1.     Amendment to Article 5 of Mandatory and Prohibitory Provisions of the Standard Form Contract for Retail Online Trading

On May 11, 2016, the Ministry of Economic Affairs preannounced draft amendments to Article 5 of Mandatory and Prohibitory Provisions of the Standard Form Contract for Retail Online Trading.  The amendments provide that business operators shall provide mechanisms to confirm the category, quantity, price and other important matters before entering into contracts with consumers and shall perform the contracts after execution.

Reported by: Kang-Shen Liu / Naiju Kuan

Social Order

2.     Amendments to the Social Order Maintenance Act

On May 25, 2016, the President promulgated Article 18-1 adding to the Social Order Maintenance Act, which provides that, among others, where responsible persons or employees of a company, limited partnership or business firm commit sexual offences or violate Human Trafficking Prevention Act or the Communication Security and Surveillance Act when performing duty and are sentenced to imprisonment, saidcompany limited partnerships or business firms may be ordered to cease operation.

Reported by: Kang-Shen Liu

TAX

3.     Draft Amendments on Regulations Governing the Issuance of Call (Put) Warrants by Issuers

The Legislative Yuan passed the amendments to the Statute for Industrial Innovation on December 30, 2015. Articles 12-1 and 19-1 were added, taking effect on January 1, 2016, and lasting until December 31, 2019. We summarize below:

(1)  Companies are encouraged to improve the usage and cooperation of Intellectual Property Rights with other companies to enhance the commercialization of new tech by providing tax advantages such as deducting the taxable income up to 200 percent of the companies' R&D expenses in the current year. (Article 12-1)

(2)  To help companies keep their employees and encourage employee participate in the business operation of their companies, employees who receive stock-based employee compensation may also be allowed to defer the payment of income tax.  (Article 19-1)

Reported by: Mike Lu / Kevin King

Banking

4.     Interpretation of the “Domestic Stock” in Which a Commercial Bank May Invest

On May 17, 2016, the Financial Supervisory Commission (FSC) released a ruling on the interpretation of the term “domestic stock” specified in Subparagraph 5, Paragraph 1, Article 2 of the Limitations on the Types and Amounts of the Securities in Which a Commercial Bank may Invest.  The ruling prescribes that a preferred share should also be encompassed by the scope of “domestic stock” and any investment in shares of said institution made by a commercial bank shall be included into the investment quota specified by the related regulations.

Reported by: Stacy Lo / Nereid Lin

Finance

5.     Transactions Other than Credit Extensions Between Financial Holding Companies and Related Persons

The FSC issued a ruling on May 17, 2016, to extend the scope of transactions (aside from credit extensions) between a financial holding company or its subsidiaries and the related persons which can be generally delegated to management departments to handle by the board of directors under Article 45 of the Financial Holding Company Act as follows:

(1)  Transactions made by subsidiaries of securities investment trust enterprises and securities investment consulting enterprises by using the assets under mandate according to the Regulations Governing the Conduct of Discretionary Investment Business by Securities Investment Trust Enterprises and Securities Investment Consulting Enterprises; and

(2)  Charity donations made for emergency relief of any serious disaster.

Reported by: Stacy Lo / Angela Lin

6.     Draft Amendment to the "Implementation Rules of Internal Audit and Internal Control System of Financial Holding Companies and Banking Industries" and the "Implementation Rules of Internal Audit and Internal Control System of Insurance Industries"

The FSC announced the draft amendment to the "Implementation Rules of Internal Audit and Internal Control System of Financial Holding Companies and Banking Industries" on May 30, 2016, which specifies the methods and qualifications for local banks to apply for adoption of risk-based internal audit systems, and that the competent authority is entitled to simplify the filing operation for banks and financial holding companies to file their internal audit reports.  The "Implementation Rules of Internal Audit and Internal Control System of Insurance Industries" also specifies that the competent authority is entitled to simplify the filing operation for insurance companies to file their internal audit reports.

Reported by: Stacy Lo / Angela Lin

M&A

7.     Explanation of Article 12 of the M&A Act

The Ministry of Economic Affairs issued a ruling on April 21, 2016, that in a short-form merger/consolidation, the board resolution date shall be the record date for calculation of payment to shareholders exercising the appraisal right.

Reported by: Mike Lu / Angela Lin

OSU

8.     Draft Amendments to the ''Regulations Governing Offshore Securities Branch''

On May 30, 2016, the Financial Supervisory Commission (FSC) announced the draft amendments to "Regulations Governing Offshore Securities Branches".  We summarized the key points below:

(1)  The offshore securities branch (''OSU'') shall open a designated account on its name to keep clients' assets.  Such designated account shall be separated from the proprietary account of the OSU, and be free from claims and attachments raised by the OSU's creditors; and

(2)  For anti-money laundering, the funds in such designated account can only be transferred to other accounts which are opened in the name of the clients.  It is not permitted to withdraw cash from such account.

Reported by: Jeffrey Liu / Caitlyn Kao

Banking

9.     The FSC Reiterated No Financial Institutions Without a Local Presence Shall Provide Banking Services Onshore

The FSC announced on May 10, 2016, that in accordance with Article 29 of the Banking Act of R.O.C., banks in Taiwan shall not refer any domestic customer to any foreign financial organization without a local presence, for any financial service.  Furthermore, according to a ruling issued by the FSC in 2010, a branch office or a subsidiary bank established in Taiwan by a foreign bank shall not introduce its Taiwanese customers to its foreign parent bank for any financial service, either.

Reported by: Stacy Lo / Nereid Lin

Funds

10.  Exercise of Voting Rights by Securities Investment Trust Funds

On May 18, 2016, the FSC issued a new ruling to elaborate in connection with the  exercise of voting rights by securities investment trust fund (SITE Funds) such as where the shareholding of any SITE Fund managed by a securities investment trust enterprise in a public company adopting the electronic voting system does not reach 0.01% of total issued shares of such company, and the gross shareholding of all SITE Funds managed by the same SITE does not reach 0.03%, the SITE has discretion not to appoint a representative to attend the shareholder's meeting.

Reported by: Jeffrey Liu / Caitlyn Kao

Health

11.  Gift Draft Amendment to Enforcement Rules of Medical Care Act

On May 17, 2016, the Ministry of Health and Welfare (MOHW) announced a draft amendment to the “Enforcement Rules of Medical Care Act” for public consultation. The draft amendment provides the definition for the term “emergency patients” recited in Articles 61 and 73 of the Medical Care Act, as follows: “According to the judgement of a medical professional, the patient is in an emergency situation that requires medical treatment in 30 minutes, otherwise the patient’s life would be in danger or the patient’s physiological function would be impaired.”

Reported by: Jolene Wang / Crick Liang

Food and Drug Administration

12.  Regulations Stipulating Food Enterprises Whose Illegal Gains Must be Forfeited or Retrieved Pursuant to Article 49-2 of the Act Governing Food Safety and Sanitation

The MOHW announced on May 19, 2016, the “Regulations Stipulating Food Enterprises Whose Illegal Gains Must be Forfeited or Retrieved Pursuant to Article 49-2 of the Act Governing Food Safety and Sanitation”, effective from the same date. Those are food enterprises with both a capital amount of NT$100 million or more and a factory registration. Where there is a difference between the capital amount recorded in the company registration and the amount of paid-up capital, the amount of paid-up capital prevails.