Taiwan Company Qualification of Investors from Mainland China

According to the definition of 3rd article in “ Measures Governing Investment Permit to the People of Mainland Area”: “ The investors mentioned herein refer to the individuals, juristic persons, organizations, other institutions from Mainland and the companies they invest into in a third area which are, in accordance with these Measures, engaged in investment behaviors in Taiwan area. The invested companies in a third area mentioned in the preceding paragraph refer to the individuals, juristic persons, organizations and other institutions from Mainland and in one of the following situations:

(1.) Directly or indirectly holding the shares issued by a company in a third area or the total contributing amount exceeding thirty percent.

(2.) Having the controlling power over the companies in a third area. The Statute for Investment by Foreign Nationals shall not apply to the investment in Taiwan area made by the companies in a third area mentioned in the preceding paragraph.”

1. Calculation of Shareholding

(1.) The calculation shall be based on the third-area company’s total capital contribution (or its total issued and outstanding common and special shares) at present, excluding stock options, or share call options, or bonds, or any other instruments convertible to common shares.

(2.) Calculation of the direct or indirect shareholding (or capital contribution) percentage shall be based on the “Tiered Recognition Calculation Method”. Accordingly, the second-tier shareholder, if having more than thirty percent of shares held by (or being controlled by) Mainland Area individual, legal person, organization or any other institution in aggregate, shall be deemed to be a Mainland Area investor, and shall account all of its shareholding to the first-tier shareholder as the first-tier shareholder’s Mainland Area equity.

(3.) Third-area company investor (i.e. the investment applicant), as well as any company within its shareholder structure, if being listed (or registered over-the-counter) on an overseas stock exchange, shall calculate its shareholding (or capital contribution) percentage based on the shareholder register at a special reference date. The special reference date shall be designated after the company’s latest book closure date.

2. Control Power

Control power shall be when Mainland Area individual, legal person, organization or any other institution having the following circumstances over a third-area company:

(1.) Having control over the majority of the votes pursuant to an agreement with other investors;

(2.) Having control over the financial, operational, and/or human resources policies pursuant to the law or regulations or contractual commitments;

(3.) Having the right to appoint or discharge a majority of the directors on the board (or other organizations determining the company’s operational policies), which has control over the company’s operations;

(4.) Having control over the majority of the votes of the directors on the board (or other organizations determining the company’s operational policies), which has control over the company’s operations; or

(5.) Other circumstances evidencing having control power in accordance with the International Financial Reporting Standards (IFRS) or ROC Statements of Auditing Standards