Newsletter
TRANSNATIONAL MERGERS AND DEMERGER AND COM-PANY REGISTRATION
When an ROC company and a foreign company engage in a merger or demerger, if there are matters that the foreign company needs to reg-ister under the legislation of its home country, it should register them accordingly with the au-thorities of that country. It does not need to ap-ply with the ROC company registration authori-ties for authorization or registration. The ROC company should apply to the ROC authorities to amend its company registration, submitting the relevant documents required under Article 16 of the Regulations Governing Company Registra-tion and Recognition according to the nature of the merger or demerger, i.e. merger with new incorporation, merger with absorption by the surviving company, merger with dissolution, demerger with new incorporation, demerger with absorption by the acquiring company, or demerger with dissolution. The ROC company does not need to submit a share exchange ratio calculation statement and fairness opinion.
If the merger or demerger requires a resolution of the foreign company, made by its shareholder's meeting, board of directors meeting or by other lawful means, as referred to in Articles 21 and 33 of the Corporate Mergers and Acquisitions Law, then documents evidencing the resolution should also be submitted, with Chinese translations. If the registrable matters arising out of the merger or demerger involve investments by overseas Chinese or foreign nationals that require ap-proval by the Investment Commission (IC), the approval documents should also be submitted for verification.
If a merger or demerger between an ROC com-pany and a foreign company involves the need for a large number of foreign investors to apply to the Securities and Futures Commission (SFC) or the IC for authorization, for the sake of ad-ministrative simplicity the Ministry of Economic Affairs (MOEA) recommends that the SFC and IC process such applications jointly. If the merger merely involves the issue of outward remittance of funds, the MOEA recommends that companies apply directly with the Central Bank of China for approval on a case-by-case basis.
If an ROC company is the surviving company after a merger, the foreign company is dissolved, and the ROC company issues new shares to the shareholders of the foreign company, then if the foreign company has a branch office in Taiwan, it needs merely to cancel its recognition in the ROC. Since all its rights and obligations are generally assumed by the surviving company, there is no need for it to go through liquidation procedures. The Taiwan branch office may be directly renamed as a branch of the surviving company.
If a foreign company is the surviving company after a mager, the ROC company is dissolved, the foreign company issues shares to the share-holders of the ROC company, and the ROC company becomes the Taiwan branch of the foreign company, then the ROC company must register its dissolution as a result of the merger. It may not be directly renamed as the Taiwan branch of the foreign company. The foreign company must separately apply for recognition, and to register the establishment of a Taiwan branch office. As for how such items as retained earnings, capital reserve, and paid-in capital in the accounts of the ROC company should be transferred to the surviving company, these are matters to be decided by the companies.
When the business of an independent division of an ROC company is demerged to become the Taiwan branch of a foreign company, and the foreign company issues new shares to the ROC company or the ROC company’s shareholders, the foreign company must first apply with the ROC authorities for recognition. Also, the valuation of the demerged division of the ROC company must be audited in accordance with the provisions of the Regulations Governing the Review of Companies’ Applications to Register Capital. As to whether the share capital, retained earnings, and capital reserve of the ROC com-pany should be transferred to the Taiwan branch of the foreign company pro rata to the relative size of the demerged division, this should be done as stipulated in the demerger computation statement. Whether the demerger results in a reduction in the capital of the ROC company depends on the details of the individual case.
When the Taiwan branch of a foreign company is demerged to become the Taiwan subsidiary of the foreign company, and the Taiwan subsidiary issues new shares to the foreign company or its shareholders, the Taiwan subsidiary of the for-eign company should apply to register the demerger. The original working capital of the Taiwan branch may directly become the capital of the Taiwan subsidiary.