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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 t
he 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.
CHAPTER II MERGER, ACQUISITION AND DIVISION
Section One Merger/Consolidation
Article 18
A resolution for the merger/consolidation or dissolution of a company 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 provided in 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 participates in the merger/consolidation and
is dissolved thereafter while the surviving or newly incorporated company 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.
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.
In case any special shares are issued by the company, the merger/consolidation
shall be separately resolved by the holders of those special shares with the exceptions
that a resolution by the general meeting is not required under this Act or that
a resolution by the meeting of special shareholders is not required as expressly
provided in the Articles of Incorporation. All the provisions set forth in the preceding
four paragraphs shall apply mutatis mutandis to the resolution of the meeting of
special shareholders.
Any company holding the shares of another company participating
in the merger/consolidation, or the company or its assigned representative is elected
as a director of another company participating in the merger/consolidation, then
the company or its assigned representative may exercise voting rights in the resolution
of the merger/consolidation by such another company.
In case the number of shares issued as a result of the merger/consolidation will not
exceed more than twenty percent of the total number of issued voting shares
of the surviving company immediately before the merger/consolidation, while
the total amount of cash or the total value of the assets delivered to the shareholders
of the dissolved company will not exceed more than two percent of the net value
of the surviving company, a resolution for the merger/consolidation 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 that the assets of the dissolved company may
not be insufficient to offset its liabilities, or that the surviving company needs
to amend its Articles of Incorporation, Paragraphs 1-4 of this Article relating
to the resolution of the general meeting still govern.
Article 19
In case that a parent company merge/consolidate with its subsidiary company
whose ninety percent or more of the total number of the issued shares is held
by the parent company or that subsidiary companies of a parent
company merge/consolidate with one another whose ninety percent or more
of the total number of the issued shares is held by their parent company
respectively, the merger/consolidation agreement 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 c
ompanies.
After adoption of the resolution by the Board of Directors of subsidiary
companies under the preceding paragraph, the details of the resolution and
entries required to appear in the merger/consolidation agreement shall be
published within ten days. A notice shall be served to each of their shareholders
and state that any shareholder who has an objection against that resolution may
submit a written objection requesting the subsidiary companies to buy back,
at the then prevailing price, the shares of the subsidiary companies
she holds. In the case of a company that has its share certificates publicly
issued, it shall deliver review results of special committees or audit committees
and opinions of independent experts in the merger/consolidation agreement
to its shareholders.
The given time referred to in the preceding paragraph shall not be shorter than
thirty days.
Where ninety percent or more of the total capital of a subsidiary company is
held by its parent company, all the provisions set forth in the preceding
three paragraphs shall apply mutatis mutandis when the parent company merges
with the said subsidiary company.
Article 20
In the case of a merger/consolidation between two companies limited by shares
or between a company limited by shares and a limited company, the surviving
or the newly incorporate company under the merger/consolidation project shall
be limited to a company organized in the form of a company limited by shares.
Article 21
The following requirements shall be fulfilled in case of any merger/ consolidation
of a domestic company with a foreign company:
1. The said foreign company, pursuant to the law of incorporation, shall be
a company limited by shares or a limited company and is duly allowed to
be merged/consolidated with other companies;
2. The merger/consolidation agreement has been duly resolved by the general
meeting, the Board of Directors of that foreign company or otherwise, pursuant
to the law of incorporation;
3. The surviving company or newly incorporated company after
the merger/consolidation shall exist only in the form of a company limited by shares.
The foreign company shall designate before the reference date of
the merger/consolidation a representative for any service made within
the territory of the Republic of China.
Article 22
The merger/consolidation agreement shall be made in writing and state
the following particulars:
1. The name and capital of the companies involved in the merger/consolidation
and the name and capital of the surviving or newly incorporated company
after the merger/consolidation.
2. Where shares are to be issued by the surviving company, the newly
incorporated company, or other companies as a result of the merger/consolidation,
the total number of shares, classes of shares and amount of each class,
or the amount of cash and other assets.
3. Where shares are to be issued to shareholders of the dissolved company
by the surviving company, the newly incorporated company, or other companies
as a result of the merger/consolidation, the total number of shares, classes of
shares and amount of each class; the amount of cash and other assets; the method
and proportion of distribution, together with other relevant matters.
