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In-depth treatment of selected topics in Taiwan law for legal professionals

Working in Taiwan as a creative professional part I: the freelance artist work permit

This is the first of two FAQs on how creative professionals can live and work in Taiwan after the Act for the Recruitment and Employment of Foreign Professionals came into force in February 2018.

Part I focuses on how to obtain a freelance artist work permit. Part II focuses on how to obtain an employment gold card as a special professional in the field of culture and arts. Click on the question to be taken to the answer, click back to return to the list of questions.

Freelance Artist Work Permit FAQ

1. What kinds of artists are eligible to apply for a freelance artist work permit?

2. What about novelists, poets, and other literary writers?

3. What does Performing and Visual Arts include?

4. What other educational and experience requirements are there for a performing or visual artist?

5. What kind of work can I do as a freelance performing or visual artist?

6. What is publishing?

7. What other educational and experience requirements are there for an artist in the publishing field?

8. What kind of work can I do as an artist in publishing?

9. What are motion pictures/television/popular music?

10. What other educational and experience requirements are there for an artist in motion pictures, television, or popular music?

11. What awards are recognized by the Ministry of Culture for motion pictures, television, and popular music?

12. What kind of work can I do as an artist in motion pictures/television/popular music?

13. What does crafts include?

14. What other educational and experience requirements are there for an artist in crafts?

15. What kind of work can I do as an artist in crafts?

16. What if I do not have one of the required qualifications for performing and visual arts, publishing, motion pictures/television/popular music, or crafts?

17. What if my application is rejected? Are there any other paths to working in Taiwan as an artist?

18. Can residents of Hong Kong and Macau apply for the freelance artist work permit?

19. Will I be able to apply for residence based on a freelance artist work permit?

20. Will I be able to enroll in Taiwan’s National Health Insurance (NHI) program based on a freelance artist work permit?

21. Can I do other work to support myself?

22. Who reviews applications for freelance artist work permits?

23. What documents are required to apply?

24. How do I fill out the application?

25. What kind of documentation should I submit to show my qualifications?

26. Does my documentation such as diplomas, letters from former employers, or promotional materials need to be translated into Chinese?

27. How and where can I apply?

28. How long does the application process take?

29. Can I extend a freelance artist permit?

30. How many artists have received the freelance artist work permit?

31. What are their nationalities?

32. Where can I read the law and regulations myself?

33. Who can I contact in the government if I have questions?

1. What kinds of artists are eligible to apply for a freelance artist work permit?

A foreign national artist is eligible to apply if he or she has a track record in one of the following fields:

(a) Performing and Visual Arts,

(b) Publishing,

(c) Motion Pictures/Television/Popular Music,

(d) Crafts (Applied Arts), or

(e) Other artistic fields.

An artist who works in a field other than (a)–(d) above may make a special application for the freelance artist work permit for other artistic fields (e). Please also see the question about lack of required qualifications below. The Ministry of Culture has emphasized that it is flexible about both fields and qualifications, that it recognizes that the arts are always evolving, and that it will consider applications from artists who do not fall neatly into the categories described in (a) to (d) above.

2. What about novelists, poets, and other literary writers?

They are included in ‘Publishing’. See Question 6.

3. What does Performing and Visual Arts include?

They include:

(a) Music (other than popular music),

(b) Dance,

(c) Drama,

(d) Environmental arts, and

(e) Photography.

4. What other educational and experience requirements are there for a performing or visual artist?

One of the following:

(a) Ten years of experience with evidence of original and outstanding work,

(b) MA degree and five years of experience in the field,

(c) PhD and three years of experience in the field, or

(d) Original and outstanding work accompanied by a letter of recommendation or other documentation issued by an official agency in the artist’s home country.

5. What kind of work can I do as a freelance performing or visual artist?

In addition to creating, exhibiting, or performing works, an artist in this class can also do related work involving research, surveys, production, and promotion. The artist can also hold workshops, give lectures, act as a judge, do criticism, and participate in competitions. All work should be related to a performing or visual art.

6. What is publishing?

This is a broad category focused on the publication of literary or artistic works in print newspapers, magazines, or books. You can qualify if you are an author, critic, editor, or translator. Literary works expressly include graphic works.

You can also qualify if you a literary agent, exhibition planner, or researcher whose work involves print literature.

7. What other educational and experience requirements are there for an artist in the publishing field?

Eight years of experience in the field plus one of the following:

(a) Editor in chief or executive at major international print newspaper, magazine, or publisher,

(b) Winner of major international award for literature, or graphic literature or winner of major national prize in these fields in the writer’s country of origin, or

(c) Original and outstanding work in the field of publishing accompanied by a letter of recommendation or other documentation issued by an official agency in the writer’s home country.

8. What kind of work can I do as an artist in publishing?

You can create textual or pictorial works with artistic value, act as a literary agent, or edit or translate such works. You can also plan exhibits of the same and do related research. All ‘publishing’ work should be related to texts or pictorial works with artistic value.

9. What are motion pictures/television/popular music?

Artists in these fields are eligible to apply if the artist:

(a) Creates, produces, or performs in motion pictures or television, or

(b) Creates, produces, or performs popular music.

You may also be eligible to apply if you promote, give workshops on, lecture on or critique motion pictures, television, or popular music, or if you participate as a contestant or act as an agent in these fields. The freelance artist work permit is also available to those who work in management or technology related to these fields.

10. What other educational and experience requirements are there for an artist in motion pictures, television, or popular music?

You must have received or been one of the following:

(a) Nomination for a Taiwanese or international film, television, or popular music award or other award recognized by the Taiwan Ministry of Culture,

(b) Associate professor or above in a department of film, television, or popular music at a foreign university, or

(c) Head of a major international movie, television or record company.

