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Chapter Law Content

CHAPTER II MERGER, ACQUISITION AND DIVISION
Section 3 Division
Article 35
In carrying on a division by a company, the Board of Directors shall draft a division plan and submit it to the general meeting.
A resolution for division shall be adopted by a majority vote at the general meeting attended by shareholders representing two-thirds or more of the total number of the issued shares of the company.
For a company that has its share certificates publicly issued, if the total number of shares represented by shareholders present at the general meeting is short of the quorum under the preceding paragraph, the resolution may be adopted by two-thirds or more of the votes of the shareholders present at the general meeting who represent a majority of the total number of issued shares.
In case a listed or OTC company carried on a division and the trading of the shares then traded on the stock exchange or OTC market shall be terminated while the surviving or newly incorporated transferee company after the division is not a listed or OTC company, the resolution of the general meeting under the preceding two paragraphs shall be adopted by two-thirds or more of the votes of the shareholders who represent the total number of issued shares of the listed or OTC company.
In the preceding three Paragraphs where higher criteria for the total number of shares represented by the shareholders present at the general meeting and the total number of votes required to adopt a resolution thereat are specified in the Articles of Incorporation, such higher criteria shall prevail.
Upon the resolution of the division, a company shall immediately notify or make a public notice to each creditor of such a division and specify a period of not less than thirty days to allow objection filed by the creditors. A company, that has not given notice or made public announcement in the manner referred to in the preceding paragraph, or fails to satisfy a creditor who has raised an objection to the division, to furnish an appropriate security, to create any trust exclusively for creditors’ satisfaction, or to certify that such a division is without prejudice to the rights of creditors, shall not assert the division as a defense against such a creditor.
The surviving or newly incorporated transferee company, unless the liabilities existing before the division may be severed, shall, within the scope of contributions made by the transferee company, be jointly and severally liable to discharge the liability incurred by the divided company prior to the division. However, the creditors’ right to claim for the performance of the joint and several liabilities shall become extinguished, if not exercised by the creditors within two years from the reference date of the division.
If the transferee company is a newly incorporated company, the general meeting of the company divided shall be deemed as the meeting of promoters of the transferee company; it may draw up the Articles of Incorporation and elect directors and supervisors of the newly incorporated company in the same meeting without being subject to Articles 128, 129 through 139, 141 through 155 and 163(2) of the Company Act.
Article 24 of the Company Act shall apply mutatis mutandis to any company dissolved as a result of a division.
Where a listed or OTC company is divided, the surviving or the newly incorporated transferee company, after the division found compliant with requirements of the division and the relevant listing or OTC rules, may continue or start to offer its shares on the stock exchange or OTC market upon completing the procedures specified for such a division and procedures of the stock exchange or OTC market, while the divided company with shares traded on the stock exchange or OTC market before the division may continue the trading of the shares as such.
In case of a division by a company limited by shares, the surviving company or the newly incorporated company shall be only in the form of a company limited by shares.
Article 25 of this Act is applicable mutatis mutandis to the registration for transfer and alteration of rights and obligations pertaining to the assets of the divided company acquired after the division by the surviving or newly incorporated transferee company.
Article 18 (6) of this Act shall apply mutatis mutandis to the procedure of the division.
Article 36
In case the business value delivered to the surviving or the newly incorporated company will not exceed two percent of the net value of the divide company while the divided company acquires the total amount of consideration, a resolution for the division agreement shall be adopted by a majority vote of the directors present at the Board meeting attended by directors representing two-thirds or more of the directors of the divided company. However, in case the divided company needs to amend its Articles of Incorporation, Paragraphs 1-5 of the preceding Article relating to the resolution of the general meeting of the divided company still govern.
In case that the surviving transferee company issued new shares as the consideration for the division, that the number of those shares will not exceed twenty percent of the total number of issued voting shares of that company, and that the total amount of cash or the total value of the assets delivered will not exceed two percent of the net value of that company, a resolution for the division agreement shall be adopted by a majority vote of the directors present at the Board meeting attended by directors representing two-thirds or more of the directors of the surviving company. However, in case the assets of the business of the divided company transferred to the surviving company may not be insufficient to offset its liabilities, or the surviving transferee company needs to amend its Articles of Incorporation, Paragraphs 1-5 of the preceding Article relating to the resolution of the general meeting of the surviving transferee company still govern.
In case the division is resolved by the Board of Directors of the divided company while the divided company is the only shareholder of the newly incorporated company, the Board meeting of the divided company shall be deemed as the meeting of promoters of the newly incorporated company; it may draw up the Articles of Incorporation and elect directors and supervisors in the same meeting without being subject to Articles 128, 129 through 139, 141 through 155 and 163(2) of the Company Act.
Article 37
In case that a parent company carries on a division with its subsidiary company whose ninety percent or more of the total number of the issued shares is held by the parent company and that the subsidiary company, as the divided company, transfers its business to the parent company, as the surviving transferee company, while acquiring the total amount of consideration for the business, the division plan may be concluded upon a resolution to be adopted separately at the Board meeting of each company by a majority vote of the directors present at the meeting attended by directors representing two-thirds or more of the directors of the respective companies.
A company shall immediately make a public notice and notify each creditor of the divided subsidiary company under the preceding paragraph of such a division pursuant to Paragraph 6 of Article 35 of this Act; as regards the notice and public announcement, the reference date to start counting is the date of the resolution by the Board of Directors.
After adoption of the resolution by the Board of Directors of the subsidiary company under Paragraph 1 of this Article, the details of the resolution and entries required to appear in the division plan shall be published within ten days. A notice shall be served to each of its shareholders and state that any shareholder who has an objection against that resolution may submit a written objection requesting the subsidiary company to buy back, at the then prevailing price, the shares of the subsidiary companies she holds. In case a company has its share certificates publicly issued, it shall deliver review results of special committees or audit committees and opinions of independent experts to its shareholders.
The given time referred to in the preceding paragraph shall not be shorter than thirty days.
Article 38
The division plan specified in Article 35, Article 36 and Article 37 of this Act shall be made in writing with the following particulars:
1. Any alteration made to the Articles of Incorporation of the surviving transferee company or execution of the Articles of Incorporation of the newly incorporated company;
2. Business value, assets, liabilities, share exchange ratio and computation criteria of the business transferred by the divided company to the surviving or the newly incorporated transferor company;
3. Where shares, cash or other assets given as the consideration by the surviving transferor company or the newly incorporated company, the total number of new shares, classes of shares, and amount of each class; the total amount of cash and other assets, types of cash and other assets, and amount of each type, together with the computation criteria;
4. The proportion of distribution and other relevant matters of shares, cash or other assets acquired by the divided company or its shareholders, or both;
5. The relevant provisions applicable if the amount of shares to be issued to the divided company or its shareholders is less than the value of one share and payable in cash;
6. Rights and obligations of the divided company assumed by the surviving or newly incorporated transferor company, together with other matters;
7. In case of capital reduction of the divided company, any matter related to such reduced capital;
8. The matters which shall be settled in the cancellation of the shares of the divided company;
9. If another company joins the division with the company, the resolution of the division shall contain matters related to the joint division.
The entries required to appear in the division plan shall be delivered together with the notice of the general meeting for the resolution of the division to each shareholder. In case a company has its share certificates publicly issued, it shall deliver review results of special committees or audit committees and opinions of independent experts to its shareholders.
In case a division is made with a foreign company, Articles 35, 36, 37, 38(1), 38(2) and 21 of this Act shall mutatis mutandis apply.