Notification and clearance timetable

Filing formalities

What are the deadlines for filing? Are there sanctions for not filing and are they applied in practice?

There are no specific rules on filing deadlines. However, notification must be filed at least 30 days prior to consummation of the combination. Sanctions for not filing include fines ranging from NT$200,000 to NT$50 million for each violation of the FTA (2015 FTA amendments increased the lower limit up from NT$100,000 to NT$200,000) and orders to cease or unwind the combination (see question 24). Fines have long been imposed for failure to file.

Which parties are responsible for filing and are filing fees required?

The following are responsible for filing:

  • all enterprises participating in a combination where the combination consists of a merger, transfer or lease of the operations or assets of another enterprise or enterprises, regular joint operation of enterprises, or operation of another enterprise by agreement;
  • the holding or acquiring enterprise, where it holds or acquires at least one-third of the shares or capital of another enterprise. However, if there are control or subordinate relations between the holding or acquiring enterprises, or the holding or acquiring enterprises are controlled by the same enterprise or a group of enterprises, then it shall be the enterprise with ultimate control;
  • the controlling enterprise, where it directly or indirectly controls the operations or employment and termination of personnel of another enterprise; and
  • an individual or a group holding more than half the voting shares or contributing capital of the ultimate parent enterprise of the participating enterprise may be required to file a notification.

If the enterprises that are responsible for filing have not been incorporated, other enterprises participating in such combination must file.

Most commonly, the ultimate foreign parent companies of foreign enterprises involved in an extraterritorial combination are the parties that file the notification. For a foreign enterprise that has a branch or subsidiary in Taiwan, filing may be made by the Taiwan branch or subsidiary. However, the FTC may request information from the ultimate foreign parent enterprise as it deems necessary.

There are no filing fees.

What are the waiting periods and does implementation of the transaction have to be suspended prior to clearance?

A combination cannot take effect until 30 working days after the FTC receives the complete notification materials; however, the FTC may shorten or extend the 30-working-day waiting period by providing written notification to the notifying enterprise of such change. This extension period cannot exceed 60 working days. If no extension is granted to the original 30-working-day period and no objection to the combination is issued by the FTC by the end of the original 30-working-day period, the enterprises may combine 30 working days after the FTC receives the complete notification. The FTC may shorten the original 30-working-day period if it determines that it has no objection to the combination. However, if the notifying enterprise agrees to the combination being further reviewed upon the expiry of the said extension period, the combination cannot take place.

Where the FTC extends the deadline, the enterprises may combine at the end of this extended deadline, or the parties may combine before the deadline if the FTC issues a decision allowing them to do so. The parties may not combine if the FTC issues an objection to the combination, or if false or misleading statements are found in the enterprises’ notification.

Pre-clearance closing

What are the possible sanctions involved in closing or integrating the activities of the merging businesses before clearance and are they applied in practice?

A combination that is required to be notified to the FTC may not legally be implemented if the FTC objects to the combination. If the combination is implemented anyway, the enterprises may be punished as described in question 24. In practice, in cases where a combination occurred without the requisite notification, the FTC imposed a fine on the participating enterprise that would have been responsible for the filing and required that the participating enterprises supplement the filings. If there is no FTC objection after the waiting period as described in question 11 has ended, the combination may take place.

One unresolved legal issue is whether a combination is void per se if it is not notified, or if it is to be deemed valid unless and until the FTC declares it to be illegal and thus void ab initio. One district court held that a combination that triggered the application requirement was void because no prior approval was obtained from the FTC. It should, however, be noted that this opinion was issued by a district court, and that this holding is without precedent. There continues to be a lack of consensus on this issue.

Are sanctions applied in cases involving closing before clearance in foreign-to-foreign mergers?

As far as we know, there has been no such case where sanctions were applied.

What solutions might be acceptable to permit closing before clearance in a foreign-to-foreign merger?

There are no such solutions.

Public takeovers

Are there any special merger control rules applicable to public takeover bids?

No special rules apply to public takeover bids. As discussed above, if the takeover falls within the definition of ‘combination’ and any of the jurisdictional thresholds is met, notification to the FTC is mandatory.

Documentation

What is the level of detail required in the preparation of a filing, and are there sanctions for supplying wrong or missing information?