11. What awards are recognized by the Ministry of Culture for motion pictures, television, and popular music?

Motion Pictures

Domestic

Competition awards at:

(a) Golden Horse Awards,

(b) Golden Harvest Awards for Outstanding Short Films,

(c) Taipei Film Festival,

(d) Kaohsiung Film Festival, or

(e) Taiwan International Documentary Festival.

International

(a) Competition or parallel selection awards at Category I or Category II International film festivals, or

(b) Competition awards at Category III or Category IV international film festivals.

The many international festivals currently recognized by the Ministry of Culture are listed here. Examples include Cannes International Film Festival (Category I), the Tribeca Film Festival (Category II ), the Sydney Film Festival (Category III), and the San Francisco International Lesbian and Gay Film Festival (Category IV).

Television

(a) Golden Bell Awards,

(b) International Emmy Awards,

(c) Seoul International Drama Awards,

(d) New York Festivals International Television & Film Awards,

(e) British Academy Television Awards, or

(f) AIB International Media Excellence Awards

Popular Music

(a) Grammy Awards,

(b) American Music Awards,

(c) BRIT Awards,

(d) MTV Europe Awards,

(e) Golden Melody Awards,

(f) Golden Indie Awards,

(g) NRJ Music Awards,

(h) Japan Record Awards,

(i) Billboard Music Awards,

(j) Juno Awards,

(k) Mercury Prize, or

(l) Golden Disc Awards.

12. What kind of work can I do as an artist in motion pictures/television/popular music?

You can:

(a) create, produce, perform in, or promote motion pictures, television, or popular music;

(b) hold workshops or give lectures related to motion pictures, television, or popular music;

(c) criticize and judge motion pictures, television, or popular music;

(d) act as an agent in the motion picture, television, or popular music business; or

(e) do management or technical work related to motion pictures, television, or popular music.

13. What does crafts include?

Crafts or applied arts means creating or teaching in any of the following mediums:

(a) Leather,

(b) Ceramic,

(c) Stone,

(d) Glass,

(e) Fiber (dying, weaving or knitting),

(f) Wood,

(g) Bamboo,

(h) Paper,

(i) Metal,

(j) Paint, or

(k) Mixed media.

14. What other educational and experience requirements are there for an artist in crafts?

You must have done, received or been one of the following:

(a) Nomination for a recognized Taiwanese or international crafts award,

(b) Associate professor or above in a department of crafts (applied arts) at an international university, or

(c) Original and outstanding work in the field of crafts accompanied by a letter of recommendation or other documentation issued by an official agency in the artist’s home country.

15. What kind of work can I do as an artist in crafts?

You can create works in any of the media listed in Question 13 or teach the craft.

16. What if I do not have one of the required qualifications for performing and visual arts, publishing, motion pictures/television/popular music, or crafts?

The Ministry of Culture will consider your qualifications on a special basis.

17. What if my application is rejected? Are there any other paths to working in Taiwan as an artist?

Yes. In this case, you will need to find a qualified employer to hire you to work as an artist. You can review the requirements on the Workforce Development Agency’s EZ Work Taiwan website.  Your employer may be able to obtain an exemption to some of the requirements through the Consultation Mechanism. Artist work permits can be issued for full time work and for one-off performances or events. In the case of full-time work, you will be able to apply for a visa and an ARC after the work permit is issued

18. Can residents of Hong Kong and Macau apply for the freelance artist work permit?

Yes.

19. Will I be able to apply for residence based on a freelance artist work permit?

Yes. You will need to first adjust your visa status with the Ministry of Foreign Affairs and then apply for an Alien Residence Certificate (ARC).

20. Will I be able to enroll in Taiwan’s National Health Insurance (NHI) program based on a freelance artist work permit?

Yes, but you will meet a six month residence period first if you do not have an employer. To meet the residence requirement, you must be physically present in Taiwan for a total of six months although you may make one trip abroad for no more than 30 days. The time spent abroad does not count toward the six months residence required.  If you are hired by an employer, you are immediately eligible for health insurance.

21. Can I do other work to support myself?

No. The holder of a freelance artist work permit can only work in his or her permitted field. For example, the artist cannot moonlight as a language teacher or a programmer on the side. This kind of work would be illegal and would result in a fine of NT$30,000 to NT$150,000. Any kind of illegal work will also result in automatic and largely unappealable deportation plus a re-entry ban.

22. Who reviews applications for freelance artist work permits?

The Ministry of Labor’s Workforce Development Agency reviews them, in consultation with the Ministry of Culture. The Ministry of Culture will review applications from artists in fields other than visual and performing arts, publishing, motion pictures/television/popular music, and crafts. It will also review qualifications that are unclear or do not fall into the required qualifications. State clearly in your application that you are applying in the ‘Other’ category or that you want a special review of your qualifications by the Ministry of Culture.

23. What documents are required to apply?

(a) Application Form

(b) Copy of passport

(c) Application fee (NT$500) receipt

(d) Documentation of required qualifications

(e) Other documents requested on a case by case basis

Typically any documents requested under (e) will be requested after you have filed an application with (a)-(d) above. Note that if documentation of your qualifications comes from overseas, you may be required to have your documents notarized and then certified (AKA ‘legalization/authentication) at a Taiwan embassy overseas. We understand that in practice notarization and legalization of documents is not usually required.

24. How do I fill out the application?

The application is very simple and largely self-explanatory. There are a few fields that you may need help with.

The ‘Intended work schedule in Taiwan’ field should be a couple of sentences explaining what you will be doing in Taiwan and how often. In practice, a simple statement of how often the artist will perform and participate in related events like workshops has worked.

The ‘Expected result and benefits’ should be another simple, general statement about how the artist’s work will benefit Taiwan and contribute to international cooperation between artists. You might mention the contribution you can make in introducing Taiwanese artists to international artists and audiences if you are able to introduce Taiwanese artists to your network overseas. Again this statement should be no more than two or three sentences.