4. Any matter related to the shares duly redeemed or purchased by the surviving
company for the distribution to the shareholders of the dissolved company.
5. Any change to the Articles of Incorporation of the surviving company
or Articles of Incorporation to be executed by the newly incorporated company
according to Article 129 of the Company Act;
6. Criteria and conditions for the computation of share exchange ratio by
the listed or OTC company.
The preceding paragraph is also applicable, mutatis mutandis, to
the merger/consolidation with a foreign company.
The entries, required to appear in the merger/consolidation agreement
under Paragraph 1, shall be delivered to each shareholder together with the notice
of the general shareholders’ meeting for the merger/consolidation. In the case
of the company that has its share certificates publicly issued, it shall send
the review results of special committees or audit committees and opinions
of independent experts to the shareholders.
Article 23
Upon the resolution of the merger/consolidation, a company shall immediately
notify or make a public notice to each creditor of such a merger/consolidation
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 merger/consolidation, to furnish
an appropriate security, to create any trust exclusively for creditors’ satisfaction,
or to certify that such a merger/consolidation is without prejudice to the rights
of creditors, shall not assert the merger/consolidation as a defense against
such a creditor.
The requirements specified in Paragraph One shall be applicable to the creditors
of the dissolved company in the merger/consolidation provided in Article 18(7)
of this Act; as regards the notice and public announcement, the reference date
to start counting is the date of the resolution by the general meeting.
The requirements specified in Paragraph One shall be applicable to the creditors
of the subsidiary company in the merger/consolidation provided
in Article 19 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.
Article 24
All rights and obligations of any company dissolved due to the merger/consolidation
shall be generally assumed by the surviving company or the newly incorporated
company after the merger/consolidation; the status as a concerned party of the
dissolved company in any on-going litigation, non-litigation, arbitration and
any other proceedings shall be taken over by the surviving company or
the newly incorporated company.
Article 25
The transfer of all rights and obligations pertaining to any properties acquired
from the dissolved company by the surviving company or the newly
incorporated company shall become operative on and after the reference date
specified for the merger/consolidation; provided, however, that any
acquisition, hypothecation, loss or change of any right under other applicable
laws shall be registered before its disposition is permitted.
The following documents are required to be forthwith registered with the
appropriate authorities by batch by the surviving company or the newly
incorporated company in carrying out the registration of the alteration
or merger/consolidation for the rights pertaining to the assets described
in the preceding paragraph without being subject to the restriction that
any registration for alteration of rights shall be jointly completed by
the obligor and obligee as provided in Article 73(1) of the Land Act, Article 7
of the Personal Property Secured Transactions Act and any other applicable
laws and ordinances:
1. Certificate of the registration for the merger/consolidation.
2. A list of registered assets of the dissolved company before the merger/consolidation
and the list of assets in the registration for modification completed by
the surviving company or the newly incorporated company.
3. Any other documents specified by the registration authorities.
Unless a longer period is otherwise provided by other applicable laws and
ordinances, the registration specified herein shall be completed within six months
upon the reference date of the merger/consolidation without being subject to
the completion of registration for alteration of land rights within one month
as provided in the former of Article 73(2) of the Land Act.
Article 26
The surviving company may report the merger/consolidation in the first general
meeting held after the merger/consolidation.
Section Two Acquisition
Article 27
The notice of credit transfer in the acquisition of business or assets by a company
under general assumption or transfer, or under Articles 185(1) (ii) or 185(1) (iii)
may be made in the form of public announcement in lieu and the recognition
from the creditors is not required in any undertaking of liabilities without being
subject to Articles 297 and 301 of the Civil Code. The foregoing transactions
require resolutions 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 provided 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 the trading of shares on the stock exchange or OTC market is terminated
because the listed or OTC company carries on the general transfer or transfers
business or assets so that the transferee company is not a listed or OTC
company anymore, 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.
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 under the preceding three paragraphs are
specified in the Articles of Incorporation, such higher criteria shall prevail.
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 transferor company acquired by the transferee company.
The preceding five Paragraphs and Article 21 of this Act shall apply mutatis
mutandis to the transfer or assumption of business or assets under Article 185 (1) (ii)
and (iii) of the Company Act and the acquisition made in the form of general
assumption or transfer by the company and a foreign company.
Article 18 (6) of this Act shall apply mutatis mutandis to the procedure of
the acquisition in this Article.
