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Title: Guidelines for Investment in Mainland China by Public Companies
Date: 2002.12.10 ( Amended )

Article Content

 
1     Enactment Purpose
    To protect investors and promote information disclosure, public companies engaging in investment in Mainland China shall comply with these Guidelines.
2     Legal Basis
    These Guidelines have been adopted in accordance with Article 36, Paragraph 2, Subparagraph 2 and Article 38 of the Securities & Exchange Law.
3     Scope of Application
  1. Any public company directly or indirectly engaging in investment in Mainland China shall do so in accordance with these Guidelines.
  2. The term "engaging in investment in Mainland China" as referred to in these Guidelines includes the following methods of investment:
    1. Investment in Mainland China companies by remittance through a third region;
    2. Investment in Mainland China companies through a company invested and established in a third region;
    3. Investment in Mainland China companies through an existing company established in a third region; and
    4. Other methods of investing in Mainland China.
  3. The term "Investments" as referred in the preceding Item, means the investments stipulated in Articles 4 and 6 of the "Approval Guidelines for Engagement in Investments or Technological Cooperation in Mainland China" promulgated by the Investment Commission, Ministry of Economic Affairs (hereinafter, referred to as the "Investment Commission"), and shall include the provision of pledges or guarantees for overseas loans for the purpose of investment in Mainland China, and instances where a company or a company located in the third region that is invested by the company provides loans or investments with terms longer than one year or more to enterprises in Mainland China that it has invested in.
4     Securities and Futures Commission (hereinafter, referred to as the "SFC") handling principles for public companies investing indirectly in Mainland China for reporting (application for) capital increase by cash or offering of corporate bonds:
  1. For any one of the following situations existing for a public company reporting (applying for) capital increase by cash or offering of domestic corporate bonds, the SFC may reject or disapprove such report or application:
    1. Where the current capital use plan will be used in direct or indirect investment in Mainland China; or
    2. Where the accumulated amounts of direct or indirect investment in Mainland China exceed the limit set by the Investment Commission. However, where the purpose of the capital is for use in domestic acquisition of fixed assets and where the company promises not to increase its investments in Mainland China, this restriction shall not apply.
  2. For any one of the following situations existing for a public company applying for offering and issuance of overseas securities, the SFC may disapprove such application:
    1. Where the amount for direct or indirect investment in Mainland China in the capital use plan to be used in the current offering exceeds 20 percent of the total amount of the current offering. However, for those offering and issuing overseas certificates of deposit, overseas convertible corporate debt, and overseas stocks, and where the amount for direct or indirect investment in Mainland China in the capital use plan to be used in the current offering does not exceed 40 percent of the total amount of the current offering, and where the issuance or conversion rules stipulate that the bearer may not request reversal, conversion, or repayment within one year of the issuance of the overseas securities, this restriction shall not apply; or
    2. Where the accumulated amounts of direct or indirect investment in Mainland China exceed the limit set by the Investment Commission. However, where the purpose of the capital is for use in domestic acquisition of fixed assets and where the company promises not to increase its investments in Mainland China, this restriction shall not apply.
5     Disclosure of information:
  1. Time limit for the placing of a public announcement and for reporting to the competent authority:
    1. Any public company engaging in investment in Mainland China shall place a public announcement within 2 days of the date of occurrence of the fact, and report to the SFC annexing the newspaper containing the public announcement and the approval letter from the Investment Commission. Documents related to the public announcement shall be copied to the Securities Dealers Association, and the Securities & Futures Institute. However, for a public company whose stocks have been listed on the Taiwan Stock Exchange or traded on the OTC Exchange, and where any related information has been disclosed on the Market Observatory Post System, this restriction shall not apply.
    2. The term "date of occurrence of the fact" as used in the preceding paragraph, means the date when the public company receives the approval letter from the Investment Commission.
  2. Required contents of a public announcement (format of the announcement as per the attachment):
    1. Newly increased investment.
      1. Amount and date of resolution of the shareholders meeting or directors meeting;
      2. Amount and date of approval of the Investment Commission;
      3. Method of investment (investment in Mainland China companies by direct investment, remittance through a third region, re-investment by a company invested and established in a third region, re-investment by an existing company in a third region invested in by the company, and other methods of investing in Mainland China.);
      4. Name of the invested Mainland China company, paid-in capital, expected current capitalization increase, major scope of business and the net worth, and condition of loss and profit as shown in the most recent financial statement; and
      5. The current actual investment in the Mainland China company and the shareholding ratio.
    2. The current total investment in Mainland China
      1. Total investment in Mainland China approved by the Investment Commission (including the current investment), its ratio against the paid-in capital, total assets, and equity of shareholders as shown in the most recent financial statement.
      2. Actual total investment in Mainland China, its ratio against the paid-in capital, total assets and equity of shareholders as shown in the most recent financial statement, and the amount of loss and profit from investment in Mainland China, and the amount of profit remitted back in the most recent three years.
    3. Other matters required to be noted
      1. For any directly or indirectly controlled company that is not a domestic public company that engages in investment in Mainland China, the parent company shall also place a public announcement, make a report to the competent authority, and annex the required copies.
      2. Where any contents required for inclusion in a public announcement are not included in the announcement during placement and shall be supplemented, an announcement containing all such contents shall be placed again, a report to the competent authorities shall be made, and the required copies annexed.