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AMENDED RULES ON TENDER OFFERS FOR SHARES IN PUB-LIC COMPANIES
Sophia H. H. Yeh/WANG, LI-CHEN
The Rules Governing Tender Offers to Purchase the Securities of a Public Company, prescribed according to Article 43-1, Paragraph 3 of the Securities and Exchange Law, were hardly im-plemented in practice since they were promul-gated by the Securities and Futures Commission (the SFC) on 5 September 1995. In order to improve the regulatory regime for tender offers, and to enhance the competitiveness of compa-nies through acquisitions, the SFC amended the rules on 19 January 2001. The major amend-ments are as follows:
Time limits for approvals: It is explicitly provided that the SFC must approve or reject a tender offer application within 12 working days from the date on which it accepts the application for processing or receives the last amended documents. However, the applica-tion for acquisition of treasury stock through tender offer must be decided within 5 working days.
Simplified procedures: The rules were re-laxed to allow financial statements prepared by the offeror to be a substitute for the audited financial statements, in case the financial statements of the offeror for the past year have not yet been audited and certified by an ac-countant. The requirement that the target company of the tender offer must inform all its shareholders within 15 days upon its receipt of notice from the offeror of the proposed tender offer, is abolished. A new provision requires a target company that is TSE listed or OTC traded to disclose the proposed tender offer in the securities market information system. The requirement that the institution retained by the offeror submit a list of responding offerees to the SFC after the expiration of the tender offer period, is also abolished.
Shorter offer period: In order to give holders of securities in the target company reasonable time for consideration, the offeror must now publicly announce the tender offer and inform the target company within 2 days from the date of the application is filed with the SFC (as opposed to the previous requirement – within 2 days after receipt of the SFC letter of ap-proval). The period of tender offer is reduced from 20–60 days to 10–50 days, provided that an extension of up to 30 days may be applied for.
Grounds for refusal of application limited: Previously, a tender offer could be rejected if the total of shareholding of the offeror, taking into account of the offeror's existing holding and the number of shares to be acquired through tender offer, in the target company amounted to between one-third and one-half of the total issued shares of the target company. Now, the SFC may reject an application if the number of shares to be acquired through ten-der offer is less than 10% of the total shares of the target company, and less than 100 million shares. Also, an offeror's inability to prove that the outcome of the intended tender offer will result in a comparative advantage to the public and the economy is no longer a ground for refusal.
Restrictions on "purchase by other means" lifted: Previously, an offeror could not pur-chase securities in a target company by other means from the day of making the decision to tender offer until the end of the offer period. Because the term "the day of making the de-cision" was ambiguous, the restricted period now runs from "the date when the application is filed". Also, the provision no longer applies to purchase of shares in unlisted or non-OTC traded companies.
Legal opinion required with application: A prospective offeror is now required to include a lawyer's legal opinion in the application.
Time limit for competing offers changed: Previously, a competing tender offer for se-curities in the same target company must be made at least 5 days before the end of the proposed tender offer period. In order to make the important news of a competing bid avail-able to the public earlier, now, a competing bidder must apply with the SFC for approval to make a public tender offer at least 5 work-ing days before the end of the proposed tender offer period.
Offeror no longer liable for lack of pro-spectus: The provision that an offeror, who fails to deliver a prospectus of tender offer to responding offerees, shall be liable for losses incurred by responding offerees acting in good faith, is abolished.
New formula for oversubscribed offers: Under a new provision, where the number of shares offered in response to a tender offer for the purchase of shares in a TSE listed or OTC traded company exceeds the intended pur-chase quantity, the shares must be purchased pro rata to the number of shares offered, up to the limit of 1,000 shares per responding of-feree.
Reporting procedure for acquisition of major shareholding simplified: An offeror is no longer required to file a post-acquisition report with the SFC concerning the acquisition of a major shareholding in accordance with Article 43-1 Paragraph 1 of the SEL.
