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Article 1     These Guidelines are prescribed in accordance with Article 8 of the Regulations Governing Trading of Securities on Over-the-Counter Markets.
Article 2     When a public company applies to trade its stocks on the over-the-counter markets as Class II stocks (hereinafter referred to as "Class II Stocks Traded on OTC Markets"), the issuer shall file an application to the ROC Over-the-Counter Securities Exchange (hereinafter referred to as the "OSE"). The OSE shall make examination in accordance with these Guidelines and the OSE Operational Procedures for Examination of Initial Trading of Class II Stocks Traded on OTC Markets.
    The Operational Procedures for Examination of Initial Trading of Class II Stocks Traded on OTC referred to in the preceding paragraph shall be separately prescribed by the OSE.
Article 3     A public company applying for trading its stocks as Class II Stocks Traded on OTC Markets shall meet the following requirements:
  1. It shall have been established and registered for one full fiscal year under the terms of the Company Law;
  2. Its paid-in capital shall be NT$30 million or more, and there shall be no accumulated loss on final account in the most recent fiscal year; or its net value shall be NT$1 billion or more;
  3. 300 or more of its registered shareholders hold 1,000 shares or more;
  4. The directors, supervisors, and the shareholders holding 5% or more of the total issued and outstanding shares of the company shall have commissioned a designated agency to hold their shares under centralized custody in accordance with the ratio prescribed by the OSE, and undertaken that they shall not sell the stocks within four (4) years after the stocks are traded on OTC markets, that the certificates of centralized custody of the stocks shall not be transferred or pledged, and that, upon expiration of the said four (4) years, the stocks under centralized custody shall be withdrawn in installments based on the ratio prescribed by the OSE;
  5. It is recommended in writing by two (2) securities firms;
  6. Its stock affairs are handled by a professional stock affair agency institution.
    A state-owned enterprise applying for trading its stocks as Class II Stocks Traded on OTC Markets shall not be subject to the restrictions under Items 2 to 4 of the preceding paragraph; state-owned enterprises undergoing privatization shall not be subject to the restrictions under Subparagraph 1 of the preceding paragraph.
    A securities enterprise, futures enterprise, financial enterprise, or insurance enterprise which applies for trading its stocks as Class II Stocks Traded on OTC Markets shall obtain an approval letter from the authority in charge of said enterprises before the OSE shall accept the application.
    A public company which obtains a clear written assessment and opinion issued by OSE or the Taiwan Stock Exchange Corporation ("TSE") to the effect that it is a technology-based enterprise and that its products have been successfully developed and have marketability (the "Technology-Based Enterprise") shall not be subject to the restriction regarding accumulated loss under Item 2 of Paragraph 1 above; provided that its shareholders providing patent rights or technical know-how as capital contribution, holding a position in the company, and holding 0.5% or more or 100,000 shares or more of the total issued and outstanding shares of the company at the time of applying for initial trading on OTC markets shall place their shares under centralized custody according to Item 4 of Paragraph 1 above.
Article 4     The directors, supervisors, shareholders holding 5% or more shares of a public company, and the shareholders of a Technology-Based Enterprise who contribute capital in the form of patent right or technical know-how, hold a position in the company, and hold 0.5% or more or 100,000 shares or more of the issued and outstanding shares of the company at the time it applied for initial trading on OTC markets shall place their shares for centralized custody in accordance with the provisions of Item 4 of Paragraph 1 of Article 3 of the OSE's Guidelines for Examination of Securities Traded on Over-the-Counter Markets, provided that such portion subject to centralized custody under Point 1 (2) of those guidelines shall not be less than 50% of the issued and outstanding shares of the company at the time the application is filed, and provided that stocks provided for underwriting in accordance with the ratios for underwriting and subscription for their own accounts by the recommending securities firms set forth under Article 4 of the OSE regulations governing issuing companies applying to sell stock on OTC markets may be deducted from this amount, and that only one-fifth (1/5) of the shares can be withdrawn upon expiration of four years from the date on which trading on OTC markets commences; thereafter, one-fifth (1/5) of the shares can be withdrawn upon expiration of each half year.
    The public company and the shareholders placing their stocks for centralized custody upon initial trading on OTC markets in accordance with the preceding paragraph shall undertake upon initial trading on OTC markets that if new shares are issued for capital increase during the period when the stocks are subject to centralized custody, they shall place an additional 50% of the stocks subscribed by or distributed to them in centralized custody until the period for centralized custody referred to in the preceding paragraph expires. The provision in the preceding paragraph shall apply to the withdrawal of such new shares.