‘Branch code’ on the second page means the post office branch you used to pay the application fee by postal remittance.

The ‘Manpower Agent’ referred to on the second page is the name of the immigration agent you have retained (if any) to file your application. Your agent will fill this section in.

25. What kind of documentation should I submit to show my qualifications?

This depends greatly on what kind of artist you are and which qualification you are trying to show. You will need to submit copies of your diploma(s) and letters from former employers to demonstrate that you meet the education and experience requirements. In practice, there is some flexibility about demonstrating experience. For example, letters from employers such as schools where the artist taught in her field in combination with letters from other band members have been used to document experience.

We also understand that evidence of awards for your work is considered to be important. It can be a good idea to submit a letter from the organization that made the award explaining who it is, the nature of the award, and its significance. You may also want to submit promotional materials and coverage in print media.

A supporting letter of recommendation from a reasonably well known Taiwanese artist can also be helpful.

You should not submit a large number of documents or feel that you need every one of the documents listed above. The objective is to clearly show that you have any required educational credentials and a proven track record in your field.

It is of course essential that all documents and information be genuine and truthful. Submitting false documents can result in criminal charges of forgery and false representations to the government. You will also make it more difficult for other artists to live and work in Taiwan in the future.

26. Does my documentation such as diplomas, letters from former employers, or promotional materials need to be translated into Chinese?

Yes but these translations do not have to be complete translations. Translations of key sections related to educational credential, experience, originality, and quality of work are enough.

27. How and where can I apply?

You can apply online on the Ministry of Labor’s EZ Work Permit site. The site is poorly designed and has imperfect English. Nonetheless it is usable with some patience. The site is bilingual once you have registered an account.

If you have trouble, take your application documents to the Taiwan Ministry of Labor Workforce Development Agency’s office in Taipei and apply in person. The address is:

10F, No. 39 Zhonghua Road Section 1, Taipei City, Taiwan

It is also possible to apply by mail if you are in Taiwan. You will need to pay the fee by means of a postal remittance from a Taiwan post office.

28. How long does the application process take?

In practice, it takes most applicants two or three months to gather the documents. It takes seven working days to process an online application if the Workforce Development Agency does not ask you for additional documents. Many candidates are asked for additional documents though.

29. Can I extend a freelance artist work permit?

Yes. A freelance artist work permit can be extended for up to three years. You will need to show evidence that you have been active and productive in your particular field during the original work permit period. In general, you should apply for an extension during the four months before your work permit expires.

30. How many artists have received the freelance artist work permit?

18 (October 31 2018).

31. What were their nationalities?

1. Japan: 2

2. Malaysia: 6

3. Philippines: 1

4. US: 3

5. India:  1

6. France: 1

7. Bhutan: 1

8. Hong Kong: 1

8. Others: 3

32. Where can I read the law and regulations myself?

You can read the Act for the Recruitment and Employment of Foreign Professionals here. The freelance artist work permit is covered in Article 10. There is also a useful Examination Manual for work permit applications under the Act for the Recruitment and Employment of Foreign Professionals. As of this writing the Examination Manual is available only in Chinese: 外國專業人才延攬及僱用法工作許可(審查作業手冊).

You can read the regulations governing applications for the freelance artist work permit here.

33. Who can I contact in the government if I have questions?

The current designated contacts at the Ministry of Labor for freelance artists are:

(a) Mr. Zheng Zhe-xin (鄭哲欣) for questions about the laws and regulations. (02)8995-6177.

(b) Mr. Huang Hu-qun (黃胡群) for questions about the application process. (02)2380-1722.

The current designated contact at the Ministry of Culture for freelance artists is:

(a) Ms. Wang Meng-zhe (汪孟哲). (02)8512-6772.

Please check this list of contact windows on the official website for the Act for the Recruitment and Employment of Foreign Professionals. The list also has email addresses.



Best practices to avoid trade secret theft

For companies taking a long-term view of protecting their intellectual property rights, trade secrets may offer an appealing alternative to a patent-based approach. Each option comes with its own tradeoffs. A patent provides its owner with an enforceable monopoly on the patented innovation, but only for a limited time, after which the owner will lose any special right to the invention or method disclosed in the patent. This is often the best option, especially for innovations which could soon become obsolete, or which are likely to be discovered by other parties. On the other hand, trade secrets have no expiry date, and the owner retains an exclusive right as long as the innovation can be kept secret from other parties. There is also no need to register trade secrets with the authorities in order to gain protection, whereas patents are only awarded after an application process that is often lengthy, complicated, and expensive. But trade secrets have their downsides as well, most notably that another party which independently arrives at the same discovery has every right to make use of it.

Although trade secrets might be a more suitable long-term strategy than patents for many companies, they are often overlooked or poorly understood, and many companies which rely on trade secrets may not be taking adequate steps to protect them. In some cases the lack of sufficient protective steps may even mean that the innovation in question will not meet the legal definition of a trade secret, and will not be protected as one under the law. This can be seen by looking at the way trade secrets are defined under Taiwanese law.

An innovation must meet the following three criteria to be considered a trade secret under Taiwan’s Trade Secrets Act:

(1)   It must not be known to persons generally involved in the field.

(2)   It must have economic value, actual or potential, due to its secretive nature.

(3)   Its owner must have taken reasonable measures to maintain its secrecy.

The first two requirements may seem obvious. It is the third requirement that can create problems for a company trying to protect its trade secrets. Due to the requirement imposed by the third part of the definition, a company which has not taken “reasonable measures” to maintain secrecy does not have a trade secret at all, and its innovation will not be protected by the Trade Secrets Act. So what would constitute a “reasonable measure” in this context?

