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Title: Taipei Exchange Rules Governing the Review of Foreign Securities for Trading on the TPEx
Date: 2003.06.16 ( Announced )
Date: 2016.10.28 ( Amended )

Article Content

 
Chapter I General Provisions
Article 1     These Rules are promulgated in accordance with Article 8 of the Regulations Governing Securities Trading on the Taipei Exchange.
Article 2     The following terms used in these Rules are defined as follows:
  1. "Competent Authority" means the Financial Supervisory Commission, Executive Yuan, of Taiwan.
  2. "Foreign securities" means government bonds issued by foreign governments, and foreign stock, Taiwan depository receipts, foreign bonds issued by foreign issuers in the territory of Taiwan and other foreign securities approved by the Competent Authority.
  3. "TPEx trading of securities" means trading of securities on the Taipei Exchange (TPEx).
  4. "Application for a TPEx primary listing" means a first application by a foreign issuer for TPEx trading of the stock issued by the issuer whose registered stock has not been listed for trading on any foreign securities market.
  5. "Application for a TPEx secondary listing" means an application by a foreign issuer for TPEx trading of the stock issued by the issuer whose registered stock is already listed for trading on an approved foreign securities market.
  6. "Taiwan Depositary Receipts" ("TDRs") means depository receipts issued within Taiwan by a depository institution and representing securities of a foreign issuer that are on deposit with a custodian institution.
  7. "Depository institution" means a financial institution located within Taiwan that has been approved by the relevant competent authority to conduct TDR business.
  8. "Custodian institution" means a financial institution that has entered into a custody contract or other documented arrangement with a depository institution to keep custody of securities that are represented by Taiwan Depository Receipts; or, it means an institution that keeps custody of securities issued by a foreign issuer.
  9. "Foreign bonds denominated in New Taiwan (NT) dollars" means foreign straight bonds, foreign convertible corporate bonds, and foreign corporate bonds with warrants, denominated in NT dollars and issued by a foreign issuer.
  10. "Insider" means a director, supervisor, managerial officer, or shareholder holding more than 10 percent of the total issued shares, of a foreign issuer, or a spouse or minor child of any of the above.
  11. "Financial reports" means consolidated financial reports, or if the issuer does not have a subsidiary, means individual financial reports.
Article 3     When applying for issuance of securities and TPEx trading of such securities, the foreign issuer and the agency or the depository institution it retains shall submit the application for TPEx primary listing of stock of a foreign issuer, application for TPEx secondary listing of stock of a foreign issuer, application for TPEx trading of TDRs, or application for TPEx trading of foreign bonds (Attachments 1 to 4), as the case may be, and record the required information, and file an application, along with required documents, with the TPEx.
    The applicable processing procedures for reviewing the application for TPEx trading of foreign securities shall be separately promulgated by the TPEx.
    The securities under application for TPEx trading under paragraph 1, and any securities privately placed by a company applying for TPEx primary listing of its stock, shall be issued in dematerialized form; provided, this restriction shall not apply if the laws or regulations of the country of registration provide otherwise.
Chapter II Application for a TPEx Primary Listing
Section 1 General Provisions
Article 4     A foreign issuer applying for a TPEx primary listing of common stock shall meet the following conditions:
  1. It is a company limited by shares organized and registered under foreign law, and has not violated any applicable provision of the Act Governing Relations Between the Peoples of the Taiwan Area and the Mainland Area, provided that if individuals, juristic persons, groups, or other institutions from the Mainland Area have direct or indirect shareholding or capital contribution exceeding 30 percent in, or effective control over, the foreign issuer, special-case permission shall be obtained from the competent authority; and the foreign issuer furthermore must have filed for retroactive public issuance of the stock pursuant to the provisions of the Regulations Governing the Offering and Issuance of Securities by Foreign Issuers.
  2. Its issued registered stock is not listed for trading on any overseas securities market.
  3. Its total equity attributable to owners of the parent company as audited and attested by a CPA for the most recent period is equivalent to at least NT$100 million.
  4. It has been incorporated and registered in accordance with foreign law for at least 2 full accounting years.
  5. The financial reports prepared by the foreign issuer shall comply with the following requirements:
    1. The content shall be stated in units of New Taiwan Dollars.
    2. The Chinese language version shall govern; an English version may also be submitted in addition thereto.
    3. The financial reports shall be prepared in accordance with international financial reporting standards recognized by the Competent Authority, US accounting standards, or the International Financial Reporting Standards.
    4. It shall be produced using period-on-period comparison, and shall include balance sheets, statements of comprehensive income, cash flow statements, statements of changes in equity, and related notes. The notes to the financial report shall state which accounting principles are employed If they are prepared according to international financial reporting standards recognized by the Competent Authority, then Taiwan's Regulations Governing the Preparation of Financial Reports by Securities Issuers shall govern, provided that Article 24 thereof need not be applied. If they are not prepared according to international financial reporting standards recognized by the Competent Authority, then the differences in the disclosure of the period-on-period balance sheet and the comprehensive income statement titles with the international financial reporting standards recognized by the Competent Authority shall be disclosed, including any material discrepancies and the dollar amounts affected.
    5. It shall have an audit (or review) report issued by two Taiwan CPAs approved by the Competent Authority to perform attestation of financial reports for public companies; or have been audited and attested (or reviewed) by an international accounting firm that has a cooperative relationship with the aforesaid CPAs, and have an audit (or review) report that is issued by the Taiwan CPAs and that does not make reference to audit (or review) work by any other accountant.
    6. It shall be signed or stamped with the seal of the chairperson, managerial officers, and principal accounting officers, who shall also produce a declaration that the report contains no misrepresentations or nondisclosures.
    7. In the audit (or review) report, the CPAs shall explain the accounting principles adopted by the foreign issuer and the differences between those principles and the international financial reporting standards recognized by the Competent Authority, and include an index to the notes, and shall expressly state that the report has been audited in accordance with Taiwan's Regulations Governing Auditing and Attestation of Financial Statements by Certified Public Accountants and generally accepted auditing standards (or that the review work has been planned and executed in accordance with Statement of Auditing Standards No. 36: Engagements to Review Financial Statements).
    8. If the stock has no par value or the par value per share is other than NT$10, in the application of the provision of Article 6 of the Regulations Governing the Preparation of Financial Reports by Securities Issuers regarding 5 percent or more of paid-in capital, 2.5 percent of equity attributable to owners of the parent company shall be substituted; for the provision of Article 17 thereof regarding 20 percent or more of paid-in capital, 10 percent of equity attributable to owners of the parent company shall be substituted.
  6. Based on the financial report prepared in accordance with the international financial reporting standards recognized by the Competent Authority, net income before tax, excluding net income (or loss) from non-controlling interests for the most recent fiscal year, may not be less than the equivalent of NT$4 million, and furthermore, its ratio to the amount of equity attributable to owners of the parent company shall meet one of the following conditions:
    1. Having reached 4 percent or higher in the most recent fiscal year, with no accumulated deficit after final accounting for the most recent fiscal year.
    2. Having reached 3 percent or higher in both of the most recent 2 fiscal years.
    3. The average of the most recent 2 fiscal years is 3 percent or higher, and profitability in the most recent fiscal year is higher than that of the preceding fiscal year.
  7. The company, excluding company insiders and any juristic persons in which such insiders hold more than 50 percent of the shares, has at least 300 registered shareholders, and the combined shareholdings those shareholders account for 20 percent or more of the total issued shares, or more than 10 million shares, of the applicant company.
  8. The directors, supervisors, and the shareholders holding 10 percent or more of the total issued shares of the company shall carry out matters relating to placement in central custody and withdrawal from custody upon expiration for the entire amount of their shareholding in accordance with Article 5 of these Rules.
  9. It is recommended in writing by two or more securities firms, provided that one of them shall be designated as the lead recommending securities firm, and the other(s) as co-recommending securities firm(s). The recommending securities firms shall sign a TPEx stock listing advisory contract with the foreign issuer. The foreign issuer shall continue to engage a lead recommending securities firm during the fiscal year of TPEx listing and the following 2 fiscal years to assist it with compliance with Taiwan's securities laws and regulations, the rules and bylaws public announcements of the TPEx, and the Foreign Issuer TPEx Primary Listing Contract (Attachment 5).
  10. It shall have engaged a professional shareholder services agent within the territory of the Republic of China (ROC) to handle shareholder services.
  11. It shall have appointed at least one litigious and non-litigious agent domiciled or residing within the territory of Taiwan; the primary duty of the agent is to facilitate effective delivery of documents between the TPEx and the foreign issuer, to notify it of matters requiring its action, and ensure its compliance with Taiwan's securities laws and regulations, the rules, bylaws, and public announcements of the TPEx, and the Foreign Issuer TPEx Primary Listing Contract, and related matters.