Article 5     A public company applying for initial offering of its stocks as Class II Stocks Traded on OTC Markets shall allocate a specified number of shares issued for underwriting by the recommending securities firms, and except for the stocks of a securities firm, shall also stipulate in the underwriting agreement that a portion of those stocks shall be reserved for subscription by the recommending securities firms.
    A public company that does not carry out underwriting as set forth in the preceding paragraph shall, with the exception of the stocks of securities firms, provide a definite amount of stock for subscription by the recommending securities firms.
    The ratios [of stocks allocated] in the preceding two paragraphs shall be prescribed by the OSE.
Article 6     A public company applying for trading its stocks as Class II Stocks Traded on OTC Markets shall submit to the OSE an application (Schedule 1), stating the particulars to be filled in, together with the required documents.
Article 7     The term "securities firms" referred to in Item 5 of Paragraph 1 of Article 3 of these Guidelines shall be qualified securities underwriters and OTC securities dealers; provided that those who recommend the stocks of a securities firm are only required to be qualified securities underwriters.
    A securities firm referred to in the preceding paragraph shall meet the following conditions:
  1. It shall meet the requirements under Article 23 of the Regulations Governing Securities Firms; provided this shall not apply if the stocks of a state-owned enterprise or securities firm are recommended;
  2. Its self-provided capital sufficiency ratio has reached 150% or more in accordance with Article 2 of the "Regulations Governing Self-Provided Capital of Securities Firms";
  3. It has acted as a recommending securities firm in an application for trading stocks on OTC markets, or a leading securities underwriter in an application for listing stocks on stock exchange, capital increase in cash or issuance of convertible corporate bonds, and such application (report) has been approved by the competent authority and the stocks under the application have been listed;
  4. It has ten (10) or more qualified registered underwriting associates.
    In the event that a public company and the recommending securities firm have any of the following conditions, the OSE shall refuse the assessment report issued by such recommending securities firm and shall not approve the trading of such stocks on OTC markets:
  1. Where the public company and the recommending securities firm have prepared assessment reports on the initial trading on OTC markets or initial listing for each other;
  2. Where there is any condition listed under Article 26 of the Regulations Governing Securities Firms; or
  3. Where the public company and the recommending securities firm belong to the same corporate group.
Article 8     In the event that a public company meets the requirements/ conditions under these Guidelines but is deemed unsuitable to have its stocks traded on OTC markets by the OSE due to any of the following conditions, the OSE may disapprove the trading of its stocks as Class II Stocks Traded on OTC Markets:
  1. Where the public company has any of the conditions provided in Item 1 to Item 3 of Paragraph 1, Article 156 of the Securities and Exchange Law;
  2. Where significant labor dispute or environmental pollution occurred and no improvement has been made;
  3. Where significant abnormal transaction occurred and no improvement has been made as of the time of application;
  4. Where, to a serious extent, its financial reports are not prepared in accordance with relevant laws and regulations and generally accepted accounting principles, or its internal control, internal auditing, and written accounting system are not soundly established and effectively executed;
  5. Where the company or any director, supervisor, general manager, or actual responsible person at the time of application has committed any act in violation of the principle of honesty and good faith in the last three (3) years;
  6. Where the OSE deems it improper to have the stocks traded on OTC markets due to business scope, nature or special circumstances.
    The period for the application of the provisions in the items of the preceding paragraph shall end on the day preceding the date on which an approval letter is issued by the competent authority for the contract for trading relevant Class II Stocks Traded on OTC Markets.
    Relevant provisions in various items of Paragraph 1 of Article 10 of the OSE's Guidelines for Examination of Securities Traded on Over-the-Counter Markets with respect to the specific standards to decide a stock unsuitable to be traded on OTC markets shall apply to the specific standards for determination of the situations described in the Items of Paragraph 1.
Article 9     Where the OSE considers that the stocks of a public company are suitable for trading on OTC markets upon examination in accordance with these Guidelines, the issuer and the recommending securities firm shall respectively enter into a contract for initial trading of Class II Stocks Traded on OTC Markets and contract for recommending securities to be traded on OTC markets with the OSE. The stocks shall be traded on the OTC market only after the contract for initial trading of Class II Stocks Traded on OTC Markets has been approved by the competent authority.