Many companies may not have considered whether their protective measures would be considered reasonable under the Trade Secrets Act, and these same companies may unfortunately fall short when putting protective measures in place. In many cases the only step taken to protect a trade secret will be the use of a non-disclosure agreement (NDA). While an NDA is certainly a good idea, there are additional, relatively easy steps that can be taken to increase protection. This is where best practices come into play. These could include any or all of the following:

  • Ensuring that the trade secret is protected using adequate, demonstrable security measures.
  • Using password protection on computers and electronic files containing information pertaining to the trade secret.
  • Protecting access to the premises with measures such as card-based entry, a front desk with receptionists controlling access to the office, etc.
  • Having a clear, written internal policy for trade secret protection, including regular training sessions or workshops to ensure that all employees are aware of proper procedures.
  • Taking measures to prevent employees from compromising security by downloading unauthorized software, bringing sensitive documents home with them, or using personal USB drives and other storage devices, etc.

This list is by no means exhaustive, and in fact there is no list of requirements for meeting the definition of “reasonable measures”.[1] That said, failure to implement any measures of this kind could be used as evidence to show that the protected information was never a trade secret to begin with, having failed to meet the third requirement under the law that there must be “reasonable measures to maintain its secrecy.” Clearly an NDA is not always going to be enough.

There is another major benefit to implementing best practices: aside from just meeting the legal standard of having “reasonable measures” in place, such best practices could also prove to be indispensable tools for proving that theft of trade secrets has indeed occurred when an alleged breach being considered by a court. For example, password protection for electronic files also brings the possibility of tracking exactly who had access to the relevant information and when. Records of this kind could make all the difference when trying to prove that a specific individual engaged in trade secrets theft. And simply allowing all employees to have unmonitored, unfettered access to trade secrets could make it virtually impossible to prove who might have leaked the information.

One important exception to all of the foregoing which should be mentioned: for foreign nationals doing business in Taiwan with trade secrets in play, there is a further issue that the Trade Secrets Act relies on reciprocity when it comes to protection of a foreign party’s trade secrets. In particular, consider the following at Article 15:

A foreign national’s trade secret(s) will not receive protection in the R.O.C., if the foreign national’s home country has not signed a bilateral trade secrets protection treaty or agreement with the R.O.C., or does not provide protection to trade secrets owned by R.O.C. nationals according to the laws and regulations of the foreign national’s home country.

In other words: if you are a foreign national, all of your attempts at best practices may be in vain if your home jurisdiction does not have a bilateral trade secrets agreement with Taiwan, or does not protect the trade secrets of Taiwanese nationals. In such a situation, your trade secrets will not be protected in Taiwan, even if you take all the proper precautions outlined above.[2] For this reason, it is recommended that foreign nationals in particular seek out legal advice when using trade secrets in Taiwan. There may be other options to consider in this situation, but they would need to be determined on a case-by-case basis with the advice of a lawyer.

Clearly, trade secrets protection can present difficult problems. But by taking simple precautions, and by hiring legal specialists to formulate an appropriate regime of trade secrets protection for your company, major disasters can be avoided. And when it comes to issues involving trade secrets protection, preventing bad outcomes before they arise is inevitably safer, less stressful, and above all cheaper than dealing with a trade secrets breach after the fact.

For more information about trade secrets protection and other intellectual property matters in Taiwan, please contact Christine Chen at cchen@winklerpartners.com.

Legal intern Wolf Cho contributed to this article.


[1] For an example of this, see 104年度智訴字第14號, in which the court held that reasonable protective measures had been implemented, including the use of confidentiality agreements, the use of document shredders, and a system of graded levels of confidentiality for internal documents, with corresponding restrictions to access.

[2] See, for example, 96年度抗字第1641號 (Interlocutory Appeal), in which the Taiwan High Court stated that the appellant’s status as a British Virgin Islands company combined with the absence of any reciprocal arrangement for trade secrets protection between Taiwan and the British Virgin Islands meant that the appellant’s trade secrets would not be afforded protection in Taiwan.

Mass layoffs in Taiwan: Additional insights for employers

As we mentioned in our previous article, “Mass layoffs in Taiwan: A guide for employers”, when an employer needs to dismiss a certain amount of its Taiwan workforce over a defined period of time, it must comply with the provisions of the Act for Worker Protection of Mass Redundancy (the “MRA”). Any employer who does not follow the procedures under the MRA may be subject to administrative fines of up to NT$500,000. As a follow-up to that article, we provide below some additional insight regarding the mass layoff process based on our recent experience of handling such cases.

Required notification and calculation of the notice period

An employer seeking to implement a mass layoff plan (a “Plan”) shall notify the relevant authorities/agencies or personnel at least 60 days prior to the proposed termination date. However, in addition to the procedures required by the MRA, an employer shall provide 10 to 30 days of advance notice to individual terminated employees based on their years of service, pursuant to the Labor Standards Act (the “LSA”).

An employer shall also notify the local labor authority and public employment services institution at least 10 days prior to the proposed termination date, according to the Employment Service Act (the “ESA”). The calculation for determining when the termination report should be submitted is slightly different than that for the 60-day notification period mentioned above in that the first day is the date the termination takes effect. If the last date in that period, the date requiring submission, is a holiday, it would automatically carry over to the next day. For example, if employees are scheduled to be terminated on 20 February, the first date to start the calculation of the 10 days would be 21 February. In general, the last day for the employer to submit the report should be 12 February; however, if that day is a Sunday, the employer may complete the submission no later than Monday, 13 February.

Submission of required documents and negotiations

The Plan shall provide detailed information regarding the layoff and relevant evidence, such as financial statements, to justify the layoffs. This evidence may also be provided after the initial submission of the Plan. If employers cannot produce such evidence, they may provide a written explanation instead.

