Press Release
FSC Amending Provisions of the “Securities Investment Trust and Consulting Act” to Allow Real Estate Investment Trust (REIT) to be Issued under Fund Structure
2021-01-12
In order to provide investors with multiple investment channels, enhance the competitiveness of the asset management industry, activate Taiwan's real estate securitization market and assist in the overall economic development, the Financial Supervisory Commission (FSC) refer to the Real Estate Investment Trust (REIT) systems in Japan, Singapore and Hong Kong, and will allow REIT to be issued under fund structure; One new enterprise called “real estate investment trust enterprise” will be added and permitted to issue fund structure REIT, and will be in parallel with the existing trust structure. In the future, business operators may choose to issue REIT through either fund or trust structure to make the available structure more flexible.
In 2003, Taiwan announced the Real Estate Securitization Act to allow REIT to be issued under trust structure, with the trust enterprise as the issuer. According to the FSC’s observation, Japan, Singapore and Hong Kong all have REIT issued under fund structure. By allowing REIT to be issued under fund structure, it is hoped that new blood will be injected into Taiwan's capital market. The fund structure REIT will have the following characteristics:
1. The Real Estate Investment Trust Enterprise as the management institution is conductive to engage management expertise: fund structure REIT will introduce Real Estate Investment Trust Enterprise with real estate investment management experiences to actively manage REIT and effectively strengthen their management.
2. Simplifying the supplementary fund raising procedure and ensuring the income support is conducive to the sustainable growth of the fund scale: fund structure REIT will ensure the continuous growth of the REIT scale and obtain a stable yield by simplifying the supplementary fund raising procedure, ensuring to obtain right of first refusal and income support, and allowing a flexible investment structure to encourage investment in overseas real estate.
3. Allowing REIT to engage in related-party transactions is conducive to improving the flexibility of REIT asset allocation: As the main sources of real estate owned by REIT in Japan, Singapore and Hong Kong are mostly from real estate developers or promoters, and most of which belong to the same group or are stakeholders of REIT management institutions, allowing fund structure REIT to engage in related-party transactions will enable REIT to activate assets through diversified transaction modes.
4. By separating custody and management responsibilities, the division of rights and responsibilities is more concrete: fund structure REIT will be exclusively managed by Real Estate Investment Trust Enterprises, and REIT assets will be custodied and supervised by the trust enterprise. It’s different from trust structure REIT that the assets of which are simultaneously custodied and managed by the trust enterprise, which will further appoint a real estate management institutions (such as real estate management companies) to provide investment advice. By separating custody and management responsibilities will make the division of rights and responsibilities more concrete.
In this proposal, amendments will be made to some provisions of the “Securities Investment Trust and Consulting Act”, and the name of the Act will be adjusted to the “Investment Trust and Securities Investment Consulting Act”. The key amendments are as follows:
1. The fund structure REIT is a contractual type fund where a trust contract is signed between the trustor (Real Estate Investment Trust Enterprise) and the trustee (fund custodian), and the REIT investor is the beneficiary of the trust contract. In addition, considering that the business nature of Securities Investment Trust Enterprises (SITEs) are mainly investment management, SITEs will be allowed to concurrently operate as Real Estate Investment Trust Enterprises (new Article 3-1 and amended Article 66).
2. Qualifications for setting up a Real Estate Investment Trust Enterprise:
(1) An institution with real estate investment management experience to act as a professional shareholder, and the total number of subscription shares by the institution shall not be less than 50% of the shares issued for the first time (new Article 82-1).
(2) With reference to foreign systems, and considering the current minimum paid-in capital of the SITEs, it is proposed that the FSC be authorized to determine the minimum paid-in capital of the Real Estate Investment Trust Enterprise and other qualifications (amended Article 67).
(3) Real Estate Investment Trust Enterprises (including exclusive and concurrent businesses) will be required to set up independent directors and an audit committee, and supervisors will be replaced by the audit committee. (new Article 82-4).
3. Regulations on the management of REIT:
(1) The investment targets of fund structure REIT are mainly inclusive of real estate, real estate related rights and real estate related securities. It is stipulated that REIT should invest at least a certain proportion in real estate or real estate related rights with stable income, and the annual income distributed shall reach a certain proportion of the distributable income. In addition, with reference to the fact in the foreign mode that REIT is allowed to conduct transactions with related parties, the Act will allow fund Structure REIT to conduct related-party transactions and will be supplemented by relevant supporting management measures (new Article 49-3).
(2) With reference to foreign norms, and taking into account the borrowing status and financial risks of REIT, the FSC is authorized to set an upper limit on the REIT borrowing ratio, as well as the announcement method and other related matters (new Article 49-5).
The FSC says that, in addition to being published in the official gazette of the Executive Yuan, a general explanation of the draft amendment and a comparison table of the amended articles will be published on the FSC website. If you have any comments, please visit the webpage “Notice of Draft Regulations” on the website “Laws and Regulations Retrieving System” of the FSC, and state your views or consult the Securities and Futures Bureau of the FSC within 60 days from the day after the announcement. After the notice of the draft amendment, the FSC will send the draft via an official letter to the Executive Yuan for its examination in accordance with administrative procedures.
