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DEREGULATION OF RESTRICTIONS ON NON-LENDING TRANSAC-TIONS BETWEEN INSURANCE ENTERPRISES AND RELATED PAR-TIES
Transactions other than lending between an insurance enterprise and a related party must comply with the Regulations Governing Non-Lending Transactions between Insurance Enterprises and Related Parties. Article 4 of the Regulations provides that when an insurance enterprise conducts a non-lending transaction with a related party, the conditions imposed on the transaction cannot be more favorable than those imposed on other parties, and the transaction must be approved by a board resolution with at least three-quarters of votes cast at a meeting attended by at least two-thirds of the directors. Article 5 further provides that the total value of the transactions with a related party may not exceed 10% of the owner's equity of an insurance enterprise, and that the total value of the transactions with all related parties may not exceed 60% of the owners' equity of an insurance enterprise.
A "related party" means any of the following:
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A responsible person (i.e., a director, supervisor, president, vice president, assistant manager, manager, or any other person with the same job responsibilities) or a major shareholder (holding 10% or more of the total issued shares) of an insurance enterprise.
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(i) An enterprise of which a responsible person or major shareholder of the insurance enterprise is the sole owner or partner; (ii) an enterprise of which the responsible person or major shareholder of the insurance enterprise is a responsible person; and (iii) an organization of which the responsible person or major shareholder of the insurer is a statutory representative.
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An affiliate of the insurance enterprise, or a responsible person or major shareholder of such an affiliate.
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A subsidiary of the insurance enterprise, or a responsible person of such a subsidiary.
A "non-lending transaction" means: investment in or purchase of securities; purchase of real estate or other assets; sale of securities, real estate, or other assets; entering into a contract with consideration or for services; acquisition of real estate, chattels, or stocks through foreclosure; rental (as a lessor or lessee) for chattels or real estate; agreement to pay security bond, royalty, or rental deposit; acting as an agent or broker for an insurance company or its subsidiary, or performing other services in return for commissions or fees.
Nevertheless, according to a letter issued by the Financial Supervisory Commission on 7 March 2008, the following transactions are not subject to the restrictions under Articles 4 and 5 of the Regulations:
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Transactions between an insurance enterprise and the government, if the government is a responsible person or major shareholder of the insurance enterprise.
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Transactions between an insurance enterprise, of which the government is a responsible person or major shareholder, and (i) an enterprise of which the government is the sole owner or a partner; (ii) an enterprise of which the government is a responsible person; or (iii) an organization of which the government is a statutory representative. However, if the enterprise mentioned in (i), (ii) or (iii) above is a responsible person or major shareholder of the insurance enterprise, or if another non-government shareholder is a responsible person or major shareholder of the insurance enterprise, the restrictions under Articles 4 and 5 will apply.