[Last updated: 1 January 2025, unless otherwise noted]

2.1 Main legal framework

The main rules and principles of Taiwan's law relating to public M&A can be found in:

• The Securities Exchange Law ("SEL");
• The Company Act;
• The Business Mergers And Acquisitions Act ("M&A Act");
• The Financial Institutions Merger Act; and
• Regulations Governing Tender Offers for Purchase of the Securities of a Public Company ("Tender Offer Regulations").

Existing shares of a company listed on the Taiwan Stock Exchange ("TSE") or the Taipei Exchange ("TPEx") can be purchased by regular trading in the market during trading hours, odd-lot trading, after-hour fixed-price trading, block trading, auction, and tender offer. One may also subscribe for new shares of these listed companies by public offering and private placement.

While acquisition of the shares of a TSE- or TPEx-listed company through a securities exchange is feasible, an acquisition of 20% or more shares of a public company within 50 days can only be carried out through a tender offer. Article 43-1 of the SEL and the Tender Offer Regulations are the main legislative provisions relating to public takeovers. The Tender Offer Regulations prescribe the circumstances under which a buyer can make a tender offer and provide the related regulations to conduct it.

The offeror may launch a tender offer to acquire up to 100% of the shares of a public company and thus bypass the TSE or TPEx, but they may be conducted only after the tender offer has been reported to the Financial Supervisory Commission of Taiwan ("FSC") and publicly announced (see 2.3).

Alternatively, a company may acquire 100% of the outstanding shares of a target public company by issuing new shares, cash, or other assets pursuant to Article 29 of the M&A Act, and the target company will become a 100% held subsidiary company of the acquiring company.

In addition to a share purchase deal, under Article 316 of the Company Law and Articles 18-21 of the M&A Act it is possible to effect a statutory merger of two companies limited by shares regardless of whether they are public companies or not. The surviving company can either be one of the existing companies or it may be a new company. In either case, the existing company or the new company after the statutory merger must be a company limited by shares.

The Financial Institutions Merger Act governs mergers between banking enterprises, securities and futures enterprises, institutions covered by the insurance enterprise and other institutions approved by the competent authority.

2.2 Governmental prior approval - Foreign investments regulation

Except for certain specific sensitive activities as listed below, foreign investments are generally not restricted in Taiwan but are subject to the prior approval from the Department of Investment Review, Ministry of Economic Affairs of Taiwan if a foreign investor wants to acquire 10% or more of the shares of a Taiwan listed company. The approval must be obtained before the final completion of the transaction.

The following are considered sensitive activities:

• activities likely to jeopardize public order, public safety or national defense interests
• activities relating to research, manufacture or sale of arms or weapons, munitions, explosive powder or other explosive substances
• operation of transportation networks and services
• operation of an establishment that is strategic to Taiwan national defense
• protection of public health

2.3 Other rules and principles

While the aforementioned legislation contains the main legal framework for public M&A in Taiwan, there are a number of additional laws and regulations that are to be taken into account, such as:

1. Articles 22-2, 25 and 43-1 of the SEL relating to the disclosure of significant shareholdings in listed companies;
2. Articles 157-1 and 155 of the SEL relating to insider trading and market manipulation;
3. "Regulations Governing Information to be Published in Tender Offer Prospectuses" relating to the prospectus to be published when there is an offer of securities to the public;
4. The general rules on the supervision and control of the financial markets; and
5. The rules and regulations regarding merger control. These rules and regulations are not discussed further herein.

Tender offers are subject to supervision and control by the FSC. The FSC is the principal securities regulator in Taiwan. It promulgates regulations pursuant to the SEL that pertain to public companies, i.e., those companies which have been approved by the FSC to publicly issue their shares and listed companies on the TSE or the TPEx. The objective of the FSC regulations is to prevent the abuse of listing rules and the circumvention of initial public offering requirements. The regulations provide guidelines for mergers between listed companies as well as mergers between private companies and listed companies.

The FSC has a number of legal tools that it can use to supervise and enforce compliance with the tender offers rules, including administrative fines. In addition, criminal penalties could be imposed by the courts in the case of non-compliance.

2.5 General principles

The following general principles apply to public takeovers in Taiwan. These regulations are provided in the SEL and Tender Offer Regulations:

1. In order to treat all shareholders equally, a tender offeror shall offer the same consideration as well as other terms and conditions to all shareholders in the tender offer, and may not modify the acquisition conditions, except for raising the offer price, changing the maximum number of shares to be acquired and extending of the tender offer period. Moreover, the tender offeror may not enter into an agreement or covenant with a shareholder of the target company entitling such shareholder to any special rights as a result of the shareholder's participation in the tender offer.
2. After receiving tender offer documents from the offeror, the target company shall promptly form a review committee to conduct a review and to comment on the fairness and reasonableness of the tender offer conditions, verify identity and financial condition of the Offeror and reasonableness of the sources of the tender offer funds and then publicly announce the results of such review within 15 days to enable the shareholders of the target company to decide on the offer.
3. A tender offeror shall report to the FSC and announce the tender offer, together with related documents, prior to the commencement date of the tender offer. The filing documents shall be reviewed by an attorney, and a lawfully prepared attorney's opinion shall be provided. If approvals or effective registration with the FSC or any other competent government authority is required, the attorney's opinion shall also cover such matters. The tender offeror shall report to the FSC and publicly announce the result of the tender offer within two days after the tender offer period expires.
4. During the period from the determination date of a tender offer to the reporting and public announcement date(s), any person who becomes aware of any information relating to that tender offer due to their professional duties or for any other reasons shall keep such information confidential.

2.6 Proposed reforms

The current Tender Offer Regulations were amended in December 2023 and we do not foresee any material reform to takeover regulation in Taiwan in the near future.