Taiwan has emerged as a dynamic hub for cross-border investment, driven by its strategic location, robust economy and cutting-edge technology sector. In response to recent policy developments, Taiwan has implemented a comprehensive regulatory framework for investments that strikes a balance between promoting industry growth and adhering to regulatory compliance standards.
Gary Chen
Partner
Lee and Li
Taipei
Tel: +886 2 2763 8000 ext. 2155
Email: garychen@leeandli.com
The following key themes are central to cross-border transaction considerations involving investment in Taiwan.
Restrictions on foreign investment. Taiwan’s foreign investment framework distinguishes between foreign (non-PRC) and PRC investment, with each category subjected to different regulatory approvals, limits on equity participation and review processes.
Foreign (non-PRC) investment. Foreign investors planning to acquire or invest in shares of Taiwanese companies (other than portfolio investments in exchange-traded securities) must obtain prior approval from the Department of Industrial Review (DIR) in accordance with the Statute for Investment by Foreign Nationals.
Most sectors are generally open to foreign investment. Regulators maintain a “negative list” that specifies industries where foreign investment is either prohibited or restricted. Investment in “prohibited industries” is not allowed under any circumstances, while “restricted industries” require special permits or licences from relevant authorities with adherence to additional conditions.
PRC investment. Under the current rules, a “PRC investor” is defined as any individual, legal entity, organisation or other institution originating from the Chinese mainland (referred to as a “mainland person”) that invests in Taiwan.
Additionally, a PRC investor encompasses companies based in third regions (areas outside the Chinese mainland) where mainland persons hold either:
more than 30% of the total shares or capital contributions, directly or indirectly; or
exercise control over the company.
Investments by PRC investors require prior approval from the DIR and must comply with the business scope restrictions and limitations outlined in Taiwan’s “positive list” for PRC investments, as updated from time to time.
Review and approval. Certain industries and companies are subject to heightened scrutiny. In such cases, the DIR will refer the investment application to relevant agencies for review before making a final decision. This inter-agency consultation process may be required for industries and companies involved finance, banks, insurance, securities, consulting, telecommunications, media and broadcasting, agriculture, transportation and energy.
Merger filing. A cross-border transaction that qualifies as a “combination” under the Taiwan Fair Trade Act (TFTA) and meets certain prescribed thresholds must be submitted for prior notification (merger filing) to the Taiwan Fair Trade Commission (TFTC).
Under the TFTA, “combinations” include:
Mergers;
Acquisitions or holdings of at least one-third of the voting shares or interest in another enterprise;
Transfers or leases of all or a substantial part of an enterprise’s business or assets;
Arrangements with another enterprise for regular, ongoing joint operation or management of another enterprise’s business based on a contract of entrustment; and
Exercising direct or indirect control over the operation or personnel of another enterprise.
The existence of “control” must be assessed in each case, as there is no definitive legal definition.
Notification is required if any of the following conditions are met:
As a result of the combination, any participating enterprise will acquire at least one-third of the relevant market share.
Any participating enterprise holds at least one-quarter of the market share prior to the combination.
The combined turnover of the participating enterprises in the preceding fiscal year exceeds the thresholds promulgated by the TFTC.
Acquiring public companies
Yuanyuan Lo
Associate Partner
Lee and Li
Taipei
Tel: +886 2 2763 8000 ext. 2282
Email: yuan@leeandli.com
Under the Taiwan Company Act and the Business Mergers and Acquisitions Act, material decisions require the approval of shareholders holding two-thirds of the voting shares present at a shareholders’ meeting.
Therefore, to gain absolute control of a public company, an acquirer would ideally secure at least 67% of the shares. In practice, however, since not all shareholders attend meetings, an investor might gain control over a listed company’s management or operations with as little as 30% to 40% of the voting rights. The ultimate degree of control depends on the dispersion of the company’s shareholding structure.
In Taiwan, it is common for an investor to first acquire a stake in a public company before making an offer, thereby securing the votes needed to approve a subsequent M&A transaction. Any individual or entity that, alone or jointly, acquires more than 5% of a public company’s total issued shares must report this to the Financial Supervisory Commission (FSC), specifying the purpose of the acquisition.
Additionally, any change in shareholding of 1% or more must also be reported. Directors, supervisors, managerial officers and shareholders holding more than 10% of the total issued shares have ongoing reporting obligations.
A mandatory tender offer is required if an individual or group, acting alone or in concert, intends to acquire 20% or more of a public company’s issued shares within 50 days, unless an exception applies. Acquisitions are deemed to be made in concert when parties acquire shares through a contract, agreement, or any other arrangement for a shared purpose.
Since mandatory tender offers are subject to regulatory scrutiny and specific rules, foreign acquirers must be mindful of regulatory boundaries, including the offer timeline and necessary lead time for obtaining regulatory approvals such as foreign investment clearance and merger filing approvals. Additionally, they must ensure adequate funding and budget timeline for remittance and foreign exchange.
A major shareholder can force out minority shareholders via a merger or share exchange, for which the compensation is usually provided in cash.
In Taiwan’s M&A market, investors aiming to privatise a public company often use a two-step transaction structure: first conducting a tender offer, followed by a share exchange with cash consideration (cash squeeze-out). In recent years, investors confident in securing majority shareholder approval increasingly opt for a one-step transaction, such as a share swap or merger, which is more cost and time-efficient compared to the two-phase acquisition.
Additionally, M&A deals between enterprises and Cayman Islands companies listed on the Taiwan Stock Exchange or the Taipei Exchange are commonly structured as reverse triangular mergers, where the public company remains the surviving entity and becomes wholly owned by the acquirer, facilitating regulatory compliance and operational continuity.
Foreign exchange control
Taiwan generally regulates foreign exchange transactions with relevant thresholds. While foreign investors are not restricted in the total amount they can invest – provided their investment is approved by the DIR or conducted through trading in Taiwan’s securities market – Taiwan’s central bank may impose daily currency conversion quotas on large investment or repatriation amounts that could significantly affect the New Taiwan Dollar exchange rate.
Under current law, investors with foreign or PRC investment approvals may remit capital for approved investments and repatriate annual net profits, interests and cash dividends attributable to these investments. Dividends attributable to the investment may be repatriated by submitting the necessary documents to the remitting bank.
Looking ahead
Given the evolving landscape, authorities are likely to strengthen inter-agency collaboration and expand the scope of industries subject to enhanced scrutiny, particularly in critical sectors such as technology, telecommunications, defence and infrastructure.
Consequently, investors should anticipate more detailed regulatory assessments and longer approval timelines, underscoring the importance of thorough due diligence and proactive engagement with regulatory bodies to effectively navigate the complex approval processes.
Additionally, investors should stay informed about evolving regulatory frameworks and emerging policy priorities, as Taiwan may introduce new guidelines or expand existing measures to address emerging threats and technological advancements.
Building strong local partnerships and leveraging expert legal and compliance advice will further enhance the ability of investors to anticipate challenges and adapt strategies accordingly.
Lee and Li Attorneys-at-Law
8F, No. 555, Sec. 4
Zhongxiao E. Rd.
Taipei 11072 Taiwan
Tel: +886 2 2763 8000
Email: attorneys@leeandli.com
www.leeandli.com