The FTC requires the following information in a notification of an enterprise combination:

  • a form describing the combination and the parties involved, the target closing date of the combination, contact information and domicile of the combining enterprises, and the name of the attorney and power of attorney, if applicable;
  • basic information about each enterprise involved, including incorporation documents, business items, employment statistics, turnover for the previous fiscal year and total capital, as well as the turnover for the previous fiscal year of the controlling and subordinate enterprises of the enterprise involved;
  • the balance sheet and income statement of the preceding year for each enterprise involved;
  • transaction-related statement, agreements, or other documents that are issued or entered into for the purpose of combination;
  • a report detailing each combining enterprise’s production or operating costs and the value and sales of the top five goods and the overlapping goods each sells in Taiwan for the three years prior to the date of the notification filing;
  • an explanation of the benefits of the combination to the overall economy of Taiwan, including information on the relevant markets of the participating enterprises in terms of market shares, major competitors, level of competitiveness and difficulty of entry into the markets, as well as the impact of the combination on the relevant markets;
  • a business plan for each combining enterprise;
  • the status of the investment of each combining enterprise;
  • the latest financial report and prospectus or annual report of combining enterprises that are listed on the Taiwan Stock Exchange or the Taiwan over-the-counter market;
  • market structure information related to horizontal and vertical businesses in the relevant markets of the combining enterprises. This may also include information regarding competitors’ market information (market share, etc);
  • any other documents that may be required by the FTC; and
  • in the case of the establishment of a financial holding company by way of combination, contract documents.

Additionally, for any enterprise that proceeds with a merger where any false or misleading information was contained in the filing, according to the FTA, the FTC may prohibit such merger, prescribe a period for such enterprise to unwind, to dispose of all or a part of the shares, to transfer a part of the operations, or to remove certain persons from certain positions, or make any other necessary dispositions, and may impose an administrative penalty of no less than NT$100,000, and no more than NT$1 million, upon such enterprise. Further, for any enterprise violating such a disposition order from the FTC, the FTC may order a dissolution, suspension or termination of the business’ operations.

In addition to the fines stipulated in the FTA, the Administrative Penalty Act (APA) can also be applied if an enterprise is found to be in violation of the FTA. According to the APA, if an enterprise is determined to have gained a benefit that exceeds the maximum statutory amount of the fine, the fine may be increased to represent the scope of the benefit gained. Further, if there has been a breach of duty because of an act of a director of an enterprise or of any other individual with the authority to represent an enterprise, the APA allows such director or individual to be separately fined if it is found that he or she has acted with intent or gross negligence.

Investigation phases and timetable

What are the typical steps and different phases of the investigation?

Under the FTC’s internal rules and procedures, notifications of combinations are first submitted for initial review to the department within the FTC that deals with combinations. During the initial review, the department will examine whether the combination falls within the jurisdiction thresholds and whether all required documents have been submitted. If such combination does not fall within the jurisdiction thresholds, the FTC will issue a letter to indicate this fact. If all the required documents have not been submitted, the FTC will issue a letter requesting supplementary information. After all required documents have been provided, the department will submit the case to the Commissioners’ Meeting of the FTC, which will make the final decision on whether or not to reject the combination, or whether to extend or shorten the clearance period.

Also, pursuant to article 27 of the FTA, the FTC may require that the parties or related third parties provide statements, or may require that relevant organisations or individuals submit records, documents or any other necessary materials. The FTC may consult with other Taiwan government authorities that regulate the industries of the parties to the combination. The FTC is also authorised to dispatch personnel to inspect the offices, places of business or other locations of the relevant organisations. The 2015 amendments to the FTA authorised the FTC to seize evidence found during an investigation.

The commissioners may also ask the participants to appear in person at hearings or interviews. In addition, the FTC passed an internal rule in April 2002 to the effect that any combination notification filed with the FTC will be published on the FTC’s website accompanied by a public request for opinions concerning the combination. However, the FTC will not respond or make any statement regarding such opinions. The FTC may choose to not make a combination case public if doing so would be contrary to any other existing laws.

What is the statutory timetable for clearance? Can it be speeded up?

As discussed in question 11, clearance takes 30 working days or less from the time the FTC receives the complete notification materials or at the end of any extension period that may or may not be granted by the FTC. The FTC may shorten the clearance period when it has determined that it has no objection to the combination. The clearance period for a combination can vary significantly based on the complexity of the combination.