M&A procedures to be simplified in new changes to 2002 law

By John Liu, The China Post

TAIPEI, Taiwan — The Ministry of Economic Affairs’ amendment to the Business Mergers and Acquisitions Act was approved by the Executive Yuan yesterday.

Since the Business Mergers and Acquisitions Act was implemented in 2002, a total of 2,050 mergers and acquisitions (M&A) have taken place, according to Vice Minister of Economic Affairs Woody Duh (杜紫軍).

The amendment stipulates conditions required for a more simplified M&A. For example, if a parent company holds 90 percent equity in a subsidiary company, the M&A of a subsidiary company does not need to go through a shareholder conference for approval. The M&A may proceed as long as it is approved by the board. Duh pointed out however, that since the Act varies widely, with similar laws applied in other countries, acquisitions and mergers usually cost more and take longer for both foreign and domestic M&A taking place in Taiwan. A Special Review Committee Nevertheless, in order to promote information transparency and to safeguard shareholder rights, a special review committee has to be set up by companies undergoing M&A process. Scholars and experts alike will be invited to determine if price and conditions of the M&A process is reasonable. As there is generally a lack of trust between small and big shareholders, the committee can serve as an arbitrary agent to establish a fair and reasonable transaction deal. More Methods of Payment More forms of payment to complete M&A are also offered in the amendment. In addition to issuing new shares, considerations may be paid with cash or other asset types. Under the amendment, paper work associated with M&A is also simplified. The M&A paperwork only needs to be published on websites designated by competent securities authorites and kept within companies. This will be sufficient to notify shareholders. Duh said that with a more simplified process, he expects that the number of M&A applications to increase substantially in the future. Protect Small Shareholders A clause was also added to the Business Mergers and Acquisitions Act, making it more difficult for acquired public companies to be de-listed in the market. The clause stipulates that two thirds of shareholders have to agree before public companies may “go private.” The rational is to protect rights of smaller shareholders. The regulation originally stipulates that only 50 percent of shareholders need to approve for a public company to be de-listed. Big buyers in the past have partnered with privately offered fund to acquire 50 percent of shares of another company and de-list the acquired company, government officials said, adding that this does not work in small shareholders’ favor.