To assist the development of innovative enterprises, provide more channels for raising capital, and expand Taiwan's capital markets, the FSC on 3 December 2020 announced that the Taiwan Stock Exchange (TWSE) and the Taipei Exchange (TPEx) will further build out Taiwan's multi-level capital market framework by launching a Taiwan Innovation Board(TIB) and a Pioneer Stock Board(PSB), respectively. The purpose of the two new boards is to assist innovative businesses in their efforts to raise funds on the capital markets.
In concert with the launch of the two new innovative boards, supporting deregulation, and amendments to the "Company Act," the FSC on 29 March 2021 amended the "Regulations Governing the Offering and Issuance of Securities by Securities Issuers," "Regulations Governing the Offering and Issuance of Securities by Foreign Issuers," "Regulations Governing the Offering and Issuance of Overseas Securities by Issuers," "Regulations Governing Information to be Published in Public Offering and Issuance Prospectuses," "Standards Governing Eligibility of Securities for Margin Purchase and Short Sale," and "Regulations Governing Book-Entry Operations for Centrally Deposited Securities." The amendments are summarized as follows:
1.Revisions to facilitate the launch of new innovative boards:
(1)To accelerate the entry of innovative companies into the capital markets and reduce the cost and time spent on preliminary procedures, the amendments expressly provide that any company which, having applied to list shares on the TWSE TIB or register shares for trading on the TPEx PSB, subsequently files for an initial public offering, may submit the financial report for the most last fiscal year as part of its offering prospectus.
(2)Given that most innovative businesses pose a higher investment risk and therefore only qualified investors are allowed to invest in them, the amendments require that this fact be disclosed in prominent lettering on the cover of the prospectus.
(3)A TIB-listed company that issues new shares for capital in its IPO as well as in its transferral to the main board, should follow the existing rules for a first-time TWSE/TPEx listing and for moving a listing from TWSE to TPEx or from TPEx to TWSE. For example, it must provide an expert’s evaluation opinions, set aside a certain percentage of shares for public offerings, and the 7-business-day effective registration rule will also apply, while the requirement for a fundraising plan and the restriction on large idle funds will not apply.
(4)Calculation methods for benchmark prices of emerging stocks on the PSB have been added in response to the fact that the trading method for emerging stocks on the PSB follows the automatic matching mechanism while original emerging stocks follow the price negotiation mechanism. The trading method differs from negotiated trading based on prices quoted by recommending securities firms.
(5)The trading volume and liquidity for PSB-listed companies remains to be seen, so margin trading in their securities will not be allowed in the early stage.
2.Revisions to support deregulation: The "Business Mergers and Acquisitions Act" was amended on 8 July 2015 to allow more diverse types of purchase consideration for a merger or acquisition. Also, in ordinary practice a combination of cash and shares is the most common form of consideration used when the acquiring company obtains all the equity of the absorbed company and assumes all of its rights and obligations, and the M&A agreement typically includes a concrete post-M&A business plan. In light of these facts, therefore, in order to allow the M&A participants greater flexibility in how they raise and utilize funds, the amended Regulations newly provide that an acquiring company which meets certain conditions (i.e. the proceeds of its securities issue will be used for M&A purposes; the absorbed company is not engaged primarily in the trading of securities; and the fundraising plan is necessary, reasonable, and feasible) is not subject to provisions that would otherwise prohibit a company with large amounts of idle funds from issuing securities.
3.Revisions to coordinate with renumbered paragraphs in the "Company Act": Where the Regulations cite specific paragraphs in the "Company Act," these paragraph citations have been adjusted in certain cases to account for renumbering due to a "Company Act" amendment. Also, in consideration of the fact that Taiwan fully adopted the International Financial Reporting Standards (IFRSs) beginning from 2015, transitional provisions in the Regulations that dealt with a gradual phasing in of the IFRSs by public companies have been eliminated.