A company shall, after the resolution made under Paragraph 1, immediately
notify as well as make a public notice to each creditor of the company of
such a resolution, while specifying a time limit of not fewer than thirty (30)
days within which the creditors may raise their objections, if any, to
such a resolution.
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 merger/consolidation, to furnish
an appropriate security, to create any trust exclusively for creditors’ satisfaction,
or to certify that such a merger/consolidation is without prejudice to the rights of
creditors, shall not assert the merger/consolidation as a defense against such a creditor.
For the purpose of the merger/consolidation and acquisition to acquire the shares
of the company whose share certificates have been publicly issued, in case ten percent
or fewer of the total shares that the company had issued are acquired, it can be done
alone or with others not in a publicly disclosed way.
The term “ alone ”under the preceding paragraph means as follows:
1. Acquiring the shares of the company in its (or her) own name.
2. Acquiring the shares of the company in others’ names, conforming
to requirements under Article 2 of Securities and Exchange Act Enforcement Rules.
3. Acquiring the shares of the company in the name of a special purpose
entity, conforming to International Accounting Standards (IAS)
and International Financial Reporting Standards (IFRS).
The term “with others” under Paragraph 10 means: several people, with the same
purpose of the merger/consolidation and acquisition, acquire already-issued shares
of a public company by contract, agreement, or other forms of mutual consent.
Those who acquire the shares under Paragraph 10 can transfer their shares
through intraday trading or after-market-close trading on the centralized
securities exchange or OTC market.
For the purpose of the merger/consolidation and acquisition to acquire the shares
of the company whose shares have been publicly issued, in case more than ten percent
of the total shares that the company had issued are acquired, the acquirers shall report
to the competent securities authority the purpose of the merger/consolidation
and acquisition and other particulars required for reporting by the competent
securities authority within ten days of the acquisition of the shares; if the
particulars required for reporting were adjusted, they shall be updated immediately.
In case of the acquisition of the voting shares already issued by the company
whose shares have been publicly issued without complying with the requirements
under the preceding paragraph, the excess shares shall not have voting rights.
Article 28
Upon complying with the following requirements, the acquisition of the entire
or substantial portion of the business or assets from a parent company by
a subsidiary company may be made as resolved by the Board of Directors of
the parent company. Resolutions adopted by the shareholders' meeting of
the transferor and transferee companies as provided in Articles 185(1)
through 185(4) are not required and the requirements set forth in Articles 186
through Article 188 of the Company Act are exempted:
1. The said subsidiary company is entirely held by the parent company;
2. The subsidiary company shall issue new shares to the parent company in exchange
for the business or assets of the latter.
3. The said parent company and its subsidiary company have prepared
the consolidated financial statements according to the Generally Accepted
Accounting Principles.
The preceding paragraph and Article 21 of this Act shall apply mutatis mutandis
to any transfer by a parent company of its entire or substantial portion of business
or assets to its 100% held subsidiary company incorporated offshore, or the transfer
by a foreign company of its entire or substantial portion of business or assets
to its 100% held subsidiary company incorporated within the territory of the Republic
of China.
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 transferor
company acquired by the transferee company.
In case the trading of shares on the stock exchange or OTC market is terminated
because the listed or OTC company transferred its business or assets to another
company, the resolution of the general meeting 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. Paragraphs 1 and 2 on the resolution of Board
of Directors of the transferor company shall not apply.
Article 18 (6) of this Act shall apply mutatis mutandis to the procedure of
the acquisition in this Article.
Article 29
If as resolved by the general meeting, a company may by means of share exchange
to be acquired by any other surviving or newly incorporation company as
a 100% held subsidiary company pursuant to the following requirements:
1. The said resolution by the general meeting shall be adopted by a majority votes
at the meeting attended by shareholders representing two-thirds or more of the
total number of the issued shares; the same governs where the designated
transferee company is a surviving company;
2. Requirements set forth in the latter of Article 197(1) of
the Company Act, Article 227 when the latter of Article 197(1) of the Company Act
shall apply mutatis mutandis, and Articles 22-2 and 26 of the Securities
and Exchange Act are not applicable to the share exchange described herein.
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 provided Item 1 under the preceding paragraph, the resolution
may be adopted by two-thirds or more of the shareholders present at the general
meeting who represent a majority of the total number of issued shares.
