The Legislative Yuan passed the Bill of Amendment to the Mergers and Acquisitions Act (the "Amendment") on June 15, 2015. Compared to the Bill of the Amendment that was submitted by the Executive Yuan to the Legislative Yuan on November 21, 2013 (the "Bill"), the Amendment is almost the same with the Bill except that it is further stipulated in the Amendment that a person shall report to the competent authorities once it acquires more than 10% of the total shares issued by a public company. The Amendment intends to increase the protection of shareholders, creditors and employees' rights, permit diversified categories of consideration for M&A transactions, simplify the mergers and acquisitions process and improve the flexibility and efficiency of M&A transactions. The Amendment will take effect six months after it is signed into law by the President and is expected to apply beginning from January 2016. Major aspects of the Amendment are as follows:

1. Increase the protection of shareholders, creditors and employees' rights, and information transparency

The Amendment adds a number of provisions to protect shareholders' interests during an M&A transaction: (a) considering that the protection of the shareholders of a listed company in the event that the listed company becomes delisted or dissolved as a result of a merger or acquisition transaction and the surviving or acquiring company is not a listed company the threshold of the shareholders resolution of the listed company to be delisted or dissolved to approve the merger or acquisition transaction will be raised to require the consent of the shareholders who represent two-thirds or more of the total outstanding shares issued by such a company; (b) a director who has a personal interest in an M&A transaction shall explain to the board and shareholders' meeting the essential aspects of such personal interest and the reasons for his/her support of or opposition to the transaction; (c) a special committee (or audit committee, if any) shall be set up by a public company to deliberate the fairness of an M&A transaction; during the deliberation, independent experts shall be appointed to provide opinions regarding the reasonableness of the consideration of the M&A transaction; the conclusion of the deliberation shall be submitted to the board and shareholders' meeting; (d) when the objecting shareholders have exercised their appraisal rights to request a company to participate in an M&A transaction to buy back their shares but have failed to reach an agreement on the price with the company, the company shall first pay the amount as it considers fair to the shareholders and then file a motion to a court for a ruling on the amount of the price for the share buyback with all the shareholders disagreeing with the price offered by the company as the respondents; and (e) A merger agreement, share exchange agreement, spin-off plan, contents of an M&A  resolution of the board, deliberation conclusion of a special committee and opinion of independent experts shall be sent to the shareholders along with the shareholders' meeting notice or the shareholders shall be kept informed of such after the board has adopted the resolution.

Given the impact that a company undergoing an acquisition transaction will have on its creditors is similar to that which occurs during a company spin-off, the Amendment stipulates that creditors of a company shall be entitled to access to the relevant information and shall have the right to object to the acquisition.

With respect to the protection of employees' rights in an M&A transaction, the Amendment requires that the remaining amount in the labor pension fund special account allocated by a company transferring all of its employees with pension liabilities under the old pension system, regardless of whether the amount has reached the threshold triggering suspension of allocation, shall be transferred to the labor pension fund special account of the surviving/acquiring company after the transaction, and removes the current provision which deprives an employee's right to request for severance pay if the employee has accepted continuous employment after the transaction but later refuses to stay on for personal reasons before the effective date of the transaction.

To prevent the hostile takeover of a public company, it is stipulated in the Amendment that if a person acquires more than 10% of the total shares issued by a public company with the intention of effecting a merger/acquisition, that person shall, within 10 days of such acquisition, report to the competent authorities and shall make supplemental filings in the event that any of the reported information changes. A person that violates this rule would not be able to exercise his/her/its voting rights with respect to those shares that exceed 10% of the total shares issued by the public company.

2.  Simplify mergers and acquisition process; diversify the category of mergers and acquisitions consideration; and improve the flexibility and efficiency of mergers and acquisitions

The Amendment supplements five types of simplified M&A procedures which can be conducted with the special resolution of the board of directors, namely, simplified mergers between brother and sister companies; whale-minnow share swaps; simplified share swaps between parent and subsidiary companies; whale-minnow spin-offs; and simplified spin-offs between parent and subsidiary companies.

The Amendment permits shares, cash or other assets to be used as the consideration for a company's share swap or spin-off to diversify the category of M&A consideration.

To improve the flexibility and efficiency of mergers and acquisitions, the Amendment proposes that: (a) to simplify the process of sending/delivering mergers and acquisitions documents, mergers and acquisitions documents are deemed to be sent/delivered to shareholders if a public company publishes them on the website designated by the competent authorities and are available at the company as well as at the site of the shareholders meeting; (b) in the event that a surviving company issues new shares for a merger, or a parent company issues new shares for its subsidiary's merger with another company, the provisions provided in the Company Act and Securities and Exchange Act regarding the pre-emptive rights of employees and shareholders to subscribe to the new shares or the obligation to allocate a certain ratio of the new shares for public offering shall not apply; and (c) it has been specified that in an acquisition or spin-off transaction, even if a company holds the shares of another company participating in the acquisition or spin-off, or such a company itself or its assigned representative has been elected as a director of another company participating in the acquisition or spin-off, such a company may still exercise voting right in the shareholders meeting of such other company to approve the proposed transaction.

3.  Amendments to relevant tax measures

Under the Amendment to the M&A Act, the types of consideration for a “spin-off transaction” would be the same as that which is permitted for an "acquisition". For the sake of implementing fair taxation, the tax treatment for a spin-off transaction should also be the same as that which is provided for in an acquisition. Accordingly, as regards the tax implications on an M&A transaction, the amendments are as follows: (a)  stamp duty, deed tax and securities transaction tax and/or other transaction tax may be exempt/deferred under a spin-off transaction, if an existing or a newly incorporated company, which acquires business operations as a result of a spin-off transaction issues new shares with voting rights as the consideration to the spin-off transaction and such shares must be at a value not less than 65% of the total consideration; (b) by virtue of the amendment to Article 39 of the Income Tax Act, from January 1, 2009, a company's losses can be carried forward for 10 years. In conformity with the Income Tax Act, in a merger or a spin-off transaction, losses can be carried over from each party to the merger or spin-off transaction in proportion to the percentage of shares that the party holds in the newly incorporated or surviving company through the merger or the demerger for 10 years; and (c) corporate tax may be exempt under a spin-off transaction, if the consideration is paid by shares with voting rights from an existing or a newly incorporated company and such shares must be at a value not less than 80% of the total consideration, and the company receiving the shares must consequently transfer all the acquired shares to its shareholders.