Newsletter
Amendments to the Regulations Governing Public Tender Offers for Securities of Public Companies and the Regulations Governing Information to be Published in Public Tender Offer Prospectuses Promulgated by the Financial Supervisory Commission
To align with the amendment to Paragraph 1, Article 43-1 of the Securities and Exchange Act, which lowers the threshold for reporting and announcing the acquisition of shares to 5%, the Financial Supervisory Commission (the "FSC") has revised Article 27 of the Regulations Governing Public Tender Offers for Securities of Public Companies (the "Tender Offer Rules"). The amendment, which took effect on May 10, 2024, reduces the threshold for exemption from reporting under Paragraph 1, Article 43-1 of the Securities and Exchange Act from the 10% to 5%.
Additionally, to enhance the protection of tenderers' interests and strengthen public tender offerors' ability to meet their settlement obligations, the FSC promulgated the amendments to the Tender Offer Rules and the Guidelines for the Contents of the Public Tender Offer Prospectus on December 4, 2023, which took effect on the date of announcement. The key amendments are outlined below:
I. Amendments to the Regulations Governing Public Tender Offers for Securities of Public Companies
1. Improvements to the Regulations on Payments and Filing Documents for Public Tender Offers:
The amendments to Paragraph 1, Article 9 of the Tender Offer Rules add the requirement that offerors should submit an appraisal issued by an independent expert. If the offeror is a company, it must also provide the minutes of the shareholder or the board of directors meeting. Additionally, regarding the requirements for the offeror to provide proof of performance and a written undertaking, Paragraph 5, Article 9 of the Tender Offer Rules specifically requires that when using securities that are listed on a stock exchange or traded on an OTC market as the consideration, the offeror must provide (i) a written confirmation from the mandated institution to confirm that such securities have already been transferred to the book-entry depository account at the mandated institution, and (ii) a written undertaking from the offeror that such securities may not be transferred out of the account during the tender offer period. Furthermore, when an offeror is a listed company and uses stocks or corporate bonds offered and issued by such offeror as consideration, the offeror is required to provide an alternative payment method (cash or abovementioned securities) in case it fails to issue such stocks or corporate bonds on schedule. Therefore, under the amended Paragraph 6, Article 9 of the Tender Offer Rules, offerors must submit relevant documents for the proof of ability of performance of payment for the alternative methods.
2. Exemption from Mandatory Public Tender Offer Requirements for Share Exchanges Under the Business Mergers and Acquisitions Act:
Based on the FSC's ruling (Ref. no. Jin-Guan-Zheng-Jiao-Zi No. 1050001063, which explained that share exchange is exempt from the mandatory tender offer), shares obtained through a share exchange in accordance with the Business Mergers and Acquisitions Act are exempt from the mandatory tender offer requirements, as specifically stipulated in Subparagraph 6, Paragraph 2, Article 11 of the Tender Offer Rules.
3. Restriction to a Single Extension of the Public Tender Offer Period:
To maintain stability in the securities market and align with practical operations, Paragraph 2, Article 18 of the Tender Offer Rules specifies that the number of extensions for a public tender offer is limited to one.
4. Removal of the Requirement for Pro Rata Allocation of Listed Stocks Beyond One Thousand Shares:
Given that the requirement to issue physical securities for TWSE-listed and TPEx-listed companies no longer applies, the provision requiring public tender offers for such stocks to be allocated pro rata with one thousand shares as the smallest unit under Article 23 of the Tender Offer Rules was deleted in the amendments. When the number of securities offered for sale exceeds the projected shares number to be acquired, offerors should purchase the securities from all tenderers on a pro rata basis with "one share" as the smallest unit.
II. Amendments to the Regulations Governing Information to be Published in Public Tender Offer Prospectuses
To align with the amendments under Paragraph 5, Article 9 of the Regulations Governing the Acquisition of Publicly Issued Securities, Articles 7 to 9 of the Regulations Governing Information to be Published in Public Tender Offer Prospectuses have been amended as below:
1. In order to prevent an offeror from failing to fulfill its settlement obligation, the offeror must provide a written undertaking to fulfill the obligation to pay the consideration, regardless of whether the consideration is in the form of cash or otherwise.
2. If an offeror uses stocks or corporate bonds offered and issued by it as the consideration, the risk of failing to issue such securities on schedule and adopting alternative methods must be clearly noted.
3. Procedures to be followed after the expiration of the public tender offer period must include information on how the offeror will handle the return of tendered securities if no other alternative form of consideration is provided when using stocks or corporate bonds offered and issued by the offeror as consideration.