Newsletter
RELAXATION OF THE REGULATIONS REGARDING FOREIGN IN-VESTMENT IN TAIWAN
In order to attract foreign investment, limits on foreign companies' investing in or trading stock in Taiwan have been reduced. The new rules of the Taiwan Stock Exchange (TSE) and GreTai Securities Market (GTSM), which conform with recent amendments of regulations promulgated by the Financial Supervisory Commission (FSC) to various regulations, are discussed below.
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New procedural rules for initial listing:
Since the relevant foreign stock exchanges had reviewed and continually supervised foreign companies whose stocks were already traded on foreign markets, the amended Article 2-1 of the TSE Rules Governing Review of Securities Listings (23 October 2008) allows a foreign issuer of stock whose stock has been traded on a major foreign securities exchange or securities market for less than six months to apply for listing on the TSE without undergoing six months of an underwriter's guidance or having registered its stock as an emerging stock for six months. Those issuers whose stocks have been de-listed from a foreign stock exchange for over six months must conform to the requirements where the applicant must undergo a qualified underwriter's guidance for six months or having registered their stocks as an emerging stock for six months.
If a foreign issuer applies for an initial listing on the TSE after its listing application is approved by a major foreign securities exchange or securities market, that issuer may apply for permission to trade after undergoing an underwriter's guidance for only two months or having registered its stock as an emerging stock for only two months.
Amended Article 4 of the GTSM Regulations Governing Review of OTC Trading of Foreign Stock (27 October 2008) provides that foreign issuers of stock already traded on a major foreign securities market applying for an initial listing on the GTSM do not need to be first traded as an emerging stock, unless that stock has ceased to be traded on the foreign securities market for over six months. A foreign issuer that has already passed the review on a major foreign securities market may, when applying for an initial listing on the GTSM, apply for permission to trade after having registered its stock as an emerging stock for only two months.
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Relaxation of the qualifications to apply for a secondary listing:
In order to actively encourage foreign companies already traded on foreign market to apply for a secondary listing in Taiwan or to issue Taiwan Depository Receipts (TDRs), TSE and GTSM announced on 25 September and 1 October 2008 respectively amendments to Articles 26, 27 and 27-1 of the TSE Corporation Rules Governing Review of Securities Listings and Articles 24 and 27 of the GTSM Regulations Governing Review of OTC Trading of Foreign Stock. The amended regulations abolish the current requirement whereby stock of foreign issuers must have been traded on an FSC-approved securities exchange or securities market for six months before applying for a secondary listing or issuing of TDRs" thereby increasing the flexibility for foreign companies to apply for a secondary listing or issue TDRs.
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Abolition of limits on investment in mainland China of capital raised in Taiwan.
In line with the FSC's relaxations of the restriction that funds raised in Taiwan by foreign issuers cannot be used for direct or indirect investments in the Mainland China, and of the threshold of the aggregated amount invested in the Mainland China, the TSE on 25 September 2008 amended the TDR Listing Application Form and the Additional TDR Listing and Trading Declaration Form, whilst GTSM on 1 October 2008 abolished Appendixes 17 and 18 of the GTSM Regulations Governing Review of OTC Trading of Foreign Stock to revoke the requirement on inspection of funds raised in Taiwan by foreign issuers through Undertakings type A or type B. Henceforth, foreign issuers may use all the funds raised in Taiwan for investments in the Mainland China.
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Abolition of limits on capital movements
In order to attract overseas Chinese and foreign nationals to invest in the Taiwanese securities market, on 15 October 2008, the FSC issued a directive to abolish the quota of the securities investments in Taiwan carried out by a single overseas Chinese or foreign national (FIDI) at US$5 million. Henceforth there is no limit on the securities investments by overseas Chinese or foreign nationals in Taiwan.
The FSC also issued a directive on 30 October 2008, which provides that foreign issuers whose stocks have already been listed on the TSE or traded on the GTSM should, in accordance with Article 10(1) of the Regulations Governing Investment in Securities by Overseas Chinese and Foreign Nationals, apply for registration as a Foreign Institutional Investor (FINI) or overseas Chinese or foreign national (FIDI) to keep invested funds in the closing account for the closing of further investments.
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In addition, the TSE on 23 October 2008 amended Article 23 of the Supplementary Provisions to the TSE Corporation Rules for Review of Securities Listings, and GTSM on 27 October 2008 amended its relevant forms to add Korea Exchange as an approved stock exchange.