  12. A period of not less than 6 months must have elapsed from the issuer's filing for TPEx-listing advisory guidance or from the trading of its stock on the emerging stock market, provided that if there is any change in the lead advisory securities firm or emerging-stock lead advisory recommending securities firm, the issuer shall receive the required advisory services from the new lead advisory securities firm or emerging-stock lead advisory recommending securities firm, and then a further period of not less than 1 months must elapse from the filing for advisory guidance or from the trading of its stock on the emerging stock market before it may submit its application for TPEx listing.
  13. The issuer shall undertake that it will comply in the following matters:
    1. Complying with the ROC Securities and Exchange Act and related laws, regulations, and policies.
    2. Cooperating with on-site audits by the TPEx as necessary, and appointing at the TPEx's request a designated CPA or professional institution to conduct a targeted examination within the audit scope designated by the TPEx. The issuer will submit the examination results to the TPEx, and agrees to bear any related expenses.
    3. TPEx-listed shares shall be delivered by book-entry transfer.
    4. Important matters in connection with protection of shareholder equity. If such matters conflict with mandatory provisions of laws or regulations in the issuer's country of registration, the issuer shall enhance the disclosure of any material discrepancies in its public prospectus. If such matters are not in conflict with mandatory provisions of law of the issuer's country of registration, they shall be specified in the company's articles of incorporation or organizational documents. If specified in the organizational documents, the articles of incorporation shall state that such matters will be separately dealt with in the organizational documents, and the procedures for adoption and amendment of the organizational documents shall be the same as for the articles of incorporation.
    5. The foreign issuer shall continue to engage a lead recommending securities firm during the fiscal year of TPEx listing and the following 2 fiscal years to assist it with compliance with Taiwan's securities laws and regulations, the rules and bylaws public announcements of the TPEx, and the Foreign Issuer TPEx Primary Listing Contract.
    6. If, with respect to important matters connected with the protection of shareholder equity, the laws of the country where the issuer is registered contain provisions regarding exclusive jurisdiction of courts that exclude the jurisdiction of ROC courts, and further, if the jurisdiction of ROC courts is not specified within the issuer's articles of incorporation, the issuer shall take out directors liability insurance and maintain it throughout the period of TPEx listing.
  14. The laws of the Republic of China shall be the applicable law for the Foreign Issuer TPEx Primary Listing Contract entered into by the foreign issuer. The Taiwan Taipei District Court shall be the competent court for litigation in the event of any dispute arising in connection with the Contract.
  15. A remuneration committee shall be established pursuant to Article14-6 of the Securities and Exchange Act and related regulations, which shall be applicable mutatis mutandis.
  16. If provisions of the ROC Securities and Exchange Act that are applicable mutatis mutandis are in conflict with mandatory provisions of law of the issuer's country of registration, the mutatis mutandis application of those provisions may be excluded only if they fall within the scope of specific provisions of the Securities and Exchange Act for which the competent authority has publicly announced an exemption from application.
  17. If the industrial classification of the TPEx listing is the food industry, or revenue from food and beverages accounts for 50 percent or more of its total operating revenue for the most recent accounting year, the company shall meet the requirements in all the following items:
    1. It shall have set up a laboratory to conduct autonomous inspections.
    2. If product raw materials, semi-finished products, or finished products are to be outsourced for inspection, they shall be submitted to a laboratory or inspection institution certified or recognized by the Ministry of Health and Welfare, by the Taiwan Accreditation Foundation, or by an institution retained by the Ministry of Health and Welfare for the inspection.
    3. It shall retain independent experts to issue opinions on the reasonableness with respect to its food safety monitoring plan, inspection frequencies, and items to be inspected.
  18. Its articles of incorporation shall specify the following matters:
    1. It shall adopt electronic means as one of the methods for shareholders to exercise voting rights.
    2. The candidate nomination system shall be adopted for the election of the company's directors and supervisors.
    The professional shareholder services institution referred to in paragraph 1, subparagraph 10 shall have documents evidencing the following issued by the Taiwan Depository & Clearing Corporation (TDCC):
  1. Its personnel and equipment for handling shareholder services all are in compliance with the Regulations Governing the Administration of Shareholder Services of Public Companies.
  2. There has been no instance in the preceding 3 years in which, after a TDCC audit, the TDCC has made written suggestions for improvement, and it has failed to make improvements by the deadline.
    When a foreign issuer applies for a TPEx primary listing and the issuer meets the conditions set out in any of the below-listed subparagraphs, the issuer may proceed in accordance with the provisions of that subparagraph, and thereby be exempted from the application of paragraph 1, subparagraph 12; provided that a foreign issuer that has submitted and obtained approval for its scheduled plan for the appointment of independent directors and reorganization of the board of directors shall, no later than by the time of the TPEx primary listing of the stocks, meet the requirement specified in Article 9, paragraph 1, subparagraph 5 hereto:
  1. If a foreign issuer's stock has already traded on a main foreign securities market, when the foreign issuer applies for the TPEx primary listing, the period of not less than 6 months for filing of TPEx-listing advisory guidance or for trading on the emerging stock market is not required, provided that this subparagraph shall not apply if a period of more than 6 months has elapsed since termination of trading of the stock on the main foreign securities market.
  2. If a foreign issuer's stock has already passed review for listing on a main foreign securities market, and the foreign issuer applies for a TPEx primary listing during the period of validity of passage of the listing review, the issuer may apply on a special-case basis for reduction of the period for filing of TPEx-listing advisory guidance or trading on the emerging stock market, provided that the period still may not be less than 2 months, and the lead advisory securities firm or emerging-stock lead advisory recommending securities firm may not be changed during the period.
    If the foreign issuer obtains from the Industrial Development Bureau, Ministry of Economic Affairs, or the Council of Agriculture, Executive Yuan, or the TPEx-designated professional institution an assessment opinion indicating that the company is a technology enterprise and has successfully developed products or technology with marketability ("technology enterprise"), it may be exempted from the provisions of paragraph 1, subparagraphs 4 and 6; provided that the foreign issuer's net worth shall not be less than two-thirds of the share capital shown in the latest CPA-audited and attested or reviewed financial report, and the foreign issuer shall, in the year of TPEx listing and the three subsequent fiscal years, continuously engage the lead recommending securities firm to assist it in complying with ROC securities acts and regulations, the TPEx bylaws, rules, and public announcements, and the TPEx primary listing contract of the foreign issuer, and its directors, supervisors, general managers, R&D managers, shareholders holding 5 percent or more of the total number of shares, and shareholders who have provided patent rights or technical know-how as capital contribution and hold a position in the company and moreover hold 0.5 percent or more of the shares or at least 100,000 shares, shall carry out the placement of their shares in centralized custody, withdrawal of shares from custody at expiration of the custody period, and related matters in accordance with paragraph 1, subparagraph 8.
    When a foreign issuer applies for a TPEx primary listing of common stock, if, during the most recent 2 fiscal years, its operating revenue derived from construction business represents 40 percent or greater of its total operating revenue, or its gross profit derived from construction business represents 40 percent or greater of its total gross profit, or its operating revenue or gross profit derived from construction business is more than that derived from other business items, it shall be subject to the mutatis mutandis application of the TPEx Supplemental Directions for Applications by Construction Companies for TPEx Listing. However, the paid-in capital requirement under Article 2, paragraph 1, subparagraph 2 of those Supplemental Directions shall be calculated instead on the basis of equity attributable to owners of the parent company, and the imputed profitability calculation under Article 2, paragraph 1, subparagraph 6 thereof shall be replaced instead by the conditions set out in paragraph 1, subparagraph 6 of the present Article. The foreign issuer may be exempted from the requirements of Article 3, paragraph 1, subparagraphs 1 to 3 of those Supplemental Directions if the construction company and the foreign issuer are not related parties, and the foreign issuer has established complete internal control systems and tender procedures for contracting projects out, and the payment terms comply with usages of trade.
Article 5     A foreign issuer's directors, supervisors, and shareholders with shareholding of 10 percent or more; or a technology enterprise's directors, supervisors, general managers, R&D managers, shareholders holding 5 percent or more of the total number of shares, and shareholders providing patent rights or technical know-how as capital contribution and holding a position in the company and moreover holding 0.5 percent or more of the shares or at least 100,000 shares; shall place in central custody the full amount of the shares they hold as set out in the application documents after deduction of the number of shares allocated to the recommending securities firm for underwriting, and the total shares placed in central custody shall not be less than a percentage - calculated in accordance with the paragraph 2 - of the total number of shares of common stock already offered and issued by the company at the time of application for TPEx listing. If there is any deficit, arrangements shall be made with other shareholders to make up the deficit, provided that this restriction shall not apply to the issuer's recommending securities firm where it holds 5 percent or more of the enterprise's total issued shares during the emerging stock registration period as a result of subscription or trading of operating securities.
    The total percentage of total shares that must be placed in central custody at the time of application for TPEx listing in accordance with the preceding paragraph shall be calculated as follows:
  1. If the total number of shares at the time of application for TPEx listing is 30 million or fewer, 25 percent of the total number of shares shall be placed in central custody.