In case the trading of shares on the stock exchange or OTC market is terminated
because the listed or OTC company is acquired by any other surviving or
newly incorporation company as a 100% held subsidiary company while
the surviving or newly incorporated company 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.
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 under the preceding three paragraphs
are specified in the Articles of Incorporation, such higher criteria shall prevail.
If the transferee company is a newly incorporate company, the general meeting
held under Item 1, Paragraph 1 of this Article shall be deemed as the meeting
of promoters of the transferee company; directors and supervisors may be elected
in that same meeting without being subject to Article 128, Articles 129
through 139, 141, 155 and 163(2) of the Company Act.
In case that the surviving transferee company issued new shares as
the consideration, 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 share exchange 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 transferor company may not
be insufficient to offset its liabilities, or the surviving transferee company needs
to amend its Articles of Incorporation, Item 1 and 2, Paragraphs 1 of this Article
relating to the resolution of the general meeting of the surviving transferee company
still govern.
Article 18 (6) of this Act shall apply mutatis mutandis to the procedure of share
exchange in this Article.
Article 30
Where ninety percent or more of the total number of the issued shares of a
subsidiary company is held by its parent company, the parent company may carry
on the acquisition by share exchange with the said subsidiary company upon
a resolution to be adopted separately at the Board meeting of both the parent
and subsidiary companies 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 respective companies.
After adoption of the resolution by the Board of Directors of the subsidiary
company under the preceding paragraph, the details of the resolution and entries
required to appear in the share exchange agreement 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 company she holds. In the case of a company that has
its share certificates publicly issued, it shall deliver review results of special
committees or audit committees and opinions of independent experts in the
share exchange agreement to its shareholders.
The given time referred to in the preceding paragraph shall not be shorter than
thirty days.
Article 18 (6) of this Act shall apply mutatis mutandis to the procedure of
the share exchange in this Article.
Article 31
In the course of share exchange by and between a company and another
company pursuant to the preceding Articles of this Act, if the designated
transferee company is a surviving company, a share exchange agreement
shall be concluded by Boards of Directors from both of the transferor and
the transferee companies; if the designated transferee company is a newly
incorporated company, a share exchange resolution shall be adopted by
the Board of Directors of the transferor company; the aforesaid agreement
and resolution shall be presented at the general meetings of
the companies concerned. However, the above requirements are not applicable
to the cases where resolutions of general meetings are not required
under the preceding two Articles.
The share exchange contract and resolution as described in the preceding paragraph
shall contain the following particulars and shall be delivered to each shareholder
together with the meeting notice:
1. Any alteration made to the Articles of Incorporation of the surviving company
or execution of the Articles of Incorporation of the newly incorporated company;
2. Where shares, cash or other assets given as the consideration by the surviving
or 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 other relevant matters.
3. Where shares are transferred by the shareholders of the company to the surviving
or newly incorporated company, the total number of shares, classes of shares, and
amount of each class, together with other relevant matters;
4. The relevant provisions applicable if the amount of shares to be issued to
the shareholders is less than the value of one share and payable in cash;
5. The share exchange agreement shall enter whether any remaining office term
of directors or supervisors at the time of the share exchange should be continued;
the share exchange resolution shall enter a list of directors and supervisors of
the newly incorporated company;
6. In case of a joint share exchange with another company for the newly
incorporated company, the share exchange resolution shall enter matters of
concerns in such a joint share exchange.
The preceding two paragraphs, the preceding two articles and Article 21 shall
apply mutatis mutandis to the share exchange between the company and
a foreign company.
Any undistributed retained earnings after the share exchange by a company
with another company shall be entered as the capital surplus of another company.
Special shares already issued before the share exchange by a company with
another company, the transferee company shall assume the rights and
obligations regarding these shares towards their holders; the transferee company,
in the fiscal year of the share exchange, may distribute dividends after the
supervisors audit the statements and reports produced by the Board of Directors,
while such distribution is immune from restrictions provided in Articles 228
through 231 of the Company Act.
If a company is newly incorporated as a result of the share exchange by the company
with another company, the portion of the capital quota for the share exchange of
the newly incorporated company may not be applicable to Article 2(1) (i) of
the Employee Welfare Fund Act.
