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Chapter Law Content

CHAPTER I GENERAL PROVISIONS
Article 1
The Business Mergers and Acquisitions Act (the Act) is enacted to facilitate merger /consolidation and acquisition by a business for purposes of reorganization and optimal operation efficiency.
Article 2
Any merger/consolidation and acquisition by a company shall be done pursuant to this Act; if not so provided, the Company Act, the Securities and Exchange Act, the Fair Trading Act, the Labor Standards Act, the Statute For Investment By Foreign Nationals and other applicable laws and regulations shall govern.
Any merger/consolidation and acquisition by a financial institution shall be done pursuant to the Financial Institutions Merger Act and the Financial Holding Company Act; if not expressly provided in the said two Acts, this Act shall govern.
Article 3
The "Competent Authority" as used in this Act denotes the Ministry of Economic Affairs (MOEA).
If any provisions set forth in this Act involve the business of the authority in charge of the relevant end-enterprise, the Competent Authority of this Act shall process things and matters hereunder jointly with that relevant authority.
Article 4
Interpretation
In this Act --
1. Company means a company limited by shares incorporated under the Company Act.
2. Merger and acquisition include merger, consolidation, acquisition, and division of a company.
3. Consolidation and merger refer to an act wherein any and all companies involved pursuant to this Act or any other applicable law are dissolved, and a new company is incorporated (consolidation) to generally assume all rights and obligations of the dissolved companies; or by any company surviving the merger from all the companies involved (merger), with shares of the surviving or newly incorporated company or any other company, cash or other assets as the consideration.
4. Acquisition means any company acquiring shares, business or assets of another company in exchange for shares, cash or other assets under this Act, the Company Act, the Securities and Exchange Act, The Financial Institutions Merger Act or the Financial Holding Company Act.
5. Share exchange means that a company transfers all its issued shares to another company in exchange for shares, cash or other assets in that company as the consideration for shareholders of the transferring company.
6. Division refers to an act wherein a company transfers all its independently operated business or any part of it under this Act or other applicable law to a surviving or a newly incorporated company as the consideration for that surviving company or newly incorporated company to give shares, cash or other assets to that company or shareholders of that company.
7. "Parent and subsidiary company" means-any company, directly or indirectly holding the majority of the total number of the issued voting shares or the total amount of the capital stock of another company, shall be the parent company; the other company with its shares held by the parent company shall be the subsidiary company.
8. Foreign Company means a company, for the purpose of profit-making, organized and incorporated in accordance with the law of a foreign county.
Article 5
In the merger/consolidation and acquisition by a company, the Board of Directors shall, in the course of conducting the merger /consolidation or acquisition, in the best interest of the company, fulfill its duty of care.
Any director involved in decision-making for a merger/consolidation or acquisition shall be liable for any damage to the company as a result of breach of applicable laws, ordinances, Articles of Incorporation or the resolution of the general meeting in dealing with the merge/consolidation and acquisition; provided, however, that upon producing sufficient evidence of minutes or written statement concerning disagreement, the director may be exempted from the liability.
In the merger/consolidation and acquisition by a company, a director who has a personal interest in the transaction of merger/consolidation and acquisition shall explain to the Board meeting and the general meeting the essential contents of such personal interest and the cause of approval or dissent to the resolution of merger /consolidation or acquisition.
Article 6
Before any resolution of merger/consolidation and acquisition by the Board of Directors, a company that has its share certificates publicly issued shall form a special committee to review the fairness and reasonableness of the plan and transaction of the merger/consolidation or acquisition, and then to report the review results to the Board of Directors and if the resolution by the general meeting is required, to the general meeting.
The functions of the preceding paragraph will, for a company establishing an audit committee in accordance with the Securities and Exchange Act, be exercised by the audit committee. The audit committee shall review matters in accordance with relevant provisions related to the resolution of an audit committee under Securities and Exchange Act.
When a special committee or audit committee reviews matters, it shall seek opinions from an independent expert on the justification of the share exchange ratio or distribution of cash or other assets.
The regulations on the composition, eligibility and review methods of a special committee as well as the eligibility, independence identification, appointing methods and other related matters of an independent expert, shall be prescribed by the competent securities authority.
Article 7
A company that has its share certificates publicly issued shall send the following documents of the merger/consolidation and acquisition to shareholders pursuant to this Act; if the company announced the same content as in those documents on a website designated by the competent securities authority and those documents are prepared in the company and at the venue of the general meeting by a company, those documents shall be deemed as having been sent to shareholders:
1. The required particulars, review results of special committees or audit committees and opinions of independent experts in the merger/consolidation agreement, share exchange agreement, or division plan, which all shall be attached to shareholders' meeting notice under Articles 22( 3), 31(7), and 38(2).
