Newsletter
APPLICATION OF STOCK SWAP RULES TO FOREIGN COMPA-NIES
Article 156 Paragraph 6 of the Company Law provides that a company may issue new shares in exchange for shares in another company. But whether "another company" in this context in-cludes foreign companies, has been a matter of great dispute in practice.
The Investment Commission (IC) of the Ministry of Economic Affairs seemed to give a negative answer when it stated, in a legal interpretation dated 29 January 2002, that the types of capital contribution enumerated in Article 6 of the Stat-ute for Investments by Foreign Nationals did not include shares in foreign companies or foreign juristic persons.
However, in an earlier interpretation dated 9 January 2002, the IC stated explicitly that al-though Article 6 Item 4 of the same statute ("Other assets approved for investment by the competent authority") did not at that time include shares in foreign companies, the IC was none-theless actively developing procedures for re-viewing applications from foreign companies to use their own shares to invest in ROC companies (share-for-share exchanges), and that once the Corporate Mergers and Acquisitions Law (CMAL) came into force, the IC would be able to process applications on that basis.
After the CMAL took effect, the MOEA held a meeting on 1 April 2002 to discuss points of doubt regarding the Company Law and the CMAL. The meeting resolved that the wording of Article 156 Paragraph 6 of the Company Law does not exclude its application to foreign com-panies, and "another company" therefore in-cludes foreign companies. However, because capital contributions by acquisition or exchange of shares fall within the scope of Article 6 Item 4 of the Statute for Investments by Foreign Na-tionals, the issue must be addressed by the IC, by amending the statute or by a legal interpretation, in order to facilitate corporate acquisitions and share exchanges.