  2. If the total number of shares at the time of application for TPEx listing is greater than 30 million but not more than 100 million, in addition to doing as specified in the preceding subparagraph, the party shall place in central custody 20 percent of those shares in excess of 30 million.
  3. If the total number of shares at the time of application for TPEx listing is greater than 100 million but not more than 200 million, in addition to doing as specified in the preceding subparagraph, the party shall place in central custody 10 percent of those shares in excess of 100 million.
  4. If the total number of shares at the time of application for TPEx listing is greater than 200 million, in addition to doing as specified in the preceding subparagraph, the party shall place in central custody 5 percent of those shares in excess of 200 million.
    If a person who is required to place shares in central custody, during the period between the date of application for TPEx listing and the listing date, obtains capital increase shares due to a share issue for capital increase by the issuing company, or obtain shares for another reason, the shares shall be transferred in full to central custody, and may not be pledged, transferred, or otherwise disposed of. Persons who have not yet actually received the shares as of the listing date shall undertake that they will submit those shares to central custody after their receipt. "Another reason" refers to a reason such as acquisition through succession, receipt of a gift, or purchase on the Emerging Stock Market.
    Any shares that were allocated for underwriting by the recommending securities firm and thus originally deducted from the amount required to be submitted for central custody, but that could not actually be sold in an overallotment (greenshoe allotment) shall be placed in central custody after their return by the recommending securities firm and prior to listing. Shares bought back from the market by the recommending securities firm while implementing price stabilization measures during the first 5 business days after listing need not be placed in central custody.
    The designated central custodian institution is the TDCC.
    One-half of the shares that were duly placed in custody may be withdrawn upon expiration of the 6-month period following the day that TPEx trading of the issuer's shares commences, provided that in the case of a technology enterprise, all of the shares may be withdrawn only upon expiration of the two-year period.
    The full amount of the remaining shares that were duly placed in custody may be withdrawn upon expiration of the 1-year period following the day that TPEx trading of the issuer's shares commences, provided that in the case of a technology enterprise, all of the shares may be withdrawn only upon expiration of the two-year period.
    The effect of stock custody shall not be affected by any change of an original holder's status.
     During the custody period, a person who is required to place shares in central custody may not rescind the custody contract, and the custodial receipt may not be transferred or pledged.
    If, prior to expiration of the custody period, as a result of withdrawal of shares by operation of court orders or for other causes, the shares placed in central custody under relevant regulations fall below the number required for central custody for such custody period as calculated pursuant to regulations, the foreign issuer's responsible person shall coordinate to remedy the deficit within 1 month.
    If a TPEx listed company fails to observe relevant regulations by remedying its deficit of shares required for central custody, the TPEx may impose a penalty of NT$50,000 on a case-by-case basis and notify the company by letter to make corrections within 2 days from receipt of the letter, and, if the company still fails to make corrections within that time limit, a further penalty of NT$10,000 may be imposed on a daily basis until the day corrective measures are taken.
Article 6     A foreign issuer applying for the first time for TPEx trading of its stock shall, out of the total shares planned for TPEx listing, allocate a specified percentage for cash capital increase through a new share issue, and, after deducting the number of shares reserved for employee subscription as provided in its articles of incorporation, engage the recommending securities firms referred to in Article 4, paragraph 1, subparagraph 9 herein to offer all of the remaining shares for public sale prior to the TPEx listing.
    The foreign issuer may use shares already offered and issued as a greenshoe (over-allotment) for stabilization of the underwriting price by the recommending securities firms; these shares also constitute a portion of the public sale prior to the TPEx listing.
    The number of shares reserved for employee subscription referred to in paragraph 1 may not exceed 15 percent of the total number of new shares issued.
Article 7     A foreign issuer applying for the first time for TPEx trading of its stock shall allocate at least 10 percent of the amount of the total shares it intends for TPEx listing and retain the recommending securities firms to underwrite the shares; provided, if the number of shares calculated by such percentage is less than 1 million, no less than 1 million shares shall be provided for underwriting, or, if the number of shares so calculated exceeds 10 million shares, no less than 10 million shares shall be provided for underwriting.
    Stock allocated for underwriting shall be confined to issued common shares.
    If the foreign issuer has commenced TPEx trading of its stock as emerging stock for less than 2 years, the number of shares it has duly provided for subscription by the recommending securities firm for such emerging stock may be deducted from the number of shares it provides for underwriting hereunder, provided that the deduction shall not exceed 30 percent of the shares provided for underwriting hereunder.
Article 8     A securities firm that is recommending stock for TPEx trading under Article 4, paragraph 1, subparagraph 9 shall be a registered member of the Taiwan Securities Association, and shall be qualified in Taiwan as a securities underwriter and TPEx securities dealer, and shall meet the conditions set out in Article 23 of the Regulations Governing Securities Firms. However, in the case of a foreign issuer applying for an initial listing on the TPEx, if not less than 6 months have elapsed from the issuer's filing for TPEx-listing advisory guidance pursuant to Article 4, paragraph 1, subparagraph 12, and its stock has not been traded on the emerging stock market, a securities firm that is qualified merely as a securities underwriter may serve as a recommending securities firm.
    If any of the following circumstances exists with respect to the foreign issuer or a recommending securities firm, the TPEx will refuse to accept the assessment report issued by the recommending securities firm and will not approve the TPEx listing of the stock:
  1. Any circumstance set out in Article 26 of the Regulations Governing Securities Firms; or
  2. If the issuer and recommending securities firm are from the same corporate group.
Article 9     Although a foreign issuer meets the conditions set out in these Rules, the TPEx may deny approval for TPEx trading of its stock under any of the following circumstances, if the TPEx deems it unsuitable for TPEx trading:
  1. Any circumstance set out in Article 156, paragraph 1, subparagraph 1 to 3 of the Securities and Exchange Act.
  2. The issuer's finances or business cannot be independently differentiated from those of another person.
  3. Any material non-arm's length transaction which has not been corrected by the time of the application.
  4. Within the past 3 years any act in violation of the principle of good faith was done by the company or by any director, supervisor, general manager, or de facto responsible person thereof who is incumbent at the time of the application.
  5. The board of directors or supervisors of the applicant company are unable to independently perform their duties.
  6. There is serious deterioration in the business it operates.
  7. The TPEx deems TPEx listing of the stock unsuitable due to the scope or nature of, or special circumstances relating to, the enterprise.
    The termination date of the period of applicability of the items in the subparagraphs of the preceding paragraph shall be the day before the date on which the TPEx issues a letter notifying the issuer of its agreement to the Foreign Issuer TPEx Primary Listing Contract.
Article 10     Specific standards for a determination under Article 9, paragraph 1, subparagraph 1:
  1. The issuer of the securities becomes involved in litigious or non-litigious matters the consequences of which could cause company dissolution, or change in corporate organization, capital, business plan, financial condition, or suspension of production, and there is a likelihood that market order will be affected or the public interest impaired.
  2. The issuer of the securities encounters a significant disaster, enters into an important agreement, experiences exceptional circumstances, changes important content of its business plan, or has a check dishonored, the consequences of which could cause significant material change to the financial condition of the company, and there is a likelihood market order will be affected or the public interest impaired.
  3. The issuer of the securities engages in any deceptive, dishonest, or illegal conduct, sufficient to affect the price of its securities, and there is a likelihood market order will be affected or the public interest impaired.
Article 11     Specific standards for a determination under Article 9, paragraph 1, subparagraph 2:
  1. An excessive share of the applicant company's funds comes from non-financial institutions.
  2. The applicant has entered into any contract that materially limits its operations or that is obviously unreasonable, with a likelihood that adverse effects will occur.
  3. The applicant company jointly shares a loan credit line with another party in which its own credit use cannot be clearly distinguished. This provision does not apply, however, to a joint loan credit line that is shared between business entities that are included in the consolidated financial statement of the foreign issuer.
Article 12     Specific standards for a determination under Article 9, paragraph 1, subparagraph 3:
  1. Where the purpose, prices, or terms and conditions with respect to, or the handling procedures for, a purchase or sale of goods are at variance with those of an ordinary arm's-length transaction or are obviously unreasonable.
  2. In any related party transaction, the applicant is unable to reasonably demonstrate the necessity of the transaction, the legality of its decision-making process, and the reasonableness of the price and the payment/collection of monies (including by comparison with its transactions with unrelated parties or comparison with transactions by other entities in the same industry).
  3. A determination of whether correction has been made with respect to the phrase "has not been corrected" shall be based upon any of the following circumstances:
    1. If a person other than the applicant company profited from the non-arm's length transaction, the receiving person disgorged such profit to the person entitled to it.
    2. If an investigating or judicial agency has determined that the non-arm's length transaction does not constitute a criminal offense.
    3. The status quo ante has been restored with respect to the non-arm's length transaction.
Article 13     Specific standards for a determination under Article 9, paragraph 1, subparagraph 4:
  1. The term "within the past 3 years " refers to the 3-year period starting from the date on which the TPEx receives and accepts for processing the company's application for TPEx listing.