2. The required particulars, review results of special committees or audit committees and opinions of independent experts in the merger/consolidation agreement, share exchange agreement, or division plan, which all shall be attached to shareholders' notice after a resolution adopted by the Board of Directors under Articles 19( 2), 30(2), or 37(3).
If a resolution of the merger/consolidation and acquisition adopted by the Board of Directors under Articles 18(7), 19(1), 29(6), 30(1), 36(1), 36(2), and 37(1) is excluded from a resolution by the general meeting and deemed to be unnecessary to make notification to shareholders, the Board of Directors shall submit reports for matters of the merger/consolidation and acquisition at the next closest general meeting.
Article 8
In case of any of the following events, the company may not be required to reserve new shares to be issued for subscription by its employees, to notify then existing shareholders for subscription, to appropriate a certain ratio for public offering, and not subject to Articles 267(1) through 267(3) of the Company Act and Article 28-1 of the Securities and Exchange Act:
1. The surviving company issued new shares for a merger reason, or parent companies issued new shares for the merger between subsidiary companies and other companies.
2. All new shares are issued for being acquired;
3. All new shares are issued for the acquisition of issued shares, business, or assets of other companies;
4. New share are issued for the share exchange
5. New shares are issued for division of a company by the succeeding company.
Any new shares issued hereunder may be paid up in cash or assets required in the business of the company, and such issuance is exempted from Article 272 of the Company Act.
Article 9
Any reorganization plan proposed under Article 304 of the Company Act may expressly provide that the credits of the creditors on the company shall be applied to pay up calls required by new shares issued by the company acquired by the creditors, and this may be exercised after seeking the approval from the meeting of interested parties held under Article 305 of the Company Act and the ruling of approval by the court, without being subject to Articles 270, 272 and 296 of the Company Act.
Article 10
In the merger/consolidation and acquisition by a company, the shareholders may decide ways and related matters on joint exercise of voting rights by written agreement among themselves.
In the merger/consolidation and acquisition by a company, the shareholders may transfer their shares to a trust company or a financial institution operating trust business to put their voting rights in trust and the trustee shall exercise such voting rights as specified in a written trust deed.
To operate against the company by putting their voting rights in trust, the shareholders shall deliver to the company no later than five days prior to the meeting date of the general meeting the written trust agreement, list of the names, titles, residence (domicile) of shareholders, the total number, class and quantity of shares with their voting rights transferred in trust.
Article 11
In the merger/consolidation and acquisition by a company, the written agreement among shareholders, the company and shareholders, may reasonably regulate the following issues:
1. The company, other shareholders or a designated third party shall have the priority to purchase the shares transferred by the shareholder;
2. The company, other shareholder or a designated third party may have the priority to subscribe for shares held by other shareholder;
3. The shareholder may request other shareholders to jointly transfer their shares;
4. Any transfer of shares or offering shares as a security in pledge to a given person by a shareholder shall seek the approval from the Board of Directors or the general meeting;
5. The transferee or pledgee of shares;
6. Restraining shares from being transferred or offered as a security in pledge within a specific period of time.
The company not having its share certificates publicly issued may stipulate the aforesaid issues.
The so-called reasonable restrictions referred to in Paragraph 1 of this Article shall comply with the following principles:
1. Such restrictions are prescribed for the compliance with the Securities and Exchange Act, the tax law or any other applicable laws and ordnances;
2. Such restrictions are prescribed due to the character of a shareholder, business competition or operation development.
In issuing new shares owing to the merger/consolidation and acquisition by a company that has its share certificates publicly issued, and thus subject to restrictions of transfer or pledge of shares as provided in Paragraph 1, such restrictions shall be explicitly entered into the prospectus as specified in the Securities and Exchange Act or in the document to be delivered to the investors as specified by the competent securities authority.
As provided in Articles 163(1) and 163(2) of the Company Act, that transfer of shares shall not be prohibited or restricted by any provision in the Article of Incorporation and transfer of shares owned by promoters shall not be effected until the elapse of one year after the incorporation registration, are not applicable to Paragraphs One and Two hereof.
The sum of the purchased quantity of shares by a company pursuant to Items 1 and 2 of Paragraph 1 and that of e redeemed and purchased shares under other laws and ordinances shall not be greater than twenty percent of the total shares issued by that company and the total amount of redemption and buying back shall not be greater than the sum of retained earnings plus realized capital surplus.
