NEW PRIOR APPROVAL OR DISCLOSURE REQUIREMENT FOR THE SHAREHOLDER OF AN INSURANCE COMPANY UNDER THE INSURANCE ACT

11/01/2010

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The Legislative Yuan recently adopted Articles 139-1, 139-2 and 171-2 to the Insurance Act. Under the new provisions, any person or entity holding more than a certain percentage of shares in an insurance company must report to or seek prior approval from the competent authority within a specified time limit. Relevant provisions are summarized as follows:
l	A person (entity) or a related party must report to the competent authority within 10 days of its holding if it/he/she, either solely, jointly or in common, holds more than 5% of the voting shares in an insurance company. This rule will apply to any subsequent change of more than 1% in the shareholding. If such a person (entity) or a related party plans to hold more than 10%, 25% or 50% of the shares in an insurance company, it/he/she must obtain prior approval from the competent authority (Paragraphs 1 to 3 of Article 139-1 and Article 139-2).
l	If a person (entity) or a related party held more than 5% of shares prior to the amendments, it/he/she must report to the competent authority within six months of the effective date of the amendments. If, afterwards, there is a change of more than 10% in its/his/her shareholding, it/he/she must seek prior approval from the competent authority, and any other following change in shareholding shall be subject to the same rule under the relevant provisions as mentioned in the preceding paragraph. (Paragraph 4 of Article 139-1).
l	Any shares acquired in violation of any of the aforementioned requirements will be deprived of voting rights, and the competent authority may order disposal of such shares (Paragraph 6 of Article 139-1).
l	Violation of any of the aforementioned requirements will result in a fine of NT$400,000 to NT$4,000,000 (Article 171-2).