  2. The term "act in violation of the principle of good faith" means any of the following circumstances on the part of the applicant company or any director, supervisor, managerial officer, or de facto responsible person thereof:
    1. Tardy repayment of a loan from a financial institution.
    2. A criminal conviction of a violation of any relevant law or regulation of the country where the foreign issuer is registered.
    3. Breach of any representation made in a written statement submitted at the time of application for TPEx listing.
    4. Any other material misrepresentation or other act that would damage the company's creditworthiness, and that is likely to harm company interests or shareholder equity or the public interest.
    5. If an act under subparagraph (1) to (3) hereinabove is not serious, or is reasonably justified, it shall not count for the purposes hereof.
Article 14     Specific standards for a determination under Article 9, paragraph 1, subparagraph 5:
  1. The applicant company shall have at least five member seats on its board of directors, among which the independent director seats shall be no fewer than two seats, and furthermore shall be no fewer than one-fifth of the director seats. If the applicant company's chairperson and the general manager are the same person, or are spouses or relatives within one degree of kinship, the independent director seats shall be no fewer than three seats, and furthermore shall be no fewer than one-fifth of the director seats. At least one of the independent directors must be domiciled in Taiwan. However, if with respect to important matters connected with the protection of shareholder equity, the laws of the country where the issuer is registered contain provisions regarding exclusive jurisdiction of courts that exclude the jurisdiction of ROC courts, and further, if the jurisdiction of ROC courts is not specified within the issuer's articles of incorporation, it must have at least two directors (which may include independent directors) domiciled in Taiwan.
  2. The applicant company shall choose to establish either an audit committee or supervisors. The audit committee shall be composed of the entire number of independent directors. It shall not be fewer than three persons in number, one of whom shall be the convenor. The supervisors may not be fewer than three persons in number.
  3. More than one-half of the directors of the applicant company shall mutually be free of, and at least one or more of the supervisors shall mutually be free of, any of the following relationships:
    1. Spouse.
    2. Lineal relative within the second degree of kinship.
    3. Representative of the same juristic person.
    Representatives of the same juristic person may not serve concurrently as director and supervisor of the applicant company; and at least one or more director and supervisor seats shall mutually be free of any of the following relationships
    1. Spouse.
    2. Lineal relative within the second degree of kinship.
    Representatives of the same juristic person include representatives appointed by the government, juristic person shareholders, or entities with a controlling or subsidiary relationship therewith (including incorporated foundations and incorporated associations).
  4. Prerequisites to serve as an independent director:
    1. Meet the conditions of substantive independence set out in the Regulations Governing Appointment of Independent Directors and Compliance Matters for Public Companies.
    2. The independent directors shall include at least one professional in accounting or finance.
    3. Have pursued continuing education every year (counting from the day on which the recommending securities firms and the company entered into the advisory contract) for at least three hours in legal affairs, finance, or accounting and obtained certification documents issued through an external continuing education system separate from the recommending securities firm, certifying that the independent director has taught courses, attended courses, participated as a discussant in symposia, or the like.
Article 14-1     The specific standards for a determination under Article 9, paragraph 1, subparagraph 6 are that if the applicant company falls in any of the following circumstances, the TPEx may determine there to be serious deterioration in the business it operates:
  1. Operating revenue and operating income for the most recent fiscal year or the fiscal year in which the application for TPEx listing is filed show a significant deterioration relative to other enterprises in the same industry.
  2. Net income before tax for the most recent fiscal year or the fiscal year in which the application for TPEx listing is filed show a significant deterioration relative to other enterprises in the same industry.
  3. There is continuing negative growth in operating revenue and operating income for each of the 3 most recent fiscal years.
  4. There is continuing negative growth in net income before tax for each of the 3 most recent fiscal years.
  5. The company's products or technology are outdated, and it has no plan for improvement.
     The provisions of the preceding paragraph do not apply if on the applicant company's financial report for the most recent fiscal year the ratio of net income before tax excluding net income (or loss) from non-controlling interests to the amount of equity attributable to owners of the parent company is 6 percent or more.
     For the "other enterprises in the same industry" in paragraph 1, subparagraphs 1 and 2, the securities underwriter shall evaluate and explain the reasonableness of the enterprises sampled for the comparison.
    The provisions of subparagraphs 3 and 4 of paragraph 1 do not apply to a company that already has a concrete improvement plan that is producing positive effects.
Article 15     The foreign issuer shall enter into a Foreign Issuer TPEx Primary Listing Contract with the TPEx before permission for TPEx trading will be given.
    When the TPEx agrees to a Foreign Issuer TPEx Primary Listing Contract, it shall issue a letter of notification to the issuer and report the matter to the competent authority for recordation.
Section 2 Group Enterprises
Article 16     The term "group enterprise" as used in these Rules refers to an overall group of enterprises which, during the fiscal year of the application for TPEx listing and the preceding fiscal year, have had a relationship of control or subordination with the applicant company. In any of the following circumstances, a relationship of control or subordination is deemed to exist:
  1. The relationship is that of a parent company with all of its subsidiaries.
  2. The applicant company directly or indirectly controls personnel, financial, or business operations of another company; or another company directly or indirectly controls the personnel, financial, or business operations of the applicant company. The standards for determination thereof are as follows:
    1. Obtaining more than half of the director's positions in the other company.
    2. Having an appointee selected as general manager of the other company.
    3. Possessing managerial authority over the other company under a joint venture agreement.
    4. Providing financing for the other company equaling one-third or more of the total assets of the other company.
    5. Providing endorsements/guarantees for the other company equaling one-third or more of the total assets of the other company.
  3. The applicant company and another company are mutually invested in each other, each in a total of one-third or more of the other's total voting shares or total authorized capital, and have direct or indirect control over each other's personnel, financial, or business operations.
    In any of the following circumstances, a relationship of control or subordination is deemed to exist between the applicant company and another company; provided if relevant evidence is submitted proving otherwise, this shall not apply:
  1. Half or more of the directors, supervisors, and general manager of the applicant company and the other company are the same. Calculation of this figure shall include the spouses, children, and relatives within the second degree of kinship of such persons.
  2. Half or more of the issued voting shares or authorized capital of the applicant company and the other company each are held or contributed by the same shareholders.
  3. If the other company invests in the applicant company and, under the equity method of valuation, such other company and its related party(ies) together hold the majority of the total issued voting shares of the applicant company, or if the applicant company invests in the other company and, under the equity method of valuation, the applicant and its related party(ies) together hold the majority of the total issued voting shares of such other company.
    Calculation of the number of shares held in, or the amount of capital contributions to, another company by the applicant company shall additionally include all of the following shares or capital contributions:
  1. Shares held in, or capital contributions to, the other company by a subordinate company of the applicant company.
  2. Shares held by or capital contributions made by a third party on behalf of the applicant company.
  3. Shares held by or capital contributions made by a third party on behalf of a subordinate company of the applicant company.
Article 17     The terms "parent company" and "subsidiary company" as used herein shall be as defined in International Financial Reporting Standard 10.
     The term "related party" as used herein is defined in accordance with Article 18 of the Regulations Governing the Preparation of Financial Reports by Securities Issuers. However, if regulations that the competent authority has issued to govern the preparation of financial reports by enterprises in other specific industries provide otherwise, those provisions shall govern.
Article 18     Although a foreign issuer in a group enterprise applying for TPEx listing of its stock meets the applicable requirements set out in these Rules, the TPEx may deny approval for TPEx listing of its stock if it fails to meet all of the following conditions:
  1. The principal business or products (referring to those accounting for 30 percent or more of the total operating revenues of the respective companies in each of the most recent 2 fiscal years) of the applicant company and other companies within the same group enterprise are not mutually competing, and the applicant company has potential to develop independent marketing. A determination of "mutually competing" shall be made on the basis of an overall assessment of general factors such as type of enterprise, product substitutability, and target customers.
  2. If there are business transactions between the applicant company and any other company(ies) within the same group enterprise, each such company shall formulate specific written operational rules and bylaws establishing the system of financial and business affairs among them and have the same passed by its board of directors.
  3. The applicant company's financial and business conditions and its operational regulations mentioned above shall not show any sign of serious irregularity as compared with those of other companies in the same industry.
  4. No more than 50 percent of the applicant company's purchases or operating revenue shall come from other companies within the same group enterprise during the fiscal year of the TPEx listing application and the preceding 2 fiscal years; provided that this shall not apply to purchases or operating revenue from a parent or subsidiary company.
    The requirement of subparagraph 4 of the preceding paragraph may be waived in situations resulting from industry characteristics, market demand and supply conditions, government policy, or any other reasonable causes.
