Newsletter
PRE-REGISTRATION REVIEW AVAILABLE ONLY FOR FINAN-CIAL HOLDING COMPANIES
On 25 October 2001 the Ministry of Economic Affairs announced the major resolutions of a conference it had held on 15 October 2001 to discuss issues related to the establishment and registration of financial holding companies. One of the resolutions called for the introduction of a pre-registration review system, so that when a financial holding company is to be set up, the company incorporation documents can be sub-mitted to the company registration authorities for advance review at least 15 working days before the conversion record date, enabling the com-pany registration to be completed on the record date itself.
With regard to the capital verification required for the pre-registration review, the certified pub-lic accountant may submit a signed audit report to the company registration authorities for re-view before the conversion record date, and on the day following the conversion record date submit a further audit report, covering the period from the date of signing of the previous audit report to the conversion record date.
When the MOEA amended the Regulations Governing Company Registration and Recogni-tion on 1 October 2003, it added a new proviso to the requirement that when companies merge or demerge, they should apply for registration within 15 days after the merger or demerger takes effect. The proviso reads ''except where, with the approval of the competent authority for the industry concerned, registration of the merger or demerger should be approved on the merger or demerger record date.'' This amend-ment provides for the introduction of the pre-registration review system, by allowing reg-istration to be reviewed prior to the record date and approved on the record date itself, condi-tional upon the approval of the relevant compe-tent authority.
When a merger or demerger involves the incor-poration of a new company, if pre-registration review cannot be carried out to enable registra-tion to be approved on the record date, this may lead to an interruption of business operation. This has a tremendous impact on mergers and acquisitions, and therefore practitioners greatly hope that the MOEA can broaden the scope of the pre-registration review system. However, in an interpretation issued on 10 May 2004, the MOEA explicitly stated that pre-registration re-view is available only for companies that are to be set up under the Financial Holding Company Act, and cannot be applied to other companies. Thus enterprises in other sectors cannot use the pre-registration review system when they carry out mergers, and therefore, at present, cannot avoid the possibility of their operations being interrupted.