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Taiwan NDC Plans to Formulate the "Guidelines for Promoting PE Funds to Invest in Industries" to Expand the Scope of Investment Allowed to Be Made by Insurance Companies


Abe T. S. Sung/ Eddie Hsiung/Sung Yi-hsuan

Taiwan's National Development Council ("NDC") stated in a press release in March 2021 that it is in discussion with the Financial Supervisory Commission ("FSC"), Ministry of Economic Affairs and domestic private equity ("PE") fund industry players, planning to formulate the "Guidelines for Promoting PE Funds to Invest in Industries" ("Guidelines"), to promote PE funds to invest in industries.

According to current laws and regulations, insurance industry can currently invest in domestic PE through the following channels:

(1)  Domestic PE established by a subsidiary, acting as a general partner of the PE, of a securities investment trust enterprise (such PE is allowed to invest in 5+2 industries and public construction);

(2)  Domestic PE established by a subsidiary, acting as a general partner of the PE, of a securities firm (such PE is allowed to invest in 5+2 industries and public construction); and

(3)  Domestic PE established by the National Investment Company (such PE is allowed to invest in 5+2 industries).

 The 5+2 industries mentioned above include: Green Energy, Asia Silicon Valley, Biomedical, Defense, Smart Machinery, New Agriculture and Circular Economy.

However, according to the aforementioned NDC press release, the domestic insurance industry has abundant funds. Considering PE has expertise in industrial investment and is good at corporate restructuring and integration, if more funds from the insurance industry can be redirected to the real economy, it should help accelerate Taiwan's industrial upgrading.

In addition, according to the aforementioned press release and related news reports, the key points of the Guidelines are that the NDC will certify the PE qualification (relevant associations may be entrusted with this task), and the FSC will amend relevant laws and regulations to allow insurance industry to invest its funds in the PE certified by the NDC. Furthermore, the scope of PE investment, including the aforementioned 5+2 industries opened by current laws and regulations, may also be expanded. It is generally believed that the Guidelines will be formulated soon.

In the past decade, PE has repeatedly engaged in domestic M&A and investment activities, but our laws and regulations are not clear about the definition and role of PE. Also, the domestic market did not seem to be very familiar with the nature and functions of PE, or even had negative comments on PE. Now the government (including the NDC, the FSC, etc.) has taken the initiative to amend relevant laws and regulations, hoping that PE can play a more active role in the real economy. It is therefore recommended that PE industry and insurance companies continue to follow the new developments relating to the Guidelines and relevant regulations.

 

 

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