Article 19     When a subsidiary company in a subsidiary-parent company relationship applies for TPEx listing of its stock, even if the subsidiary meets the applicable requirements set out in these Rules, the TPEx may deny approval for TPEx listing of its stock if it fails to meet all of the following conditions:
  1. The subsidiary company shall annex to its application the financial statement of the parent company and all subsidiary companies of the parent company prepared in accordance with international financial reporting standards recognized by the Competent Authority, US accounting standards, or the International Financial Reporting Standards. If they are not prepared according to international financial reporting standards recognized by the Competent Authority, then the differences in the disclosure of the period-on-period balance sheet and the comprehensive income statement titles with the international financial reporting standards recognized by the Competent Authority shall be disclosed, including any material discrepancies and the dollar amounts affected.
  2. Its profitability calculated according to the annexed financial statement submitted pursuant to the requirements of the preceding paragraph shall meet the requirements set out in Article 4, paragraph 1, subparagraph 6. However, this profitability restriction may be lifted if the applicant company applies for TPEx listing pursuant to the requirements of Article 4, paragraph 4 herein, or during the fiscal year of application for TPEx listing and the preceding fiscal year, the dollar amount of purchase/sales transactions between the applicant company and its parent company is less than 10 percent of its total amount of purchases/sales.
  3. During the fiscal year of application for TPEx listing and the preceding fiscal year, no more than 50 percent of its operating revenue came from its parent company, and no more than 70 percent of its principal raw materials, principal products, or total purchase amount came from its parent company.
  4. The total number of shares of the applicant company held by the parent company and all of its subsidiaries, and by the directors, supervisors, representatives, and shareholders holding more than 10 percent of its total issued shares, of the aforesaid companies, and by related party(ies) thereof, shall not in total exceed 70 percent of the applicant company's total issued shares.
  5. The independent directors of the applicant company may not be fewer than three persons in number.
  6. At the time of application for TPEx listing by a subsidiary of a domestic TPEx (or TWSE) listed company or a TPEx (or TWSE) primary listed company, the pro forma operating revenue or operating income as stated in the CPA-reviewed pro forma financial statements of the TPEx (or TWSE) listed parent company for the most recent 4 quarters, excluding the financial data for the applicant company, was not down by 50 percent or more from the operating revenue or operating income stated in the financial statements for the preceding same period, and the parent company has not transferred any material customers or business within the most recent 2 fiscal years. However, this need not apply if the parent company and the subsidiary have different business types, industrial classifications, or product types, and moreover are not mutually competitive, or if it resulted from another reasonable cause.
    The requirements of subparagraphs 2 and 3 of the preceding paragraph may be waived in situations resulting from industry characteristics, market demand and supply conditions, government policy, or any other reasonable causes.
     When a subsidiary applies for TPEx listing pursuant to the proviso of subparagraph 6 of paragraph 1, with regard to any activities of equity ownership dispersion conducted by the parent company to reduce its shareholding percentage in the subsidiary within the 3 years before the application for TPEx listing, such activities shall have been done in a manner in which the pre-emptive subscription right is given to the original shareholders of the parent or other manner not detrimental to the interests of the parent's shareholders. Subparagraph 10 of the Standards for Determining Unsuitability for TPEx Listing under Article 10, Paragraph 1 of the Taipei Exchange Rules Governing the Review of Securities for Trading on the TPEx shall apply mutatis mutandis to the review of such applications by subsidiaries.
Section 3 Investment Holding Companies
Article 20     The term "investment holding company" as used herein means a foreign issuer that is a professional investment company the purpose of which is to control the operations of a holding company subsidiary or subsidiaries either directly, or indirectly through a subsidiary.
    The term "holding company subsidiary" means any of the following companies:
  1. Any invested company in which an investment holding company directly holds more than 50 percent of the issued voting shares or more than 50 percent of the contributed capital;
  2. Any invested company in which an investment holding company indirectly through its subsidiary(ies) holds more than 50 percent of the issued voting shares or more than 50 percent of the contributed capital;
  3. Any invested company in which an investment holding company directly, and indirectly through its subsidiary(ies), holds more than 50 percent of the issued voting shares or more than 50 percent of the contributed capital.
    At least 70 percent of the operating income on the investment holding company's financial report shall come from holding company subsidiaries referred to in the preceding paragraph.
    Those holding company subsidiaries may not be professional investment companies, and may not hold shares in the investment holding company. This restriction shall not apply, however, if the holding company subsidiary is required to be a professional investment company because the applicant company has invested indirectly via a third location.
Article 21     Satisfaction of the requirement "has been incorporated and registered in accordance with foreign law for at least 2 full accounting years" in Article 4, paragraph 1, subparagraph 4 of these Rules may also be determined on the basis of the actual number of years of operation of the holding company subsidiary of the investment holding company.
    If a subsidiary of an investment holding company obtains an opinion from the Industrial Development Bureau, Ministry of Economic Affairs, or the Council of Agriculture, Executive Yuan, or the TPEx-designated professional institution indicating the subsidiary is a technology enterprise, the investment holding company, when applying for TPEx primary listing of its stocks, may be exempted from the provisions of Article 4, paragraph 1, subparagraphs 4 and 6 hereof, provided that such investment holding company's net worth shall not be less than two-thirds of the share capital shown in the latest CPA-audited and attested or reviewed financial report, and that the investment holding company, in the year of TPEx listing and the 3 subsequent fiscal years, continuously engages the lead recommending securities firm to assist it in complying with ROC securities acts and regulations, the TPEx bylaws, rules, and public announcements, and the TPEx primary listing contract of the foreign issuer, and its directors, supervisors, general managers, R&D managers, and shareholders holding 5 percent or more of the total number of shares, and those shareholders providing patent rights or technical know-how as capital contribution and holding a position in the investment holding company or its holding company subsidiary and also holding not less than 0.5 percent of the total issued shares or 100,000 or more shares of the investment holding company at the time of application for trading on the TPEx, shall carry out the placement of shares in centralized custody, withdrawal of shares from custody at expiration of the custody period, and related matters in accordance with Article 4, paragraph 1, subparagraph 8, and Article 5, provided that this restriction shall not apply to the issuer's recommending securities firm where it holds 5 percent or more of the issuer's total issued shares during the emerging stock registration period as a result of subscription or trading of operating securities.
    If any circumstance set out in subparagraphs 1 to 4, or subparagraph 7, of paragraph 1 of Article 9 hereof exists with respect to any holding company subsidiary of an investment holding company, the TPEx may deny approval for the investment holding company's TPEx stock listing application.
    If an investment holding company is applying for TPEx stock listing on the basis of a technology enterprise under paragraph 2, 50 percent or more of its consolidated operating revenue in the most recent fiscal year shall have been contributed by the subsidiary that has obtained the opinion that it is a technology enterprise.
Article 22     The holding company subsidiary of the investment holding company shall issue an undertaking that it will comply with the Securities and Exchange Act and relevant laws, regulations, and policies of the ROC.
Article 23     (Deleted)
Chapter III Application for a TPEx Secondary listing
Article 24     A foreign issuer that applies for TPEx secondary listing of its stock shall meet all of the following conditions:
  1. Number of TPEx shares to be traded: not less than 10 million shares, or the aggregate market value of the application not less than the equivalent of NT$ 100 million or more. However, it may not exceed 50 percent of the total number of issued shares.
  2. The registered shares issued by the foreign issuer in accordance with the relevant laws in its country of registration are already traded on the main board of one of the overseas stock markets approved by the Competent Authority prior to the TPEx secondary listing of the stock for which the application for TPEx secondary listing is made.
  3. Shareholder's equity: the equity attributable to owners of the parent company as audited and certified for the most recent period by a certified public accountant is valued as equivalent to NT$200 million or more.
  4. Profitability: the net income before tax excluding net income (or loss) from non-controlling interests in the most recent fiscal year may not be lower than the equivalent of NT$4 million, and its ratio against the total amount of equity attributable to owners of the parent company shall meet one of the following standards:
    1. it reaches 4 percent or higher for the most recent fiscal year, and there is no accumulated loss in the final accounting for the most recent fiscal year.
    2. it reaches 3 percent or higher for both of the most recent two fiscal years.
    3. it reaches 3 percent or higher on average for the most recent two fiscal years, and the profitability in the most recent fiscal year is better year-on-year.
  5. When the shares of the issuer are traded on the TPEx, excluding company insiders of the issuer and any juristic persons in which such insiders hold more than 50 percent of the shares, the number of registered shareholders residing within the ROC shall be no less than 300, and the aggregate number of shares held by them shall be at least 20 percent of the total issued shares or more than 10 million shares.
  6. The foreign issuer shall have engaged, within the ROC, a professional shareholder services agent meeting the requirements of Article 4, paragraph 2 herein to handle shareholder services.
  7. At least one litigious and non-litigious agent domiciled or residing within the territory of Taiwan shall be appointed; the primary duty of the agent is as provided under Article 4, paragraph 1, subparagraph 11 herein.
  8. During the 3 months prior to TPEx agreement to the secondary listing contract for the foreign issuer's stock, there has not been any abnormal fluctuation in the price of registered shares issued by the foreign issuer pursuant to the laws and regulations of its country of registration.
