Newsletter
NEW INSURANCE COMPANIES MAY BE ESTABLISHED BY SPINOFF
Lee and Li recently successfully assisted a US insurance company in spinning off the assets of its Taiwan branch office as a new subsidiary company under the Corporate Mergers and Ac-quisitions Law (CMAL), and in obtaining all the necessary licenses for the new company's opera-tion on the day it was incorporated. This is the first time that a new insurance company has been set up in Taiwan by demerger.
Under the Criteria for Establishing Insurance Companies, the capital of an insurance company may only be paid in cash. But if an insurance company is established by demerger, so that part of its capital is given in the form of assets, this effectively reduces the cash investment required of investors, which should be very helpful in terms of cash flow. Also, part of the guarantee bond deposited by the demerged company in accordance with the Insurance Law can be con-verted into the guarantee bond of the newly in-corporated company, so that it does not need to be separately deposited by the new company. A demerger with new incorporation under the CMAL has the further advantage that losses can be offset against profits according to the propor-tion of shares spun off.