Newsletter
SHARE ACQUISITION REPORT-ING RULES AMENDED
According to Article 43-1 of the Securities and Exchange Act (SEA), any person or entity that individually or jointly with others acquire more than 10% of the shares of a public-issuing com-pany is required to report the acquisition to the regulatory authority. To comply with the spirit of Constitutional Interpretation No. 586 of the Constitutional Court (CI586), in May 2006 the Financial Supervisory Commission (FSC) amended its relevant guidelines for filing reports on acquisition of shares. The main points are as follows:
The old guidelines provided that existence of certain relationships, such as family relation-ships, shareholding relationships, or relation-ships of employment or office held, would result in a share acquisition automatically be-ing deemed to be a joint acquisition. In CI586, the Constitutional Court indicated that these provisions were unconstitutional because they exceeded the powers granted to the FSC under the SEA. The offending provisions have therefore been deleted from the guidelines. The new guidelines redefine "joint acquisi-tion" as "acquiring issued shares of a pub-lic-issuing company by contract, agreement, or other mutual assent," and provide that when an acquirer acquires shares jointly with others, any written agreement between them must be reported to the regulatory authority.
The provision in the old guidelines that "reg-istration of transfer of shares is not a necessary condition for share acquisition" is retained, but the description about the various forms of share acquisition in the old Guidelines is de-leted, to avoid loopholes by omission.
In order to understand the shareholding struc-ture of financial institutions and promote the sound development of the securities and fi-nancial markets, the new guidelines provide that if an acquirer is a financial holding com-pany, and the company whose shares it ac-quires is a financial institution, the financial holding company must also disclose any shareholdings in the same financial institution acquired by the financial holding company’s subsidiary companies and affiliated enter-prises.
Because a company whose shares are acquired should have a right to be informed about fu-ture changes in its shareholder structure, a new provision is added to the guidelines requiring an acquirer to inform the company of its report to the regulatory authority.