Article 12
If any of the following events occurs in the course of the merger/consolidation and acquisitions by a company, the shareholder may request the company to buy back her shares at the then fair price:
1. If a company attempts to amend its Articles of Incorporation to prescribe restrictions on transfer or pledge of shares, the shareholder has expressed her objection, in writing or verbally with a record before or during the meeting and waived her voting right;
2. In case of any merger/consolidation proceeded under Article 18 of this Act by a company, the shareholder of the surviving or dissolved company has expressed her objection, in writing or verbally with a record before or during the meeting and waived her voting right, provided, however, that in the merger/consolidation proceeded under Article 18(7) of this Act, only the shareholder of the dissolved company may express such objection;
3. In case of any short-form merger/consolidation proceeded under Article 19 by a company, the shareholder of the subsidiary company has expressed her objection in writing within a term specified in the notice and public announcement made under Article 19(2) of this Act by the Board of Directors of the subsidiary company that resolves the merger/consolidation;
4. In case of an acquisition proceeded under Article 27 of this Act by a company, the shareholder has expressed her objection, in writing or verbally with a record before or during the meeting and waived her voting right;
5. In case of share exchange proceeded under Article 29 by a company, the shareholder of the transferor company and of the surviving transferee company has expressed her objection, in writing or verbally with a record before or during the meeting and waived her voting right. But in case of a share exchange proceeded under Article 29(6) by a company, only the shareholder of the transferor company can express her objection;
6. In case of a share exchange proceeded under Article 30 by a company, the shareholder of the subsidiary company has expressed her objection in writing within a term specified in the notice and public announcement made under Article 30(2) of this Act by the Board of Directors of the subsidiary company that resolves the share exchange;
7. In case of a division proceeded under Article 35 by a company, the shareholder of the company being divided or of the surviving transferee company has expressed her objection, in writing or verbally with a record before or during the meeting and waived her voting right;
8. In case of any short-form division proceeded under Article 37 by a company, the shareholder of the subsidiary company has expressed her objection in writing within a term specified in the notice and public announcement made under Article 37(3) of this Act by the Board of Directors of the subsidiary company that resolves the short-form division.
The shareholder filing a request under the preceding paragraph shall make it in writing within 20 days since the resolution of the general meeting was made, specify the price for buying back, and deposit certificates of her shares; in case of the resolution of merger /consolidation or acquisition made by the Board of Directors under this Act, it shall be made in writing within a term specified under Article 19(2), Article 30(2) or Article 37(3) of this Act, with the requested price for buying back specified and certificates of her shares deposited.
When the shareholder deposited her shares, the company shall mandate an institution that is permitted by law to handle shareholder services. The shareholder shall deposit her shares to that institution and the institution shall issue the certificate specifying the type and amount of shares to the shareholder; if the shareholder deposited her shares by book-entry transfer, she shall follow the procedure under the rules or regulations for centralized securities depository enterprises.
The request of a shareholder as provided in Paragraph 1 shall lose its effect when the company calls off its acts.
If the company and shareholder reach an agreement about the price of buying back, the company shall pay for the shares within 90 days since the resolution of the general meeting was made. In case no agreement is reached, the company shall pay the fair price it has recognized to the dissenting shareholder who asks for a higher price within 90 days since the resolution of the general meeting was made. If the company did not pay, the company shall be considered to be agreeable to the price requested by the shareholder as provided in Paragraph 2.
In case no agreement is reached within 60 days since the resolution of the general meeting was made, the company shall apply to the court for a ruling on the fair price against all the dissenting shareholders as the opposing party within 30 days after that duration. If the company did not apply against the dissenting shareholders as the opposing party, or the application was voluntarily dismissed by the company or dismissed by the court, the company shall be considered to be agreeable to the price requested by the shareholder as provided in Paragraph 2. But if the opposing party has already expressed her opinions or the ruling has already been served upon the opposing party, the rescission by the company shall be effective if agreed by the opposing party.
When the company applies to the court for a price ruling, the company shall annex the specification of the auditing and attestation of financial statements by certified public accountants of the company and the assessment about the fair price, and present to the court written copies or photocopies of the specification based on the number of people of the opposing party, which are to be served upon the opposing party by the court.
Before making the ruling on the price, the court shall let the applicant and the opposing parties have the chance to express their opinions. In case the opposing party includes two people or more, The provisions set out in Articles 41 to 44, as well as Paragraph 2 of Article 401 of Taiwan Code of Civil Procedure shall apply mutatis mutandis.
When the ruling made under the preceding paragraph is appealed against, before making the ruling on the appeal, the court shall let the applicant and the opposing party have the chance to express their opinions.
When the price ruling becomes final and binding, the company shall, within 30 days of the ruling becoming final and binding, pay for the shares with that price deducted from the part already paid plus the legal interest accruing from the date next to the expiration of the 90-day period after the resolution was made.
