Amendments to the Business Mergers and Acquisitions Act were promulgated on 8 July 2015, and will take effect on 8 January 2016 (Part 1).

[2015/08/16]

The Business Mergers and Acquisitions Act was last amended in 2004. The Legislative Yuan has finally enacted a new package of amendments to the Act, which were promulgated by the President on 8 July 2015, and will come into force six months from the date of promulgation.

The main points of the recent amendments are as follows:

I. The provisions governing companies’ payment of consideration for share exchanges and demergers are relaxed: In the future, consideration for share exchanges and for demergers will no longer be limited to payment in the form of shares. Cash and any other assets whose value can be reasonably assessed may be given as consideration for such M&A transactions.

II. Streamlined M&A procedures for greater flexibility and efficiency:
1. New provisions are introduced allowing for five types of simplified procedure. If an M&A transaction meets the criteria for any of the categories listed below, the transaction may be approved by a resolution of the company’s board of directors, without the need to convene a shareholders’ meeting.
(1) “Simplified merger of sister companies”: A merger between sister companies in which the parent company owns at least 90% of each subsidiary’s issued shares.
(2) “Asymmetric share exchange”: The total number of new shares issued by an existing transferee company as consideration for shares that it acquires through a share exchange does not exceed 20% of the company’s previously issued voting shares, and the total value of cash or other assets given as consideration does not exceed 2% of the company’s net asset value.
(3) “Share exchange between parent and subsidiary”: A company uses a share exchange to acquire its subsidiary, in which it owns at least 90% of the issued shares.
(4) “Asymmetric demerger”: The qualifying criteria for simplified asymmetric demerger are defined separately for demerging companies and transferee companies. For a demerging company, the value of business operations that the company transfers to an existing or newly established company does not exceed 2% of the net asset value of the demerging company, and the demerging company receives the entirety of the consideration given. For an existing company that acquires business operations from a demerging company, the number of new shares issued by the transferee company in order to acquire the demerged operations does not exceed 20% of its total previously issued voting shares, and the total value of cash or other assets paid to the demerging company does not exceed 2% of the net asset value of the transferee company.
(5) “Simplified demerger between parent and subsidiary”: A company that holds at least 90% of the issued shares of its subsidiary conducts with its subsidiary a demerger transaction in which the parent is the existing company that acquires the demerged operations, while the subsidiary is the demerging company and receives the entirety of the consideration given.

2. Following a board resolution to approve one of the simplified forms of M&A transaction listed above, in the case of a resolution by a subsidiary company to conduct a merger, share exchange, or demerger with its parent company, the subsidiary must within 10 days publicly announce, and notify its shareholders of, the resolution and the matters required to be stated in the M&A contract, in order to enable shareholders to exercise their right to request share buyback; in all other cases, the company need only report the details of the M&A transaction to the next shareholders’ meeting.