Article 10     The issuer of Class II Stocks Traded on OTC Markets shall, after receipt of a notice of approval for the contract referred to in the preceding Article, process the following matters with the OSE three (3) days before trading the securities on OTC markets:
  1. To decide the date for commencement of the trading on OTC markets;
  2. To pay fees for trading on OTC markets; and
  3. To submit a prospectus, statement of shareholding dispersal, specimen of certified securities, seal impression card for handling securities affairs, and other necessary documents specified by the OSE.
    The commencement date of trading the securities approved by the OSE for trading on the OTC markets shall be within three (3) months after the issuer has received the OSE's notice of approval of the contract referred to in the preceding Article. In the event that the trading does not commence within the said period, the OSE shall, following report to the competent authority for approval, revoke the contract for trading of Class II stocks, provided that where legitimate cause exists for an application for extension, a one-time only extension for a period of three months may be granted with the approval of the OSE and following the OSE's submission for filing with the competent authority.
Article 11     Before the commencement date of trading of stocks as Class II Stocks Traded on OTC Markets under Article 9, the issuer shall publicly announce the following matters on daily newspapers in the locale of the OSE and submit two copies of the newspapers containing the public announcement to the OSE for recordation:
  1. Name of issuer;
  2. Commencement date of trading on OTC markets;
  3. Date and reference number of approval letter issued by the competent authority;
  4. Value of stocks per share, date of issuance, number of shares, total amount, and total amount of the accumulated stocks for trading on OTC markets; and
  5. Other matters to be publicly announced.
Article 12     When an issuer of Class II Stocks Traded on OTC Markets re-issues new shares of the same type, the new shares shall be traded on the OTC markets from the date on which they are delivered to shareholders, and three (3) business days before the new shares are traded on the OTC markets, the issuer shall submit a Report for Trading New Capital Stocks on the OTC Markets (Schedule 2) and relevant documents to the OSE and pay the fees for trading on the OTC markets. Those who issue certificates of entitlement to new shares and certificates of payment for new shares may file an application (Schedules 3 and 4) to the OSE for trading the same on OTC markets.
    After the documents referred to in the preceding paragraph are examined by the OSE and found complete, a public announcement shall be made to OTC securities firms. The Report for Trading New Capital Stocks on the OTC Markets, Application for Trading Certificates of Entitlement to New Capital Stocks on the OTC Markets, Application for Trading Certificate of Payment for New Capital Stocks on the OTC Markets shall become a part of the original contract for trading Class II Stocks Traded on OTC Markets.
    Where an issuer of Class II Stocks Traded on OTC Markets applies to trade its issued shares of a different type from those already traded on the OTC markets on the OTC markets as Class II Stocks Traded on OTC Markets, such application shall be approved by the OSE only where the total amount of the par value of the shares applied for trading on the OTC markets is NT$50 million or more and stocks conform to the requirements for shareholding distribution set forth under Article 3, Paragraph 1, Subparagraph 3; provided , however, that in any of the following events, the OSE shall not approve the trading on the OTC markets:
  1. Where upon approval for issuance, the competent authority decides that public offering at market value is improper, where there is not extinguishments of the reason therefor;
  2. Where the most recent application for offering and issuance of securities is returned or disapproved by the competent authority, where the circumstances were serious and no improvement made;
  3. Where the previously issued shares of an OTC-listed company were restricted to OTC trading due to circumstances as set forth under Article 156, Paragraph 1 of the Securities and Exchange Law and where the reasons has not been extinguished, or where the circumstances set forth under any of the subparagraphs of Article 156, Paragraph 1 exist.
  4. Where the OSE otherwise deems it improper to trade the stocks on the OTC markets.
    Where an issuer of Class II Stocks Traded on OTC Markets applies to trade stock of a different type than is already issued and trading on the OTC and that are redeemable for cash upon maturity shall comply with the provisions of the preceding paragraph, provided that they may be exempt from the requirements for shareholding distribution set forth under Article 3, Paragraph 1, Subparagraph 3.?ꆼWhere an issuer of Class II Stocks Traded on OTC Markets converts its stocks not traded on the OTC markets into the same type of stocks already traded on the OTC markets, the OSE may approve for the trading of such stocks with the original type of stocks; provided that if the stocks are not allowed to be traded on OTC markets before conversion pursuant to the proviso of Paragraph 3 of this Article, the stocks after conversion shall not be traded on the OTC markets.
Article 13     These Guidelines and any amendment to them shall become effective after having been passed by the board of directors meeting of the OSE and reported to the competent authority for recordation. The addition, deletion, or amendment of any appended documents or schedules shall take force after submission to and approval by the general manager of the OSE for approval.