Contact unit: Section Chief Hsiao-Yun Lin, Securities Investment Trust and Consulting Division, Securities and Futures Bureau
Tel: (02)2774-7320
If you have any questions, please write to:
http://fscmail.fsc.gov.tw/FSC-SPS/SPSB/SPSB01002.aspx
In 2003, Taiwan announced the Real Estate Securitization Act to allow REIT to be issued under trust structure, with the trust enterprise as the issuer. According to the FSC’s observation, Japan, Singapore and Hong Kong all have REIT issued under fund structure. By allowing REIT to be issued under fund structure, it is hoped that new blood will be injected into Taiwan's capital market. The fund structure REIT will have the following characteristics:
1. The Real Estate Investment Trust Enterprise as the management institution is conductive to engage management expertise: fund structure REIT will introduce Real Estate Investment Trust Enterprise with real estate investment management experiences to actively manage REIT and effectively strengthen their management.
2. Simplifying the supplementary fund raising procedure and ensuring the income support is conducive to the sustainable growth of the fund scale: fund structure REIT will ensure the continuous growth of the REIT scale and obtain a stable yield by simplifying the supplementary fund raising procedure, ensuring to obtain right of first refusal and income support, and allowing a flexible investment structure to encourage investment in overseas real estate.
3. Allowing REIT to engage in related-party transactions is conducive to improving the flexibility of REIT asset allocation: As the main sources of real estate owned by REIT in Japan, Singapore and Hong Kong are mostly from real estate developers or promoters, and most of which belong to the same group or are stakeholders of REIT management institutions, allowing fund structure REIT to engage in related-party transactions will enable REIT to activate assets through diversified transaction modes.
4. By separating custody and management responsibilities, the division of rights and responsibilities is more concrete: fund structure REIT will be exclusively managed by Real Estate Investment Trust Enterprises, and REIT assets will be custodied and supervised by the trust enterprise. It’s different from trust structure REIT that the assets of which are simultaneously custodied and managed by the trust enterprise, which will further appoint a real estate management institutions (such as real estate management companies) to provide investment advice. By separating custody and management responsibilities will make the division of rights and responsibilities more concrete.
In this proposal, amendments will be made to some provisions of the “Securities Investment Trust and Consulting Act”, and the name of the Act will be adjusted to the “Investment Trust and Securities Investment Consulting Act”. The key amendments are as follows:
1. The fund structure REIT is a contractual type fund where a trust contract is signed between the trustor (Real Estate Investment Trust Enterprise) and the trustee (fund custodian), and the REIT investor is the beneficiary of the trust contract. In addition, considering that the business nature of Securities Investment Trust Enterprises (SITEs) are mainly investment management, SITEs will be allowed to concurrently operate as Real Estate Investment Trust Enterprises (new Article 3-1 and amended Article 66).
2. Qualifications for setting up a Real Estate Investment Trust Enterprise:
(1) An institution with real estate investment management experience to act as a professional shareholder, and the total number of subscription shares by the institution shall not be less than 50% of the shares issued for the first time (new Article 82-1).
(2) With reference to foreign systems, and considering the current minimum paid-in capital of the SITEs, it is proposed that the FSC be authorized to determine the minimum paid-in capital of the Real Estate Investment Trust Enterprise and other qualifications (amended Article 67).
(3) Real Estate Investment Trust Enterprises (including exclusive and concurrent businesses) will be required to set up independent directors and an audit committee, and supervisors will be replaced by the audit committee. (new Article 82-4).
3. Regulations on the management of REIT:
(1) The investment targets of fund structure REIT are mainly inclusive of real estate, real estate related rights and real estate related securities. It is stipulated that REIT should invest at least a certain proportion in real estate or real estate related rights with stable income, and the annual income distributed shall reach a certain proportion of the distributable income. In addition, with reference to the fact in the foreign mode that REIT is allowed to conduct transactions with related parties, the Act will allow fund Structure REIT to conduct related-party transactions and will be supplemented by relevant supporting management measures (new Article 49-3).
(2) With reference to foreign norms, and taking into account the borrowing status and financial risks of REIT, the FSC is authorized to set an upper limit on the REIT borrowing ratio, as well as the announcement method and other related matters (new Article 49-5).
The FSC says that, in addition to being published in the official gazette of the Executive Yuan, a general explanation of the draft amendment and a comparison table of the amended articles will be published on the FSC website. If you have any comments, please visit the webpage “Notice of Draft Regulations” on the website “Laws and Regulations Retrieving System” of the FSC, and state your views or consult the Securities and Futures Bureau of the FSC within 60 days from the day after the announcement. After the notice of the draft amendment, the FSC will send the draft via an official letter to the Executive Yuan for its examination in accordance with administrative procedures.
Contact unit: Section Chief Hsiao-Yun Lin, Securities Investment Trust and Consulting Division, Securities and Futures Bureau
Tel: (02)2774-7320
If you have any questions, please write to:
http://fscmail.fsc.gov.tw/FSC-SPS/SPSB/SPSB01002.aspx
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- Update： 2021-01-15