The entries required to appear in the transfer agreement or resolution of
under Paragraph 2 shall be delivered to each shareholder together with the notice of
the meeting for transfer; the company that has its share certificates publicly issued,
shall deliver the result of the review that made by special committee or
audit committee and the review result of independent expert to
shareholders. The entries, required to appear in a share exchange agreement or
resolution under Paragraph 2, shall be delivered to each shareholder together
with the notice of the general shareholders’ meeting for the share exchange. In the
case of the company that has its share certificates publicly issued, it shall send
the review results of special committees or audit committees and opinions of
independent experts to the shareholders.
Article 32
The case where a company engaging in the share exchange acquires shares
of the designated transferee company, is not subject to Paragraphs 3 and 4, Article 167
of the Company Act.
When the company engaging in the share exchange acquires shares under
the preceding paragraph, it must not exercise the rights of a shareholder unless
under any of the following circumstances:
1. Claim for surplus earnings distribution.
2. Claim for distribution of residual assets.
3. Distribution of the legal reserve or capital surplus by issuing new shares and
by paying cash.
Article 33
After the share exchange resolution is adopted by a company, it shall make a public
notice to shareholders, notify each shareholder and each pledgee of the shareholders
as registered in the shareholders’ roster, no later than 30 days prior to the reference
date of the share exchange, of the following matters:
1. The essentials of a resolution adopted by the shareholders' meeting
or the Board of Directors.
2. Transfer of shares shall be executed on the reference date of the share exchange.
3. Shareholders shall file the shares they held with the company one day before
the reference date of the share exchange; those shares not filed shall become
null and void.
Article 34
Where a listed or OTC company enters into a share exchange plan with another
surviving company or a newly incorporated company under Article 29, the trading
of the shares then traded on the stock exchange or OTC market shall be terminated
upon the completion of the share exchange and required procedure of the stock
exchange or OTC market, and shares of the surviving company or the newly
incorporated company in compliance with requirements set forth for a listed
or OTC company shall be traded on the stock exchange or OTC market.
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.
CHAPTER III TAX PAYABLE TO GOVERNMENT
Article 39
In carrying on a division or the acquisition of assets or shares by a company
pursuant to Articles 27 through 30 of this Act, with the shares entitled with
voting rights as the consideration to pay the company so merged/consolidated
and acquired while such shares are at a value not less than sixty-five percent
of the total consideration, or where a company is carrying on the merger/consolidation,
the following shall apply:
1. Any and all deeds and certificates so created are exempted from stamp tax;
2. The title-ship of acquired immovable property is exempted from deed tax;
3. Transferred securities are exempted from securities exchange tax;
4. Any commodities or labor service transferred is deemed as not falling
within the scope of imposition of business tax;
5. The transfer registration of the title-ship shall be immediately completed
after the current value of any land owned by the company with the transfer
declared is confirmed. The land value increment tax duly born by the existing
land title holder may be registered under the name of the company acquiring the
land after the merger/consolidation and acquisition; in case of any further transfer
of that land, the land value increment tax registered shall be paid on a priority
basis over any and all liabilities and mortgage from the proceedings of the disposition
of such land.
After the land value increment tax under Item 5 of the preceding paragraph is
registered, when shares as the consideration are transferred by the acquired
company or divided company such that the shares it holds becomes lower than
sixty-five percent of the consideration within three years upon completing
the registration of the land transferred, the acquired company or the divided
company shall make later payment of the land value increment tax registered;
any shortage of the later payment shall be made good by the acquiring company
and the surviving company or the newly incorporated company after the division.
Article 40
The good will created as a result of the merger/consolidation and acquisition
by a company may be equally amortized within fifteen years.
Article 41
The expenses incurred from the merger/consolidation and acquisition by a company
may be equally amortized within ten years.
Article 42
In case of a merger/consolidation, division or acquisition provided
in Articles 27 and 28 of this Act by a company, the surviving company or
the newly incorporated company after the merger/consolidation, the surviving
company or the newly incorporated company after the division or the company
of acquisition may respectively continue to assume any tax incentives entitled
to the dissolved company, the company divided or the company acquired that
is not yet deducted or not expired for the assets or business already acquired
before that current acquisition; provided, however, that any company qualified
for the incentive of exemption of business income tax shall continue to produce
the product or labor service enjoying the incentives by the dissolved company,
the company divided or the acquired company before the merger/consolidation
and acquisition; such incentives shall be limited to the income accounted for
the product independently manufactured or the labor service provided and
otherwise enjoyed by the dissolved company, the company divided or the
company acquired as of the surviving company or the newly incorporated company
after the merger/consolidation, or the surviving company or the newly
incorporated company after the division or the acquisition company. In case
of being qualified for the incentives of investment offset, such shall be limited
to the tax payable accounted for the part of the dissolved company, the company
divided or the company acquired as of the surviving company or the newly
incorporated company after the merger/consolidation, or the surviving company
or the newly incorporated company after the division or the acquisition company.
