent Companies and Insurance Broker Companies”. The amended items include: (1) the revenue threshold for the requirement to establish internal control, auditing and business solicitation systems is raised from NTD 100 million to NTD 300 million; and (2) all public traded insurance agent companies and insurance broker companie are required to establish internal control, auditing and business solicitation systems. (Roy Su)
Personal information protection was added to the “Regulations Governing Business Solicitation, Policy Underwriting and Claim Adjusting of Insurance Enterprises” (“Regulations”)
The FSC amended the Regulations on April 1, 2019 to require (1) that the internal underwriting system and procedure of insurance enterprises include the method and time limit of keeping personal information in underwritten cases as well as non-underwritten cases and the procedure for destruction thereof (Article 7 Paragraph 1(8)); and (2) that the time limit in such system and procedure regarding keeping personal information in non-underwritten cases be no more than 5 years in principle, and that the system and procedure provide that the personal information in non-underwritten cases shall be processed and used, and be deleted upon expiration of the time limit, in compliance with the Personal Information Protection Act. (Roy Su)
FSC established the “Principles Governing the Review and Issuance of Approval Letter of the application for Exchange Listing, OTC Listing and Registration as Emerging Stocks by Insurance Companies” (“Principles”)
The FSC established the Principles on March 14, 2019, providing that it would consider the following 4 criteria when determining whether to issue approval letters for insurance company to be listed on the stock exchange or OTC, or registered as an emerging stock: (1) Profitability: positive profit before tax in the most recent 5 years as calculated in accordance with the Principles. (2) Solvency: a capital adequacy ratio of 250% or higher after deducting the elements specified in the Principles in the case of an applicant of stock exchange or OTC listing, and 200% or higher in the case of an applicant for registration as emerging stock. (3) Compliance: No citation in the most recent 3 year under Article 149 Paragraph 1 of the Insurance Act (violation of laws, regulations or articles of organization, or likelihood of interfering with sound management) or Article 12 Paragraph 1(2) to 1(6) of the Financial Consumer Protection Act; no fine exceeding NTD 1 million was imposed by the competent authority for the most recent 3 years. (4) Other Criteria: no instance of bad corporate governance; investment in real property not exceeding 10% of available capital; net worth to asset (not including investment-linked insurances) ratio no less than 5.5%, or no less than the net worth to asset ratio (not including investment-linked insurances) of the industry operating insurance business of same types; and no significant employer-employee dispute. (Roy Su)
Legislative Yuan passed the amendment to the Banking Act
The Legislative Yuan recently passed the amendment of the Banking Act. In addition to authorizing the competent authority to promulgate rules regarding the conflict of interest of bank’s responsible person, the amendment also provides that competent authority may restrict the bank’s investment, or may order or prohibit the bank to dispose of transfer certain assets, or may order the bank to close its branch or department and to suspend the duty of its manager or employee for a period of time. In a case of serious violation, the maximum penalty is raised from NTD 10 million to NTD 50 million. On the other hand, if a case of mild violation, the competent authority may waive the penalty or order the violating bank to take appropriate corrective measure before waiving penalty. Additionally, in order to reinforce anti-money laundering and crack down information terrorism, the amendment also adds a new provision to authorize the government or its authorized institutions to exchange information, promote technical cooperation, assist in investigations, or enter into cooperation treaties or agreements with foreign governments, institutions or international organizations based on the principle of reciprocity and confidentiaility. (C.H.Chen)
Ministry of Labor (“MOL”) amended the Directions Governing Day (Night) Duty of Workers and announced the abolishment thereof from 2022
On April 11, 2019, the MOL amended the “Directions Governing Day (Night) Duty of Workers” (“Directions”), suggesting that the rate of hourly allowance should not be lower than the amount equal to the monthly basic payment divided by 240. Simultaneously, the MOL announced that the Directions will be abolished beginning January 1, 2022, and overtime payment provisions under the Labor Standard Act will govern the payment for day (night) duty work therefrom. (Elvin Peng)
Amendment to the “Guidelines on Hearings for Patent Invalidation Cases”
The Intellectual Property Office promulgated the amended “Guidelines on Hearings for Patent Invalidation Cases s” on April 2, 2019. The gist of the amendment is as follows: (1) The application for hearing may be made by either party involved in an invalidation case without the consent of the other party. (2) If either party believes that there exist a reason of recusal for the examiner, such party shall submit an application with supporting arguments within 10 days from the receipt of the notice of hearing. (3) During an invalidation hearing, the parties may only provide their comments or arguments and may not rasie a new means of attack or defense. (Genson Hung)
The Act Governing Relations between the People of Taiwan and Mainland China (“Act”) was amended to raise the amount of maximum fines against illegal investments by Mainland China enterprises
The Legislative Yuan amended Article 93-1 of the Act on April 9, 2019. The new amendment provides that, if a Mainland China enterprise makes investments in Taiwan without approval, the maximum fine upon such violation is raised from NTD 600,000 to NTD 25,000,000. If the content of the application for approval is incorrect or incomplete, or the enterprise evades, obstruct, or refuse the investigation from the competent authority, the maximum fine for such violations is raised from NTD 300,000 to NTD 2,500,000. (Dennis Chen)
Ministry of Labor issued a letter explaining the payment on the election day for workers subject to Article 84-1 of Labor Standard Act
On March 4, 2019, the MOL issued an administrative interpretation to indicate that when a worker subject to Article 84-1 of the Labor Standard Act works on the election day, he/she should be paid doubled wage based on his/her actual working hours and hourly wage if the election day is an agreed normal working day. In addition, the employer may not hinder the worker’s right to vote. (Elvin Peng)
When an oversea subsidiary relocates, its Taiwanese parent company would not be required to calculate investment revenues for payment of business income tax if certain particular circumstances exist
The Ministry of Finance issued circular Tai-Tsai-Shui-Zi No. 10704699570 on March 29, 2019, stating that when a Taiwanese company’s oversea subsidiary relocates to another overseas country or district, the Taiwanese parent need not calculate investment revenues for payment of business income tax when all of the following 4 conditions are met: (1) the parent company’s shareholding proportion of the subsidiary is unchanged and the structure and shareholding proportion of the parent company’s indirect investment in other overseas countries or districts through the subsidiary are also unchanged; (2) both of the jurisdiction from which the subsidiary moves out and the jurisdiction to which the subsidiary moves to recognize that the subsidiary continues to exist as the same juristic person; (3) the subsidiary is not required to be dissolved and wound up by the jurisdiction from which it moves out; and (4) the subsidiary’s undistributed profits prior to the relocation remain unchanged after the relocation. (Roy Su)
Board of directors (“BOD”) of a public traded company has exclusive right to decide the issuance of cash dvidends or bonus if the articles of organization of the company asauthorized BOD to do so by supermajority resolution
The Ministry of Economic Affairs issued an administrative interpretation on March 12, 2019, stating that the BOD of a public traded company has exclusive right to decide the issuance of cash dvidends or bonus if the articles of organization of the company has expressly authorized BOD to do so by supermajority resolution pursuant to Article 240 (5) of the Company Act. There will be no distribution of cash dividends for a fiscal year If the BOD does not resolved to distribute cash dividends for the year. The shareholders meeting may only resolve to distribute stock dividends in accordance with Paragraph 1 of Article 240. (Alex Cheng)
For further information, please contact:
C. Y. Huang, Partner, Tsar & Tsai Law Firm
CYHuang@TsarTsai.com.tw