If an agreement is not reached by the employer and the employees within 10 days from the day that notification has been given, the relevant local labor authority will invite both sides to form a negotiation committee in order to finalize the terms of the Plan. In our experience, this 10-day period is not a hard and fast rule (at least for the Taipei City Government). In circumstances in which the employer can provide written evidence that it has been trying to negotiate with the terminated employees, intervention by the labor authority is less likely. In practice, such evidence is usually in the form of meeting minutes. The minutes submitted in the final stage, once negotiations have concluded, must be sufficient to prove that both parties have reached a mutual agreement and should contain an acknowledgement that the terminated employees have agreed to the formula used to calculate their severance package. Each employee must sign the minutes to show his/her express consent to their content. An attendance sheet bearing the signatures of the representative of the employer and all employees is also required.

Employment counseling for terminated employees

After the Plan is filed with the local labor authorities, the public employment services institution will ask the employer if the terminated employees require employment counseling. This is a procedural inquiry made of every company subject to mass redundancy and is not compulsory. It offers the terminated employees a chance to better understand Taiwan’s employment counseling resources. The process involves an informational session at the company’s offices, during which the presenters introduce employment resources, such as counseling services, employment insurance, channels for job hunting, and others. They also hold a Q&A session to respond to employee’s questions regarding issues related to unemployment benefits and other services.

Employer’s post-termination obligations

Employers shall issue involuntary termination certificates. Service certificates may also need to be provided if the terminated employees ask for them. The involuntary termination certificate is required for employees looking to register for job placement, apply for unemployment benefits, and obtain vocational training. The service certificate lists the employee’s job title, their years of service, the nature of the job, and their salary. Please note that employers may not record any negative information regarding the employee on the service certificate.

Tips for negotiating with terminated employees

The employers may terminate employees at the end of the 60-day notice period under the MRA, provided that the laid-off employees are all issued statutory entitlements under the LSA and Labor Pension Act (the “LPA”). The MRA merely imposes an obligation on employers to negotiate the severance package with the employees; there is no punishment for employers who are unable to ultimately reach a better deal with the employees. Employers should however be reminded that unhappy employees may challenge the termination’s legal basis through official complaint, mediation or even bring a suit.

To avoid such risks, employers can of course offer a more generous severance package than that mandated by the LSA and LPA if they believe that their legal basis for the layoff is not strong enough or if they wish to facilitate a more efficient mass layoff process and reduce the risk of future disputes arising. However, as the MRA does not require the employer to provide the employees with a better deal when a mass redundancy occurs, it is important for the employer to acknowledge that it’s not wise to show all of their cards at the very beginning of the negotiations. In our experience, such a move leads to deadlock and requires much more effort to reach a settlement with the employees.

For more information on Taiwan employment matters, please contact Christine Chen at cchen@winklerpartners.com or on +886 (0) 2 2311 8307.

2017 Data protection enforcement decisions by Taiwan’s Financial Supervisory Commission

Taiwan’s Financial Supervisory Commission (the “FSC”) continues to be the only regulatory agency in Taiwan that regularly publishes its data protection enforcement decisions. This update summarizes the FSC’s 2017 data protection decisions. Please see this feature from last year that explains Taiwan’s data protection regulatory regime and discusses the FSC’s 16 decisions between 2012 and 2016.

The FSC issued 13 data protection enforcement decisions in 2017 after issuing seven such decisions in 2016 and none in 2015. All 13 of the 2017 decisions were against insurance businesses, and 11 of these decisions imposed fines ranging from NT$300,000 (c. US$10,000) to NT$700,000 (c. US$23,000). It should be noted that most of the decisions also included violations of Taiwan’s Insurance Act in addition to data protection violations. As a result, the fines include penalties for violations of not only the Insurance Act, but also Taiwan’s Personal Information Protection Act (“PIPA”) without a breakdown. The decisions also included orders to remedy the violations. Typically, the FSC gave the insurance businesses one to three months to remedy.

Eleven of the 13 decisions involved failures to implement appropriate security measures to protect personal information under Article 27(1) of the PIPA. More specifically, the FSC repeatedly cited insurance businesses for violations of its standards for appropriate security measures at financial institutions. These standards are set out in the Financial Supervisory Commission’s Regulations Governing Security Measures for Personal Information Files at Designated Non-Public Agencies (the “FSC Security Measures Regulations”).[1]

For example, an insurance brokerage was cited for the following violations:

  1. Failure to establish a security auditing mechanism for personal information (FSC Security Measures Regulations §13); and
  2. Failure to establish a record keeping mechanism for deletion of personal information and cessation of processing or use of personal information (FSC Security Measures Regulations §14(2)).

The FSC’s almost exclusive focus on security measures in 2017 contrasts with enforcement decisions from 2012-2016 where decisions were more evenly divided between data breaches, notice/consent failures, and inadequate security measures.[2]

This focus on appropriate security measures is consistent with the approach of other Taiwanese regulators in the past year or so. For example, the Ministry of Economic Affairs’ Investment Commission now sometimes requires foreign investors in sensitive industries to produce personal information security plans as part of the foreign investment approval process.

It is also worth mentioning that the FSC is far from alone in having issued regulations on personal information security standards. As of this writing, there are 34 such regulations issued by various sectorial regulators pursuant to Article 27(3) of the PIPA. Notable examples include personal information security standards for:

  1. Telecommunications enterprises, cable network operators, and television stations;
  2. Tourist hotels; and
  3. Power and gas companies.

Currently, these security standards are something of a regulatory blind spot for international businesses since very few have been translated into English.


[1] 金融監督管理委員會指定非公務機關個人資料檔案安全維護辦法

[2] In addition to the security measure enforcement decisions, there was also one data breach case involving negligent disclosure of insurance policy information to third parties as well as one inadequate notice case in 2017.