If any tax incentives continued to be enjoyed by the company pursuant to the
requirements set forth in the preceding paragraph is required to comply with
the conditions and standards as specified in applicable laws and ordinances, the
company shall meet the same incentive conditions and standards after the assumption
of the tax incentives.
To facilitate readjustment of the structure of the industry, a company with surplus
is encouraged to merge/consolidate and acquire any other company in loss to repay
the debts due to banks transferred at the time the merger/consolidation and
acquisition take place, the Executive Yuan may prescribe a procedure to exempt
the business income tax for the income created from the assets or business so
merged/ consolidated and acquired within a given period of time.
The preceding paragraph may be applicable, mutatis mutandis, to
the merger/consolidation between two companies in loss.
The Executive Yuan shall specify the given period of time, applicable conditions
and procedure for the exemption of business income tax as described in Paragraphs 3
and 4 of this Article.
Article 43
If provided with sound and complete accounting books and records, the loss and
the year for the declaration of deduction as a result of the merger/consolidation
by a company entitled to use the blue declaration form as referred to in Article 77
of the Income Tax Act or if provided with a CPA certified report and the income
tax has been declared and paid up within the given time, the surviving company or
the newly incorporated company after the merger/consolidation in declaring
the final income tax of profit business may deduct from the net profit of the
current year within ten years upon the year the loss takes place the losses provided
under Article 39 of the Income Tax Act before the merger/consolidation for deduction
to each company participating in the merger/consolidation in pro rata of the equities
of the surviving company or the newly incorporated company held by each
corporate shareholder due to the merger/consolidation.
In case of a merger/consolidation by a domestic company with a foreign company,
the surviving company or the newly incorporated company or the subsidiary
company incorporated by the foreign company within the territory of the Republic
of China may deduct any loss not yet deducted before the merger/consolidation by
each company participating in the merger/consolidation or by the subsidiary
company incorporated by the foreign company within the territory of the Republic
of China.
Upon the division of the company, the surviving company or the newly
incorporated company may, as specified in Paragraph 1 of this Article, deduct
from the net profit of the loss pending deduction before the division by
each company participating in the division at the amount calculated pro
rata according to the division of equity. Upon calculating of the deductible loss
by the surviving company, the ratio of equity of the surviving company held
after the division by the shareholders of each company participating in the division
shall be further accounted for the calculation.
Article 44
If the shares with voting rights acquired by a company as a result of the transfer
of its entire or substantial portion of business or assets to another company is not
less than eighty percent of the consideration of the entire transaction, and all the
shares so acquired have been transferred to the shareholders, then any
proceedings generated from the transfer of the business or assets is exempted
from business income tax; any loss incurred is prevented from deduction from
the income.
The substantial portion of business as described in the preceding paragraph refers
to the income of the latest three years of the transferor business is at an amount not
less than fifty percent of the total operation income for each respective fiscal year;
the substantial portion of assets refers to the assets to be transferred with a value
not less than fifty percent of the total assets at the time the transfer takes place.
If the shares with voting rights acquired by a company as a result of a division is
not less than eighty percent of the consideration of the entire transaction, and all
the shares so acquired have been transferred to the shareholders, any income created
as a result of the division is exempted from business income tax; any loss
incurred is prevented from deduction from the income.
Article 45
If as a result of carrying on the merger/consolidation, division or the acquisition
as provided in Articles 27 through 30 of this Act, the shares or contributed capital
of the subsidiary company held by the company reaches ninety percent or more
of the total number of issued shares or subscribed capital, the company may be
elected as the tax payer since the fiscal year having survived twelve months of
a given taxable year during the term of such holding to declare a combined final
business income tax as provided in the Income Tax Act, and declare the
undistributed earnings with an additional ten percent of business income tax;
any other tax related matters shall be carried out separately by the company
and its subsidiary company.
