The amendments to the Corporate Mergers and Acquisitions Act ("M&A Act") were promulgated on 8 July 2015 and will take effect on 8 January 2016. To ensure that all the shareholders obtain adequate and appropriate information for resolving on a merger or acquisition transaction, according to Article 6 of the M&A Act, a public issuing company, before the Board of Directors adopts the resolution for such a transaction, should establish a special committee to review the fairness and reasonableness of the transaction and to report the result to the Board of Directors or the shareholders meeting, if applicable.
As authorized by the M&A Act, the Financial Supervisory Commission promulgated the Regulations Governing Establishment and Related Matters of Special Committee for Mergers and Acquisitions of Public Issuing Companies on 17 December 2015 ("Regulations"), which will take effect on 8 January 2016. The major provisions of the Regulations are summarized below:
- Before a public issuing company holds a meeting of the Board of Directors to resolve on the matters for a merger or acquisition transaction ("Transaction"), it should establish a special committee for mergers and acquisitions ("Special Committee") in accordance with the M&A Act and the Regulations. The power of the Special Committee should be exercised by the audit committee ("Audit Committee") in accordance with the Securities and Exchange Act ("SEA") if the company has already established such Audit Committee in accordance with the SEA. (Article 2 of the Regulations)
For those matters that are not set forth in the SEA or its relevant regulations, the Audit Committee in exercising the power of the Special Committee should follow the provisions of the Regulations.
- A public company should stipulate the organizational rules of the Special Committee. The stipulation of such rules and any amendments thereto should be resolved by the Board of Directors. (Article 3 of the Regulations)
It is anticipated that the Taiwan Stock Exchange and the Taipei Exchange will announce examples of the organizational rules for reference.
- The Special Committee should have at least three members, to be selected by the Board of Directors. For a company that has independent directors, the Special Committee should be formed by these independent directors. The members of the Special Committee should be independent from the parties of the Transaction and meet the qualifications as set forth in Articles 2 and 3 of the Regulations Governing Appointment of Independent Directors and Compliance Matters for Public Issuing Companies. (Article 4 of the Regulations)
- When reviewing the Transaction, the Special Committee should engage an independent expert for the fairness opinion with the concurrence of at least 1/2 of the members. The independent expert should be a lawyer, CPA, or securities underwriter independent from the parties of the Transaction. (Article 6 of the Regulations)
- Important matters for the Special Committee to adopt resolutions: (Article 7 of the Regulations)
- Resolution should be adopted with the concurrence of at least 1/2 of the members.
- Review results should be submitted to the Board of Directors along with the precise concurring opinion and dissenting reasons, if any.
- The members should attend the meeting in person. No proxy or waiver is allowed. Attendance by video conference is deemed as attendance in person.
- Within 2 days of the Board of Directors adopting the resolution, the resolution and the review results of the Special Committee should be publicly disclosed on the Market Overstain Post System with the names of the dissenting Directors and the dissenting members of the Special Committee and their reasons.
- The meeting minutes of the Special Committee (including the video and audio contents of a meeting by video conference) should be retained by the company permanently. The entire meeting proceeding should be recorded or videoed and the audio and/or video material should be kept for at least five years or until the conclusion of a ligation, if applicable. (Article 10 of the Regulations)