How the Company Act amendments will affect your Taiwan business

On 6 July, 2018, Taiwan’s legislature enacted 148 amendments to the Company Act (the “Act”). The effective date of the amended Act is 1 November 2018.

In this article, we highlight certain amendments which we expect to have a significant impact on our clients’ operations in Taiwan. We have organized these amendments into the following categories:

  1. Increased Flexibility in Equity Fundraising and Related Shareholder Arrangements;
  2. Relaxed Corporate Governance Formalities;
  3. Enhanced Substantive Shareholder Protections;
  4. More Appropriate Treatment of Foreign Companies;
  5. Increased Corporate Transparency;
  6. More Flexible Employee Equity Incentive Arrangements; and
  7. Increased Dividend Distribution Options.

1. Increased Flexibility in Equity Fundraising and Related Shareholder Arrangements

Prior to recent amendments, the Act posed a number of difficulties for companies engaged in equity financing. The Act previously contained a rule requiring a company to issue all of its existing authorized shares before it could authorize and issue new shares. This rule has been eliminated making it procedurally easier for companies to issue new equity capital.

The amended Act has also expanded the types of equity shares that may be issued. Private companies may now issue preferred shares with special voting, veto, and other control rights. A private company will now also be able to issue shares without par value, provided that all of the company’s shares are issued without par value.

In a related amendment, the new Act allows for further individual tailoring of corporate control by permitting voting agreements and voting trusts among shareholders. It is important to note that the amended Act clearly permits restrictive voting arrangements with respect to the election of directors and supervisors as well as voting arrangements concerning certain other company matters. This amendment was a direct legislative response to the majority view in Taiwan’s courts that voting agreements among shareholders regarding elections of directors and supervisors were unenforceable except in the limited case of a closed company.

2. Relaxed Corporate Governance Formalities

The amended Act eliminates a number of cumbersome corporate governance formalities and simplifies others. As amended, the Act does not require wholly owned, incorporated subsidiaries to appoint a minimum of three directors. Now, one director will suffice. Additionally, wholly owned subsidiaries are no longer required to have supervisors.

Corporate governance meetings have also been simplified. Shareholder meetings of a private company may be held by video conference in lieu of a physical meeting, provided that the company’s articles of incorporation expressly permit such video conference meetings. Private company boards may also pass written resolutions in lieu of holding meetings, provided that (i) written board resolutions are expressly permitted by the company’s articles of incorporation and (ii) all directors have agreed to the use of such written resolutions. We expect these meeting-related changes to be particularly welcomed by the many international businesses with wholly owned, incorporated subsidiaries in Taiwan.

3. Enhanced Substantive Shareholder Protections

While reducing some of the more ineffectual corporate formalities, the new Act introduces improvements in substantive shareholder protection. The amended Act permits a majority of shareholders to call a shareholders meeting with three months’ advance notice. Previously, shareholder meetings had to be called by the board unless the shareholders had received approval from the company’s relevant regulator to call a shareholders meeting directly.

Rules for shareholder meeting notices have also changed. The types of matters which must be explicitly set forth and explained in a shareholder meeting notice in order to be properly brought before shareholders for discussion or resolution at a meeting was expanded in the revised Act to include matters relating to (i) capital reductions; (ii) going private transactions; (iii) waiver of certain director non-compete obligations; and (iv) capitalization of profits and capital surpluses. Such measures are intended to prevent management from introducing unexpected meeting agenda items and otherwise concealing the nature of the business to be transacted at shareholder meetings.

4. More Appropriate Treatment of Foreign Companies

One of the more important features of the amended Act is the elimination of the recognition system for foreign companies. So long as a foreign company has been duly established in its home jurisdiction, such company now automatically has legal personhood in Taiwan without the need to make a special application for recognition from the Taiwan government. This amendment has the very practical and beneficial result that all properly established foreign companies will be recognized in Taiwan, thus eliminating the personal risk and liability that a representative of an unrecognized foreign company would incur if he or she were to act on behalf of an unrecognized foreign company.

The amended Act creates another benefit specifically for foreign companies. While foreign companies are still required to register Chinese names, they may now also register a name in a foreign language and enjoy certain exclusive rights to the use of that name in Taiwan. We strongly encourage all foreign companies operating in Taiwan to register their foreign language name after the amendments come into force.

5. Increased Corporate Transparency

In an effort to increase corporate transparency, the revised Act prohibits the issuance of bearer shares. Existing bearer shares may remain in circulation; however, when any holder of bearer shares exercises its rights with respect thereto, the issuing corporation must exchange such shares for registered shares. In addition, the amended Act requires corporations to make annual reports of major shareholders (defined as a shareholder holding 10% or more of a corporation’s outstanding shares), directors, and officers. Corporations must also file to update such reports within 15 days of any change.

We note that a controversial requirement to report ultimate beneficial owners was not included in the revised Act. We continue to watch this particular issue with interest.

6. More Flexible Employee Equity Incentive Arrangements

The new Act improves the ability of companies to create and manage an employee equity incentive plan. The amendments allow companies to repurchase previously issued shares and use the resulting treasury shares as employee equity compensation. Private companies may also now directly issue new restricted shares to employees.

The amended Act introduces further flexibility with respect to which employees can be included in equity incentive plans. Under the new Act, a company’s articles of incorporation may provide that existing incentives such as warrants and subscription rights can be issued to the employees of affiliated companies, including holding companies, subsidiaries, and other affiliates.

7. Increased Dividend Distribution Options

Another positive change found in the amended Act is the flexibility for a company to provide for annual, semi-annual, or quarterly dividend distributions in its articles of incorporation.

