Proposed Amendment to Business Mergers and Acquisitions Act in Taiwan


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December 2, 2013

On November 21, 2013 a major revision to the Business Merger and Acquisition Act was finalized by the top executive branch of the government, i.e. the Executive Yuan, and will be submitted to the legislature for readings.  The law has largely remained unchanged since its initial promulgation in 2002 and many has since then criticized the inflexibility of the law in comparison to its foreign counterparts.  The important aspects of this proposed revision to the law includes the following:-

 

  1. To enable those directors who are conflicted out because of their role in the acquiring or to-be-acquired entity to vote in matters relating to the mergers, acquisitions or spinoffs.  However, the directors must be liable to explain to the meeting of the board of the directors as well as the meeting of the shareholders the reasons that they agree or disagree in these corporate matters.
  2. More types susceptible to using simplified M&A procedure, which only requires the action of the board of directors (without the shareholders action): merger of sibling companies, asymmetric share swap, asymmetric spin-offs, share swap between parent and subsidiary companies, and spin-offs of parent and subsidiary companies.
  3. More types of consideration for spin-offs and share swaps are available in addition to issuing new shares, e.g. cash, real properties, patents, etc.
  4. Ad Hoc committee should be established to evaluate the fairness and reasonableness of the proposed merger. If an audit committee is already established, the role of the ad hoc committee should be replaced by the audit committee.
  5. Provisions to speed up the company's payment to the dissenting shareholders to purchase the shares in case there is no mutual agreement on the fair price, by requiring the company to make payment of whatever its considers fair first and then submit the dispute to the court for final resolution instead of going to the court first.
  6. Certain adjustments to the triggering of tax incentives and benefits when M&A is involved.