Tender Offerer Required to Show Sufficient Financial Ability in Advance

January 5, 2017

Taiwan's legislature recently amended the requirement for making a tender offer for the shares of a publicly traded company in Taiwan. This is in light of the recent scandal in Taiwan of a tenderer who failed to pay up for the shares put up for the tender offer.  The tenderer has been suspected of being involved in a scam to defraud stock investors.  This amendment to Sec. 43-1 of the Securities and Exchange Act will not apply however when the tender offerer along with its affiliates (i) do not intend to acquire more than 5% of the total outstanding shares of the target company or (ii) have already owned more than 50% thereof.  The Financial Supervisory Commission subsequently issued a directive by a letter dated November 21, 2016, which requires a financial advisor with an underwriter qualification or a certified public accountant to be retained to issue a letter of confirmation regarding the financial ability of the tender offeror.  The financial advisor or the certified public accountant should not have any conflicts when acting in such capacity for the contemplated transaction. In particular, there shall no circumstance falling under Sec. 26 of the Regulations Governing Securities Firms.