Amendment to Business Mergers and Acquisitions Act Completes Three Readings at the Legislative Yuan

The Legislative Yuan passed the third reading of the amendment to the Business Mergers and Acquisitions Act on June 15, 2015.  Aiming at simplifying merger and acquisition procedure, the amendment is expected to take effect in 2016 and there will be a six-month grace period after the announcement by the President.  The key points of the amendment are summarized as follows.

In the amendment, restrictions on ways of paying considerations for share transfer and demerger are relaxed.  Considerations payment may be in share, cash, or other assets in addition to new shares. 

The amendment adds that some types of mergers and/or acquisitions require only the board’s special resolution with no need to seek shareholders’ approval, which include merger between brother companies, whale-minnow share exchange, share exchange between a parent and its subsidiary, whale-minnow share demerger, and short-form demerger between a parent and its subsidiary, etc..  This is to enhance merger and/or acquisition efficiency.

For protecting the rights of individual and minority shareholders, the amendment requires that any public company should establish a special committee to review whether the proposed merger and/or acquisition transaction is fair and reasonable in advance, and further report the review result to the board meeting and shareholders’ meeting.

According to the amendment, if a public company will be delisted due to merger and/or acquisition and the surviving or new company is not a listed one, the de-listing is subject to a resolution adopted by shareholders who represent two-thirds or more of the total number of the issued shares.

In addition, any director who has interest in the merger and/or acquisition transaction shall report to the board and shareholders’ meeting his/her interest involved and the reasons why he/she votes for or against the transaction.

To prevent any insider trading or market manipulation, any acquisition of shares of more than 10% of the total issued shares of a public company shall be reported to the securities competent authority within 10 days after such acquisition.  (June 2015)
/CCS