  9. The foreign issuer shall issue a written undertaking stating that after TPEx listing it will establish a reporting system with both the TPEx and the overseas stock market on which it is originally listed for automatic synchronous reporting of material information.
  10. The foreign issuer shall continuously engage a recommending securities firm for the fiscal year of TPEx listing and the two subsequent fiscal years to assist it in complying with ROC securities laws and regulations, the bylaws, rules, and public announcements of the TPEx, and the TPEx secondary listing contract for the foreign issuer's stock. Additionally, during the engagement period, the recommending securities firm shall on a quarterly basis issue research reports on the foreign issuer, or introduce research reports prepared by foreign institutional investors, or make the foreign issuer's financial information available on the recommending securities firm's website.
    The preceding TPEx traded stocks shall be limited to the same classes as those being traded in overseas stock markets. The rights and obligations of the TPEx traded stocks shall be the same as those traded in overseas stock markets and the shareholders shall be free to sell the stocks in overseas stock markets.
    The financial information referred in subparagraphs 3 and 4 of paragraph 1 shall be reviewed in accordance with the financial statement or financial information prepared pursuant to the laws of the foreign issuer's country of registration or country of listing, and the opinions given by the ROC certified public accountant on the differences between the accounting principles adopted by the ROC and the foreign issuer's country of registration or country of listing respectively and on the impact of such differences on the financial report presented
    A foreign issuer that has obtained an appraisal opinion from a professional institution engaged by the Industrial Development Bureau of the Ministry of Economic Affairs, or engaged by the TPEx, stating that such issuer is a technology enterprise may be exempted from the restrictions in subparagraph 4 of paragraph 1. However, the foreign issuer shall continuously engage a recommending securities firm for the fiscal year of TPEx listing and the three subsequent fiscal years to assist it in complying with ROC securities laws and regulations, the bylaws, rules, and public announcements of the TPEx, and the TPEx secondary listing contract for the foreign issuer's stock.
Article 24-1     Although a foreign issuer applying for TPEx secondary listing meets the conditions set out in these Rules, the TPEx may deny approval for TPEx trading of its stock under any of the following circumstances, if the TPEx deems it unsuitable for TPEx trading:
  1. Any circumstance set out in Article 156, paragraph 1, subparagraphs 1 to 3 of the Securities and Exchange Act.
  2. Within the past 3 years any act in violation of the principle of good faith was done by the company or by any director, supervisor, general manager, or de facto responsible person thereof who is incumbent at the time of the application.
  3. Within the past 3 years the company, or any director, supervisor, general manager, or de facto responsible person thereof who is incumbent at the time of the application, has had a sanction or disposition imposed by a competent securities authority or exchange of the country of listing, and the circumstances are serious.
  4. There is serious deterioration in the business it operates.
  5. The TPEx deems TPEx listing unsuitable due to the scope or nature of, or special circumstances relating to, the enterprise.
    The provisions of Articles 10, 13, and 14-1 shall apply to the specific standards for determinations under subparagraphs 1, 2, and 4 of the preceding paragraph. However, the provisions of paragraph 4 of Article 14-1 shall not apply.
    The termination date of the period of applicability of the items in the subparagraphs of paragraph 1 shall be the day before the date on which the TPEx issues a letter notifying the foreign issuer of its agreement to the TPEx Secondary Listing Contract.
Article 25     In a case of an application by a foreign issuer for a TPEx secondary listing, after the TPEx agrees to its Foreign Issuer TPEx Secondary Listing Contract (Attachment 6), and the foreign issuer has filed with the Competent Authority for effective registration, the TPEx will publicly announce the TPEx trading of the stock.
Article 26     In a case of an application by a foreign issuer for a TPEx secondary listing, after the foreign issuer has filed with the Competent Authority for effective registration, it shall ask the recommending firm to underwrite the stocks in accordance with relevant regulations.
Chapter IV Taiwan Depository Receipt
Article 27     An application for TPEx trading of a proposed issuance of TDRs made by a foreign issuer and its depository institution shall meet the following conditions:
  1. The units of TDRs for TPEx trading: not less than 10 million units, or the aggregate market value of the application is not less than the equivalent of NT$100 million or more. However, it may not exceed 50 percent of the total number of issued shares.
  2. The registered stocks or the marketable securities representing the stocks issued by the foreign issuer in accordance with the laws of its country of registration are already traded on the main board of one of the overseas stock markets approved by the Competent Authority prior to the TPEx listing of the Taiwan Depository Receipts for which the application for TPEx trading is made.
  3. Shareholder's equity: the equity attributable to owners of the parent company as audited and certified for the most recent period by a certified public accountant is valued as equivalent to NT$200 million or more.
  4. Profitability: the net income before tax excluding net income (or loss) attributable to minority interests in the most recent fiscal year may not be lower than the equivalent of NT$4 million, and its ratio against the total amount of equity attributable to owners of the parent company shall meet one of the following standards:
    1. it reaches 4 percent or higher for the most recent fiscal year, and there is no accumulated loss in the final accounting for the most recent fiscal year.
    2. it reaches 3 percent or higher for both of the most recent two fiscal years.
    3. it reaches 3 percent or higher on average for the most recent two fiscal years, and the profitability in the most recent year is better year-on-year.
  5. When the TDRs are traded on the TPEx, excluding company insiders of the issuer and any juristic persons in which such insiders hold more than 50 percent of the shares, the number of registered shareholders of the TDRs residing within the ROC shall be no less than 300, and the aggregate number of units held by them shall be at least 20 percent of the total issued units or more than 10 million units.
  6. Transfer of the shares represented by the TDRs shall not be restricted.
  7. The rights and obligations for the shares represented by the TDRs shall be the same as for the shares of the same type and in the same issuance.
  8. The foreign issuer shall have engaged, within the ROC, a professional shareholder services agent meeting the requirements of Article 4, paragraph 2 herein to handle shareholder services.
  9. At least one litigious and non-litigious agent domiciled or residing within the territory of Taiwan shall be appointed; the primary duty of the agent is as provided under Article 4, paragraph 1, subparagraph 11 herein.
  10. During the 3 months prior to TPEx agreement to the contract for TPEx trading of the TDRs, there has been no abnormal fluctuation in the price of the securities represented by the TDRs.
  11. The foreign issuer shall issue a written undertaking stating that after TPEx listing the foreign issuer and its depositary institution will establish a reporting system with both the TPEx and the overseas stock market on which it is originally listed for automatic synchronous reporting of material information.
  12. Within the past year there has been no material event of the depository institution being sanctioned by the TPEx for any error in information reporting.
  13. The foreign issuer shall continuously engage a recommending securities firm for the fiscal year of TPEx listing and the two subsequent fiscal years to assist it in complying with ROC securities laws and regulations, the bylaws, rules, and public announcements of the TPEx, and the contract for TPEx trading of the TDRs. Additionally, during the engagement period, the recommending securities firm shall on a quarterly basis issue research reports on the foreign issuer, or introduce research reports prepared by foreign institutional investors, or make the foreign issuer's financial information available on the recommending securities firm's website.
    The financial information referred in subparagraphs 3 and 4 of the preceding paragraph shall be reviewed in accordance with the financial report or financial information prepared pursuant to the laws of the foreign issuer's country of registration or country of listing, and the opinions given by the ROC certified public accountant on the differences between the accounting principles adopted by the ROC and the foreign issuer's country of registration or country of listing respectively and on the impact of such differences on the financial report presented.
    A foreign issuer that has obtained an appraisal opinion from a professional institution engaged by the Industrial Development Bureau of the Ministry of Economic Affairs, or engaged by the TPEx, stating that such issuer is a technology enterprise may be exempted from the restrictions in subparagraph 4 of paragraph 1. However, the foreign issuer shall continuously engage a recommending securities firm for the fiscal year of TPEx listing and the three subsequent fiscal years to assist it in complying with ROC securities laws and regulations, the bylaws, rules, and public announcements of the TPEx, and the contract for TPEx trading of the TDRs.
Article 27-1      Although an application for TPEx trading of a proposed issue of TDRs by a foreign issuer and its depository institution meets the conditions set out in these Rules, the TPEx may deny approval for TPEx trading of the proposed issue of TDRs under any of the following circumstances, if the TPEx deems them unsuitable for TPEx trading :
  1. Any circumstance set out in Article 156, paragraph 1, subparagraphs 1 to 3 of the Securities and Exchange Act.
  2. Within the past 3 years any act in violation of the principle of good faith was done by the company or by any director, supervisor, general manager, or de facto responsible person thereof who is incumbent at the time of the application.
  3. Within the past 3 years the company, or any director, supervisor, general manager, or de facto responsible person thereof who is incumbent at the time of the application, has had a sanction or disposition imposed by a competent securities authority or exchange of the country of listing, and the circumstances are serious.
