When considering whether to lend | Taiwan | Asia Pacific Guide to Lending and Taking Security

1. Is it necessary or advisable for any lender, arranger, facility agent or security agent to be licensed, qualified or otherwise entitled to carry on business in this jurisdiction: (a) by reason only of its execution, delivery or performance of the finance documents; or (b) to enable it to enforce its rights under the finance documents?

Yes. Only a licensed bank, insurance company or other entity with permission from the Financial Supervisory Commission (FSC) is allowed to conduct the business of lending money.

However, if the finance documents are executed and delivered outside Taiwan, a lender, arranger, facility agent or security agent may enforce them in Taiwan without being licensed, qualified or otherwise entitled to carry on business in Taiwan.

2. Will any lender, arranger, facility agent or security agent be deemed to be resident, domiciled, carrying on business or subject to tax by reason only of the execution, delivery, performance or enforcement of the finance documents?

If a lender, arranger, facility agent or security agent (being a licensed bank, insurance company or other entity with permission from the FSC, as mentioned in our answer to question 1 of this section) executes, delivers and performs the finance documents in Taiwan, it may be held to be conducting the business of lending money, and be subject to tax, in Taiwan.

In the case of a foreign lender, arranger, facility agent and security agent, if the finance documents are signed offshore and the loan(s) are disbursed to bank account(s) outside Taiwan, and no business activity is conducted in Taiwan, they will not be deemed to be resident, domiciled or carrying on business in Taiwan by reason only of the execution, delivery, performance or enforcement of the finance documents.

3. Are there any regulatory reporting requirements that lenders must observe in connection with those transactions?

Yes. If a lender is a public company, it must disclose its lending amount in its financial report in accordance with the relevant guidelines for the preparation of financial reports. If a lender is a financial institution, it must keep all documentation in connection with the transactions, which are subject to the FSCs periodic inspection.

4. Is it necessary to establish a place of business in your jurisdiction in order to enforce any provision of the finance documents?

No. According to Supreme Court decisions and the Civil Procedure Act of Taiwan, an unrecognized foreign entity (i.e., a foreign entity that has not obtained registration or other legal recognition in Taiwan or does not have a representative office or branch in Taiwan) is allowed to initiate legal proceedings in Taiwan through its representative (being an individual) in Taiwan.

In relation to the possible difficulties that could be encountered by foreign entities when taking and enforcing security interests over assets in Taiwan, see the answer to question 9 of the "If taking security" section.

5. Is a foreign bank/financial institution permitted to approach local entities for business?

No. In Taiwan, business and related activities conducted by financial institutions are highly regulated. A foreign bank/financial institution is not permitted to conduct any business or related activity in Taiwan, such as approaching local entities for business unless it obtains the approval of/permission from the FSC to establish a branch in Taiwan.

Asia Pacific Guide to Lending and Taking Security

Taiwan

Select a Topic