The provisions set out in Article 171 as well as Paragraph 1, 2, and 4 of Article 182 of the Non-litigation Act shall apply mutatis mutandis.
The company shall bear the expenses of the application procedure and the compensation for the inspector.
Article 13
A company purchasing shares under Article 12 shall proceed as follows:
1. Any shares purchased from shareholders of the dissolved company shall be surrendered together with other shares issued by that dissolved company to file an application for registration of cancellation;
2. Shares purchased other than the preceding item shall be:
(1) transferred to shareholders of the dissolved company or any other company according to a merger/consolidation agreement, share exchange agreement, division plan or any other contract;
(2) made an alteration of the entries of the corporate registration;
(3) sold at a fair market price within three years from the date of redemption or buying back. If the shares so redeemed or bought back remain unsold after expiry of the foregoing time limit, such shares shall be deemed as the shares which have never been issued by the company; under such circumstance, the company shall apply for an alteration of the entries of the then existing corporate registration in respect of such shares accordingly.
No shares redeemed or bought back under this Act shall be produced as pledge and shall not be entitled with the shareholder right before such shares have been sold or cancelled.
Article 14
In case the Board of Directors is unable to exercise its power and authority in the merger/consolidation and acquisition by a company, a temporary manager may be elected upon a resolution adopted by a majority of the shareholders present at the general meeting, who represent two-thirds or more of the total number of the issued shares. The scope and term of power and authority to be exercised by the temporary manager shall also be specified for the temporary manager to exercise the power and authority of the Chairman of the Board and the Board of Directors under the Company Act in the event that the Board of Directors is unable to exercise its power and authority.
For a company whose share certificates have been publicly issued, if the total number of shares represented by shareholders at the general meeting is short of the quorum, the temporary manager may be elected by two-thirds of the votes of the shareholders present at the general meeting who present a majority of the total number of issued shares.
An application for registration shall be filed within fifteen days after a temporary manager is on board; the removal of the temporary manager, together with new directors and supervisors, shall be filed within fifteen days after the election of directors and supervisors takes place.
Article 15
In the course of a merger/consolidation by a company, any sum of the pension reserves appropriated by the dissolved company remaining after paying pension and, if the dissolved company decides as such, making severance pay to the labor not retained and any labor declining the continued employment shall be totally transferred from the designated account of the labor pension reserves monitor commission of the company to that of the newly incorporated or surviving company.
In the transfer of the entire business or any part of it by a company as a result of the acquisition of assets or division, the transferor company or the divided company, upon having paid pension to the labor not retained and then made the severance pay to any labor declining the continued employment(if the company decides as such), shall make the pro rata transfer of the remaining sum of the pension reserves appropriated for the labors who are transferred together with the business or the assets and applicable for the period of service of the pension system under Labor Standards Act to the designated account of the labor pension reserves monitor commission of the transferee company.
Before the transferor company or the divided company appropriates the labor pension reserves proportionate to that required under the preceding paragraph, the labor pension reserves shall reach the amount specified as the minimum in filing the application for a suspension of appropriation under the applicable labor laws and ordinances; provided, however, that in case the labors are applicable for the period of service of the pension system under Labor Standards Act and already totally transferred to the transferee company, the remaining sum of the pension reserves shall be transferred to the designated account of the labor pension reserves monitor commission of the transferee company.
Article 16
Any surviving company, newly incorporated company or transferee company shall, no later than thirty days before the reference date of the merger/consolidation and acquisition, serve a written notice expressly describing labor conditions to any labor staying after the merger/consolidation and acquisition according to the negotiation between the existing and the new employers. Any labor within ten days upon receiving the notice shall notify her decision of whether to accept the conditions in writing to the new employer. The absence of such notice from the labor shall be deemed as consent to stay with the new company after the merger/consolidation and acquisition.
The period of service the labor accepting the continued employment has covered at the dissolved company, transferor company or divided company before the merger/consolidation and acquisition shall be recognized by the surviving company, newly incorporated company or the transferee company after the merger/consolidation and acquisition.
Article 17
In case of the merger/consolidation and acquisition by a company,, the prior employer company shall terminate the labor contract with any labor not retained or declining the continued employment; the labor shall be entitled with a prior notice of termination of employment or paid a wage payable during that prior notice in accordance with Article 16 of the Labor Standards Act, and be duly paid the pension or made severance pay as the law prescribes.
The case of any labor declining the continued employment comprises that any labor having accepted the continued employment later refuses to stay with the company before the reference date of the merger/consolidation and acquisition by a company.