Overall, the changes made to the Company Act have reduced unnecessary corporate formalities while enhancing flexibility around shareholder and financing arrangements. While no date has been given, we expect most amendments will go into effect in early 2019. The new major shareholder reporting requirements may be implemented even earlier in light of an upcoming international anti-money laundering review scheduled for this fall.

If you have any questions as to how the amendments may affect your business in Taiwan, please contact Daniel Chen at dchen@winklerpartners.com and Gregory Buxton at gbuxton@winklerpartners.com.

Associates Michael Fahey, Brian Yang and trainee lawyer Pei-hsu Wu contributed to this article.

Could Taiwan’s new regulatory sandbox spur innovation in its financial services industry?

The Financial Technology Development and Innovative Experimentation Act, passed by Taiwan’s Legislative Yuan in January of this year, aims to foster a positive environment for new and untested forms of financial technology, also known as “fintech.” The Act provides for the creation of a regulatory sandbox, following in the footsteps of the UK, Singapore, Australia, and Hong Kong. The sandbox would allow fintech startups a period of up to three years to develop and test out their products or services, while avoiding the risks associated with such development or endangering the rights and interests of financial consumers.

Thus far, two companies have submitted a complete application package to participate in the sandbox, but around 40 potential applicants have approached the competent authority designated by the Act, the Financial Supervisory Commission (FSC), with queries regarding the sandbox. Most of these are simply inquiring about the application requirements and process; however, over ten have received guidance from the FSC and will likely apply in the future. Applicants include companies engaging in a wide range of financial technology development, such as blockchain cross-border remittance technologies, P2P online lending platforms, investment robo-advisors, online insurance, cryptocurrency platforms, and others.

In this article, we provide a general overview on the Act, highlighting key provisions related to participation in the regulatory sandbox.

As mentioned above, the competent authority designated in the Act is the FSC, which is responsible for the creation of a unit dedicated to reviewing all applications, determining the effectiveness and feasibility of each innovative experimentation plan being applied for, and overseeing the progress of each plan once it has been approved.

Chapter II of the Act indicates the required documentation for applying to take part in the sandbox. This includes an application form, information regarding the individual, sole proprietorship or partnership, or legal person applying for the sandbox, and an innovative experimentation plan, which should illustrate the innovativeness of the technology, indicate the source of funds for the project, and potential risks and risk management mechanisms, among others. Supplemental documentation may also be requested by the FSC.

The FSC, in its review of an applicant’s filing package, will determine whether 1) the project involves financial businesses that require its permission, approval, or concession; 2) the project is innovative; 3) the project can increase the efficiency of financial services, reduce costs, or enhance the interests of financial consumers or enterprises; 4) potential risks have been assessed and response mechanisms have been prepared; and 5) protection measures and compensation for participants (those consumers that have chosen to take part in the experimentation) have been prepared. The review process may take up to 60 days, and may include adjusting the content of the plan being applied for, limiting the eligibility of participants, adding requirements, and exempting the plan from certain regulations. Any application that is approved by the FSC will be disclosed on its website, and this disclosure will include the applicant’s name, the duration and scope of the experimentation, the regulations that the project is exempted from, and other relevant information.

Once the experimentation by an approved applicant is underway, the FSC will continue to play a supervisory role, and maintains the right to periodically check the progress of any project. Furthermore, it has full discretion in revoking its approval of a project that it determines could be adverse to the market or to the interests of the participants, goes beyond the scope approved of by the FSC, or violates any additional requirements or obligations established by the FSC or any of the provisions of the Act. The length of the experimentation is limited to one year, but a six month extension may be applied for. In cases in which the experimentation involves amending existing laws, the duration may be extended up to three years, longer than that of other countries’ sandboxes.

The Act also contains a number of articles protecting participants in the sandbox, including ensuring that the financial product or service contract entered into by the applicant and participant is fair and drafted in good faith, and providing for a dispute resolution channel, in accordance with the Financial Consumer Protection Act.

The final section of the Act lists the specific regulations that experimentation approved by the FSC is exempt from. This includes provisions of the Banking Act, the Trust Enterprise Act, the Act Governing Electronic Payment Institutions, and the Securities and Exchange Act, among others. Nevertheless, sandbox applicants will not be exempt from the provisions of the Money Laundering Control Act, the Terrorism Financing Suppression Act, and other related laws and regulations.

Based on the success of other fintech sandbox schemes worldwide (90 percent of applicants participating in the first round of the UK’s version have gone on to market, for example), there are high hopes that such a system can foster much-needed innovation in Taiwan’s finance industry as well. As with similar regulations, knowledge of the application process, as well as of the relevant restrictions and exemptions once an application is approved, are essential to ensuring an applicant’s successful navigation of the sandbox.

Update: Since launching in 2018, the FSC has announced that they have met their target for applications. Read our May 2019 update here.

For more information on Taiwan’s fintech regulations, please contact Christine Chen at cchen@winklerpartners.com.

Key points to know when engaging in civil disputes in Taiwan

Litigation in Taiwan can be costly and complex. Before filing a claim, potential foreign plaintiffs need to understand pre-filing steps such as attachment, demand letters, and payment orders as well as the formalities and evidentiary considerations involved after a decision to litigate has been made. Strategically, it is important to understand that filing a case and presenting one’s evidence is usually necessary before there is any possibility of settlement.

Attachment

An attachment order may be applied for before filing litigation to ensure that the defendant’s assets are not improperly transferred, hidden, or disposed of. In order to obtain an attachment order, the plaintiff must prove to the court that there is a strong likelihood that the defendant would engage in such behavior. They must also post a bond of one-third of the attachment claim.

