Global Public M&A Guide

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Takeover Tactics
6. Takeover Tactics

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

6.1 Inside information

A Taiwanese company is obligated to immediately disclose to the public all "material information" that relates to it, including all material changes in information that has already been disclosed to the public. Such material information is usually deemed as inside information under the insider trading regime.

  • "Inside information" means information that will have a material impact on the price of the securities of the issuing company.
  • The phrase "information that will have a material impact on the price of the securities" shall mean information relating to the finances or businesses of the company, or the supply and demand of such securities on the market, or tender offer of such securities, the specific content of which will have a material impact on the price of the securities, or will have a material impact on the investment decision of a reasonably prudent investor.
  • The scope of the material information is prescribed in the Taiwan Stock Exchange Corporation Procedures for Verification and Disclosure of Material Information of Companies with Listed Securities and the Taipei Exchange Procedures for Verification and Disclosure of Material Information of Companies with TPEx Listed Securities.

6.2 In the event of a public takeover bid

Under Taiwanese law, the tender offer cannot be launched until the tender offeror submits its report to the FSC and makes a public announcement.

6.3 Insider dealing and market abuse

The basic legal framework regarding insider dealing and market abuse under Taiwanese law is set forth in the SEL.

In principle, the rules on insider dealing and market abuse remain applicable before, during and after a tender offer, albeit that during a tender offer additional disclosures apply in relation to trading in listed securities

6.4 Common anti-takeover defense mechanisms

There are only limited anti-takeover defense mechanisms that a Taiwanese company may take after the tender offer is launched. The table below contains a summarized overview of the mechanisms that can be used by a target company as a defense against a tender offer. These take into account the restrictions that apply to the board and general shareholders' meeting of the target company pending a tender offer.

Mechanism Assessment and considerations

1. Share Exchange (white knight and poison pill)

 

Issue new shares to exchange the shares of the "friendly company" which will enlarge the total outstanding shares of the target company and result in cross holding of the target company and the friendly company.
  • Requires only the approval of the board of directors (approval vote of a majority of at least two-thirds of the directors present) as long as the number of the new shares to be issued does not exceed the authorized capital of the company.

2. Share buyback

 

Buy back shares to "maintain the company’s credit and shareholders’ equity".
  • Requires only the approval of the board directors (approval vote of a majority of at least two-thirds of the directors present).
  • The number of shares bought back under the preceding paragraphs may not exceed 10% of the total number of issued and outstanding shares of the company.
  • The total amount of the shares bought back may not exceed the amount of retained earnings plus premium on capital stock plus realized capital reserve.

3. Sale of crown jewels

 

An arrangement affecting the assets of, or creating a liability for, the company which is triggered by a change in control or the launch of a tender offer.
  • Requires prior approval by the general shareholders' meeting (by a majority vote of the total shares present where a quorum represents two-thirds of the total outstanding voting shares or, if the aforementioned quorum is not met, by two-thirds of votes of the total shares present where a quorum represents a majority of the outstanding voting shares).

4. Private placement of equity securities

 

Offering equity securities through private placement prior to the tender offer in favor of "friendly person(s)" (without preferential subscription rights of the shareholders) who can exercise the warrants at their option and subscribe for new shares.
  • Requires prior approval by the general shareholders' meeting (by two-thirds of votes of the total shares present where a quorum representing a majority of the outstanding voting shares).
  • The terms and condition of the equity securities (including the exercise price) and the reasonableness thereof must be disclosed to the shareholders before the aforementioned general shareholders' meeting.
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