  4. There is serious deterioration in the business it operates.
  5. The TPEx deems TPEx listing unsuitable due to the scope or nature of, or special circumstances relating to, the enterprise.
    The provisions of Articles 10, 13, and 14-1 shall apply to the specific standards for determinations under subparagraphs 1, 2, and 4 of the preceding paragraph. However, the provisions of paragraph 4 of Article 14-1 shall not apply.
    The termination date of the period of applicability of the items in the subparagraphs of paragraph 1 shall be the day before the date on which the TPEx issues a letter notifying the foreign issuer of its agreement to the contract for TPEx trading of the TDRs.
Article 28     In a case of an application for TPEx trading of TDRs, after the TPEx has agreed to the contract for TPEx trading of the TDRs (attachment 7) and the issuer has filed and obtained effective registration with the Competent Authority, the TPEx will publicly announce TPEx trading of the TDRs in question.
Article 29     In the event that the foreign issuer and its depository institution apply for TPEx trading of TDRs for the first time, after filing and obtaining effective registration with the Competent Authority, unless otherwise required by the Competent Authority, they shall ask the recommending firm to underwrite the remaining stocks in accordance with relevant regulations.
Chapter V Application for TPEx Trading of New Capital Increase Shares
Article 30     If a TPEx primary listed company makes a new share issue within the ROC for the purpose of cash capital increase, or issues certificates of entitlement to new shares, certificates of payment for new shares, or other securities approved by the competent authority, the TPEx, after filing and effective registration with the Competent Authority, and 5 business days before the new shares are traded on the TPEx, shall file and upload relevant documents on the TPEx-designated Internet information reporting system, and pay the TPEx trading fees. The new shares will be traded on the TPEx from the date they are delivered to shareholders; provided that if any circumstance set out in Article 156, paragraph 1, of the Securities and Exchange Act exists with respect to the company, the TPEx may restrict the trading thereof on the TPEx.
    After the TPEx has confirmed that the filed and uploaded documents referred to in the preceding paragraph are complete and in compliance with applicable regulations, it shall make a public announcement regarding the TPEx trading of the securities, and the documents shall become a part of the original Foreign Issuer TPEx Primary Listing Contract.
    Securities that are privately placed by a TPEx primary listed company and securities subsequently distributed, converted, or subscribed may not be listed on the TPEx during the period of restriction of transfer as set forth in Article 43-8 of the Securities and Exchange Act. Once the period of restriction of transfer has elapsed, the company may submit a TPEx listing application only after first submitting an application (Attachment 8) to the TPEx for a letter of approval and, on the basis of that letter, completing retrospective issuance examination and approval procedures with the Competent Authority. However, it may be exempted from the requirement of conducting public sale prior to TPEx listing.
    When applying to the TPEx for issuance of a letter of approval under the preceding paragraph, a TPEx primary listed company shall meet the standards in each of the following subparagraphs; the TPEx will reply by letter to the applicant company after it has inspected the application documents submitted for completeness and the administering department has examined them for compliance with requirements:
  1. The financial reports for the most recent period and the most recent accounting year show an absence of accumulated deficit and a positive net worth.
  2. Its profitability meets the requirements of Article 4, paragraph 1, subparagraph 6.
  3. A certified public accountant has audited the financial reports for the most recent 2 accounting years and has signed and issued an audit report containing an unqualified opinion. If an audit report containing other than an unqualified opinion is issued, it does not affect the fairness of presentation of the financial reports.
  4. None of the events set out in Article 9, paragraph 1, subparagraphs 1, 3, 4, or 7 is present.
  5. The fund utilization plan has been completely executed for the funds obtained from the private placement of securities, and has yielded reasonable benefits; provided, this restriction shall not apply if there is legitimate reason.
  6. For an applicant company that had net income after tax and no accumulated deficit for the fiscal year before the shareholders meeting resolved on the private placement of securities, if any of the circumstances listed below exists, then in addition to meeting the profitability requirements of subparagraph 2, the ratio of net income before tax to net worth for the most recent fiscal year shall be better than that for the fiscal year before the shareholders meeting resolved on the private placement of securities. However, the above-mentioned profitability restriction shall not apply if, because of a change in the business cycle of the industry, the average of the 3 fiscal years before the application is better than that of the fiscal year that, or better than the average of the 3 fiscal years before, the shareholders meeting resolved on the private placement of securities, and the average reaches 4 percent or more:
    1. The private placement solely introduced strategic investors, and at the time the company applies for the letter of approval, the privately placed shares have not been transferred, or have been transferred to the holding of any non-insider(s) or non related party(ies) of the applicant company.
    2. There is a likelihood of an event under Article 7 or 8 of the Regulations Governing the Offering and Issuance of Securities by Foreign Issuers, but the applicant company for a legitimate reason is unable to reasonably correct the situation and unable to conduct the public offering, and is urgently in need of capital, and is granted permission for the private placement by the TPEx, and at the time the company applies for the letter of approval for listing of the privately placed securities, the securities have not been transferred, or have been transferred to the holding of any non-insider(s) or non related party(ies) of the applicant company.
  7. For an applicant company that had net income after tax and no accumulated deficit for the fiscal year before the shareholders meeting resolved on the private placement of securities, if any of the circumstances listed below exists, then in addition to meeting the profitability requirements of subparagraph 2, the ratio of net income before tax to net worth for the most recent fiscal year may not be lower than 200 percent of that of the fiscal year before the shareholders meeting resolved on the private placement of securities. However, the above-mentioned profitability restriction shall not apply if, because of a change in the business cycle of the industry, the average of the three fiscal years before the application is not less than 200 percent of that of the fiscal year that, or of the average of the 3 fiscal years before, the shareholders meeting resolved on the private placement of securities, and the average reaches 4 percent or more:
    1. The private placement solely introduced strategic investors, and at the time the company applies for the letter of approval, part or all of the privately placed shares have been transferred to the holding of any insider(s) or related party(ies) of the applicant company.
    2. The private placement did not introduce strategic investors.
    3. There is a likelihood of an event under Article 7 or 8 of the Regulations Governing the Offering and Issuance of Securities by Foreign Issuers, but the applicant company for a legitimate reason is unable to reasonably correct the situation and unable to conduct the public offering, and is urgently in need of capital, and is granted permission for the private placement by the TPEx, and at the time the company applies for the letter of approval for listing of the privately placed securities, part or all of the securities have been transferred to the holding of any insider(s) or related party(ies) of the applicant company.
    4. The conducting of the private placement of securities was not done in accordance with the Directions for Public Companies Conducting Private Placements of Securities ("the Directions for Private Placements"), where the circumstances were serious.
  8. For an applicant company that had net loss after tax or accumulated deficit for the fiscal year before the shareholders meeting resolved on the private placement of securities, if any of the circumstances listed below exists, then in addition to meeting the profitability requirements of subparagraph 2, the ratio of net income before tax to net worth for the most recent fiscal year shall be 6 percent or higher:
    1. Any insider or related party of the company participates in the private placement, and the subscription price does not comply with the percentage requirements set out by the Competent Authority.
    2. The private placement of securities is not carried out in accordance with the Directions for Private Placements, and the circumstances are serious.
  9. Others consistent with the provisions of the Competent Authority.
     "Net worth," "net income (or loss) before tax," and "net income (or loss) after tax" in the preceding paragraph refer to the amounts attributable to the owners of the parent company. Additionally, prior to the TPEx listing, all privately placed shares held by non-strategic investors, insiders, and related parties as referred to in subparagraph 7 or 8 of the preceding paragraph, shall be placed in central custody with a central securities depository enterprise incorporated with the approval of the Competent Authority. One half of the shares placed in central custody may be withdrawn only after the lapse of a 6-month period starting from the date of commencement of TPEx listed trading; the remaining shares may be withdrawn in full only after the lapse of a 1-year period starting from the date of commencement of TPEx listed trading. The custodial agreement may not be rescinded during the term, and the shares in central custody may not be transferred or pledged. The validity of central custody shall not be affected by a change of the identity of the holders of shares in central custody.
    Where the competent authority has placed restrictions on TPEx trading of securities issued by a TPEx primary listed company, no application for TPEx trading of its privately placed securities may be made until such restrictions have been lifted, even if the period of restriction of transfer of those securities referred to in the preceding paragraph has expired..
Article 31     If a TPEx primary listed company subsequently makes a further issue of new shares of common stock for purposes of distribution of bonus shares, and they are distributed to shares that are already traded on the TPEx, the company, 5 business days before the commencement of TPEx trading of the new shares, shall file and upload relevant documents on the TPEx-designated Internet information reporting system, and pay the TPEx trading fees. The new shares will be traded on the TPEx from the date they are delivered to shareholders.
    After the TPEx has confirmed that the filed and uploaded documents referred to in the preceding paragraph are complete and in compliance with applicable regulations, it shall make a public announcement regarding the TPEx trading of the securities, and the documents shall become a part of the original Foreign Issuer TPEx Primary Listing Contract.