Companies electing to file a combined final business income tax return according
to the preceding paragraph shall bring into all qualified domestic subsidiary
companies. It is not required to secure a prior admission before such combination
choice is made; however, once the choice of combination is made, unless there is
due cause and approved by the Competent Tax Authority two months before the
end of the fiscal year, no change is permitted.
Within five years after the shift is permitted under the preceding paragraph,
the company is not allowed to opt for combination filing. When the holding
of shares or subscribed capital drops below the standard prescribed
in Paragraph 1 of this Article, the subsidiary company shall file a separate
business income tax return and since then, the subsidiary company has not been
permitted to be brought into the combined business income tax return for five
consecutive years.
Companies file combined business income tax return according to Paragraph 1
of this Article, the calculation of the combined business income and the tax payable,
of the undistributed earnings under the combination and the additional tax,
the deduction of the business loss, the application of investment
encouragement deduction, the deduction of foreign tax payment, the arrangement
of shareholders’ deductible tax account, the filing of temporary payment and
other rules are prescribed by the Competent Tax Authority.
Article 46
If a domestic company is carrying on a merger/consolidation, division or the
acquisition of assets or shares under Articles 27, 28 and 31(3) of this Act with
a foreign company, Articles 39 through 45 of this Act shall apply to
the domestic company and Articles 39 and 43 to that foreign company.
Article 47
Between a company and its subsidiary company, between a company or its
subsidiary company and any domestic or foreign individual, profit-making business
or education, culture, public interest, charities or organization, if there is one of
the following situations, the tax collection authorities may seek the approval from
the Competent Tax Authority to readjust such tax obligations either according to
the arm’s length transaction or depending on the results of investigation in order
for an accurate computation of the income tax and tax payable of the tax payer:
1. Any arrangement not made in arm’s length transaction, avoidance or reduction
of tax obligation on the amortized income, expenses, expenditures and profit/loss;
2. Any improper avoidance or reduction of tax obligation for oneself or for any
other person by means of the acquisition of equity, transfer of assets or
any other fraudulent arrangement.
Any company or its subsidiary company when subject to a recompilation of
the amount of income and the taxable amount by the tax collection authorities
pursuant to the preceding paragraph hereof is prevented from filing a combined
business income tax as provided in Article 45.
Article 48
Any loss from the transaction in which a company applied its business or assets
in subscribing or exchange for the shares from another company and the value
of such acquired shares is lower than the book value of the business or assets
may be amortized within of fifteen years; provided, however, that any loss incurred,
that is prevented from deduction from the income pursuant to Article 44, may
not be amortized.
CHAPTER IV FINANCIAL FACILITIES
Article 49
If the result of the merger/consolidation, acquisition or division by a company
breaches the credit authorization quota permitted by the laws to an interested party,
the same principal, the same interested party or the same affiliated enterprises,
the financial institution may stick to the credit authorization agreement until the
expiry of the term of credit authorization.
Article 50
For any shares acquired from the surviving company by transferring a certain part
of business or assets by a company due to the merger/consolidation, acquisition
or division, the financial institution may replace then existing collateral for the
original business or assets with the shares acquired.
CHAPTER V REORGANIZATION
Article 51
The plan of reorganization may contain the proposal for the merger/consolidation
and acquisition.
If the reorganization of a company is done through the merger/consolidation
and acquisition, supporting documents shall be produced and deemed as
an integral part of the plan of reorganization, without being subject to the
requirement of the resolution adopted by the general meeting or the Board
of Directors as provided in Articles 18, 19, 27 through 30 and 35 through 37
of this Act.
Article 52
If the merger/consolidation and acquisition are made in the course of reorganization
by a company, any shareholder of that company is not vested with the right to request
the company to buy back his shares while Article 12 of this Act is not applicable.
CHAPTER VI SUPPLEMENTAL PROVISIONS
Article 53
Any company applicable to the provisions of tax payable to government as provided
in Chapter III of this Act shall produce those documents required by
the Competent Tax Authority; failure of or insufficiency in the documents
shall be notified for a later submittal by the tax collection authorities; the further
failure of the later submittal without justified cause will prevent the applicability
of those provisions.
Article 54
This Act shall become effective from six months after the date of promulgation. |