Article 32     In the event that, for reason of a capital increase through cash injection, a TPEx secondary listed company applies for TPEx trading of a seasoned issue of new shares with the same rights and obligations as those already traded on the TPEx, the TPEx, after examining that the documents (Application for TPEx Trading of a Seasoned Issue of Foreign Stock, Attachment 9) provided by the foreign issuer and the agent it retains are complete, and that the company is free of any of the following circumstances, may submit documents evidencing its agreement to TPEx trading and, after the company has filed and obtained effective registration with the Competent Authority , publicly announce the TPEx trading thereof.
  1. Any non-compliance with Article 24, paragraph 1, subparagraph 4 herein.
  2. Any material violation of TPEx rules and regulations relating to material information within the most recent year.
  3. Any abnormal fluctuation in the trading price within 1 month before the date of application.
  4. Any material violation of the laws and regulations of the country of registration or country of listing.
  5. The sum of the new shares for this planned seasoned issue and the shares already listed on the TPEx exceeds 50 percent of the total number of issued shares.
    In the event that, due to issuance of new shares for reason of a capital increase through cash injection, for which existing shareholders have preemptive subscription rights or bonus shares, or due to receipt of request for conversion into or subscription for shares with respect to any previously issued convertible corporate bonds, corporate bonds with warrants, or other securities whatsoever in the nature of equity conversion, a TPEx secondary listed company files for TPEx trading of a seasoned issue of new shares with the same rights and obligations as those already traded on the TPEx, the TPEx shall, after confirming that the documents are filed and uploaded in full, publicly announce the TPEx trading thereof.
Article 33     In the event that, for reason of a capital increase through cash injection, the foreign issuer and its depository institution apply for TPEx trading of a seasoned issue of new TDRs with the same rights and obligations as those TDRs already traded on the TPEx, or in the case where the foreign issuer, using its previously issued shares, applies for TPEx trading of its sponsored issue, using its already issued shares, of TDRs with the same rights and obligations as those already traded on the TPEx, the TPEx, after examining and verifying the completeness of the submitted documents (Application for TPEx Trading of a Seasoned Issue of TDRs, Attachment 10) and finding that none of the following circumstances exists, may issue documents evidencing its agreement to TPEx trading and, after the issuer has filed and obtained effective registration with the Competent Authority, publicly announce such TPEx trading:
  1. Any non-compliance with Article 27, paragraph 1, subparagraph 4.
  2. Any material violation of TPEx rules and regulations relating to material information within the most recent year.
  3. Any abnormal fluctuation in the trading price within 1 month before the date of application.
  4. Any material violation of the laws and regulations of the country of registration or the country of listing.
  5. The sum of the new TDRs for this planned seasoned issue and the TDRs already listed on the TPEx exceeds 50 percent of the total number of issued shares.
    In the event that, a foreign issuer and its depository institution apply for TPEx trading of its sponsored issue, by means of shelf registration, of TDRs with the same rights and obligations as those already traded on the TPEx, they shall, in addition to being free of any of the circumstances in the preceding paragraph, meet all the conditions under Article 39, paragraph 1 of the Regulations Governing the Offering and Issuance of Securities by Foreign Issuers, whereupon the TPEx will issue a document evidencing its approval of the TPEx trading thereof and, after the issuer has filed and obtained effective registration with the Competent Authority, publicly announce the TPEx trading thereof.
    If due to issuance of new shares for reason of a capital increase through cash injection, for which existing shareholders have preemptive subscription rights or bonus shares, or due to receipt of request for conversion into or subscription for shares with respect to any previously issued convertible corporate bonds, corporate bonds with warrants, or other securities whatsoever in the nature of equity conversion, the foreign issuer and its depository institution seek to issue for TPEx trading new TDRs with the same rights and obligations as those TDRs already traded on the TPEx, the TPEx shall publicly announce the TPEx trading after confirming that the filed and uploaded documents are complete.
    In the event that, a foreign issuer and its depository institution further issue, within the amount that has been redeemed, or further issue, within the scheduled issuance period and permitted number of units for issue under a shelf registration, TDRs with the same rights and obligations as TDRs that are already traded on the TPEx, the TPEx shall, after confirming that the filed and uploaded documents are complete, proceed directly to publicly announce the TPEx trading thereof.
    When a foreign issuer sponsors issuance of TDRs, and the TDRs are already traded on the TPEx, if the shareholders of the foreign issuer, using shares that are already issued and held by such shareholders, engage a depository institution to apply to domestically issue TDRs for TPEx trading, the application shall meet all of the following conditions, and the TPEx, upon examining and verifying the completeness of the submitted documents (Application for TPEx Trading of a Seasoned Issue of TDRs, Attachment 10), may issue documents evidencing its agreement to TPEx trading and, after the issuer has filed and obtained effective registration with the Competent Authority, publicly announce the TPEx trading thereof:
  1. The foreign issuer is free of any of the circumstances in paragraph 1.
  2. The number of units under application for TPEx trading is not less than five million.
  3. The engaged depositary institution and custodian institution shall be the same depositary institution and custodian institution as were engaged by the foreign issuer.
  4. The rights and obligations of the stock represented by those TDRs shall be the same as the rights and obligations of the stock represented by the TDRs of which the foreign issuer sponsored issuance.
Chapter VI Foreign Bonds
Article 34     In the event that a foreign issuer applies to issue foreign bonds denominated in New Taiwan dollars for TPEx trading and the conditions set out by the competent authority have been met, the TPEx may issue a document evidencing its approval of such application.
Article 35      (Deleted)
Article 36     A foreign issuer applying for TPEx trading of NT dollar-denominated foreign bonds shall, no later than 5 business days prior to the commencement of TPEx trading, submit the application to the TPEx. The TPEx will announce the TPEx trading of such bonds after a document review confirms that all required documents have been submitted. If it is the initial time that the issuer applies for TPEx trading, the case handler shall report by letter the contract of TPEx trading of foreign bonds (attachment 16) to the Competent Authority for its recordation. However, for NT dollar-denominated foreign bonds that are sold only to professional investors as defined under the TPEx Rules Governing Management of Foreign Currency Denominated International Bonds, and where the relevant securities underwriters publish the underwriting announcements on the websites of the securities dealers association, the aforementioned deadline for application may be adjusted to no later than 4 business days prior to the commencement of TPEx trading.
     When an issuer applies for trading of NT dollar-denominated foreign bonds on the TPEx, unless the bonds are exempt from the requirement of filing for effective registration, or the bonds are a further issue within the prescribed time period under an effective shelf registration, the issuer shall, within 7 business days after the date of effective registration, complete the offering and issuance and commence TPEx trading.
Article 37     The trading, or suspension or termination of trading, on the TPEx of government bonds issued by foreign states and of bonds denominated in New Taiwan Dollars issued by international organizations shall be publicly announced by the TPEx after receiving instruction from the Competent Authority.
    Article 11 of the Taipei Exchange Rules Governing Management of Foreign-denominated International Bonds shall apply mutatis mutandis to the termination or suspension of sale of NTD-denominated foreign bonds issued by issuers other than the ones specified in the preceding paragraph, and whose stocks or TDRs are not TPEx (or TWSE) listed in Taiwan.
    The provisions of the TPEx Operating Rules regarding TPEx listed securities shall apply mutatis mutandis to the alteration of the trading method of, and the halt, suspension, and termination of TPEx trading of, NTD-denominated foreign bonds issued by TPEx (or TWSE) primary listed and TPEx (or TWSE) secondary listed companies other than the ones specified in paragraphs 1 and 2.
     Following the full repayment of the principal of a TPEx traded bond at maturity or earlier, the TPEx may immediately announce the termination of TPEx trading of the bond.
Chapter VII Supplemental Provisions
Article 38     In the event that the foreign issuer and the agent or the depository institution it retains has been approved by the Taiwan Stock Exchange ("TSE") to issue foreign securities for listing and the Competent Authority has agreed to such issuance, Articles 24 and 27 are inapplicable if documents evidencing the approval of the TPEx are required to be obtained first. If not listed on the TSE and having met the requirement of Articles 24 or 27, the foreign issuer and the agent or the depository institution it retains may submit either the application for TPEx secondary listing of stock of a foreign issuer or application for TPEx trading of TDRs, and record all required information, along with relevant documents, to file an application with the TPEx. After the TPEx agrees to the contract for TPEx trading it will publicly announce TPEx trading of the securities.
Article 39     For the foreign security which has applied for TPEx trading in accordance with these Rules and whose trading has been agreed to and publicly announced by the TPEx, the relevant provisions of the Taipei Exchange Rules Governing the Review of Securities for Trading on the TPEx shall apply mutatis mutandis to the procedures it must observe prior to being traded on the TPEx.
Article 40     These Rules, and any amendments hereto, will be effective after being adopted by the Board of Directors of the TPEx and reported to and approved by the Competent Authority; any additions, deletions, or amendments to any attachments hereto will be effective after ratification by the President of the TPEx.