Demand letter

In Taiwan, as elsewhere, a potential litigant may send the counterparty a demand letter. This letter states the legal claim(s), demands restitution or compensation, and lists out the consequences of noncompliance. This letter is generally drafted by an attorney and sent as a ‘legal attest letter’. When a legal attest letter is sent, the post office will retain a certified original copy of the letter and record the date and time of delivery to the recipient.

The demand letter in the form of a legal attest letter is a key item of evidence for future litigation in cases where the remedy sought is rescission of a contract and a refund of the payment.

Payment order

If the counterparty has not paid or refuses to pay an outstanding debt, a creditor may move to have the court issue a payment order. Once the counterparty receives this official document, she has 20 days to object. An objection does not need to state any grounds, and once it has been made, the creditor’s motion for a payment order will automatically become a civil complaint. However, if the recipient of a payment order does not lawfully raise an objection within 20 days, the creditor may file a motion with the court to enforce the payment order as a final judgment against the counterparty’s assets. The official fee for issuance of a payment order is NT$500. Payment orders can be a faster and cheaper way to enforce the plaintiff’s monetary claims against the debtor’s assets.

Civil action

If an amicable settlement does not appear to be a possibility, the aggrieved party can move forward with filing a civil complaint. Key issues for a foreign litigant to be aware of include:

1) Document authentication

A Power of Attorney designating a foreign litigant’s legal counsel is frequently required to be notarized and legalized (authenticated) before being submitted to the court. Civil litigation in Taiwan requires a specific POA for each proceeding. Since there can be multiple proceedings, we recommend notarizing and legalizing (authenticating) these documents as soon as possible.

2) Security bond

A defendant may move the court to order a foreign litigant who does not have a domicile, residence, or office in Taiwan to put up a bond of roughly 4% of the total claim unless the foreign litigant possesses sufficient assets in Taiwan to cover court costs. This bond may be paid in the form of cash, bank guarantee, or a cash equivalent. The purpose of the bond is to ensure that the defendant can recover the court fees it pays during the civil action (especially in appellate proceedings) from the foreign plaintiff if the defendant ultimately prevails in the final judgment.

3) Translation

As Chinese is the official language of the courts in Taiwan, all documentation, such as agreements, correspondence, reports, and any other documentary evidence in a foreign language must be translated into Chinese for the court’s review. Given that the first instance for a civil action in Taiwan can take six months to two years to conclude, include several hearings, and require submission of many documents from the plaintiff, this could entail a significant amount of work and time if the wrong translator or translation house is chosen.

4) Evidence preservation order and absence of discovery

Taiwan does not have a full-fledged system of discovery as is the case in the US. However, preservation orders can function as a basic discovery device. A party that believes that the counter party is likely to spoliate evidence may move the court for an evidence preservation order. The motion for preservation order may be made before the civil action. Motions for evidence preservation orders are not frequently granted. In the absence of an evidence preservation order, a party may choose not to produce evidence detrimental to its interests. As a result, a plaintiff in Taiwan litigation is often in the position of having to produce all the evidence necessary to prove his or her case while the defendant can win even if he or she produces very little evidence. It is therefore very important to review the plaintiff’s evidence in advance before deciding whether or not to file litigation.

Settlement

Settlement may be carried out through the courts, or through alternative dispute resolution such as mediation.

In the absence of discovery, a Taiwan defendant is unlikely to settle simply with receipt of a demand letter. Before deciding whether to settle a dispute, a local defendant would usually wait until the plaintiff produces its evidence to assess how much of a threat the plaintiff’s case poses to the defense. As a result, filing a civil action is usually necessary to create the proper conditions for a settlement. Settlement also becomes more likely after the judge discloses his or her preliminary evaluation of the evidence and arguments.

To learn more about civil litigation in Taiwan, please contact Christine Chen at cchen@winklerpartners.com and Daniel Chen at dchen@winklerpartners.com.

To inquire about legal translation services, please contact translation@winklerpartners.com.

Taiwan enacts Cyber Security Management Act

Taiwan’s legislature enacted the Cyber Security Management Act (the “Act”) in early May 2018. The Act was published by the Presidential Office in June and will take force on a date to be announced by the Executive Yuan.

This introduction to the Act begins with a discussion of the background, policies and definitions in the general principles chapter of the Act. That discussion is followed by a brief look at the Act’s chapter on public agencies and a more detailed look at the chapter on the private sector focusing on critical infrastructure operators.

The objectives of the Act are to implement a national information security policy and to build a secure information environment to protect national security and the public’s welfare. Act §1. According to the Executive Yuan, there were 360 security incidents at Taiwanese public agencies in 2017. While most were less serious Level 1 and Level 2 incidents, 12 were Level 3 incidents.

The Act’s competent authority or regulator is the Executive Yuan. Act §2. The designation of a single regulator was made relatively late in the legislative process due to concerns that dispersed regulation of different sectors by sectorial authorities would be ineffective.[1] In practice, the Executive Yuan’s Department of Cyber Security will lead the Executive Yuan’s regulatory effort.

The Act’s key definitions include definitions of information systems, information security, information security incidents, and critical infrastructure. Act §3. These definitions closely track similar definitions in relevant U.S. law. For example, the Act defines information security as “protecting information and information systems from unauthorized access, use, disclosure, disruption, modification, or destruction in order to ensure the confidentiality, integrity, and usability of information systems.” Act §(3)(1). This definition is a slightly simplified version of the definition of information security given in 44 U.S. Code §3542.

The Act defines critical infrastructure as “…a physical or virtual asset, system, or network in sectors to be periodically reviewed and announced by the competent authority where there is a likelihood that the cessation or diminishment of the asset, system, or network would have a serious impact on national security, the public interest, or the life and economic activities of citizens .”[2] Act §3(7). There have been concerns that this very broad definition of critical infrastructure might subject internet services such as social media or widely used messaging platforms to regulation under the Act.

Public Sector Information Security

Chapter II of the Act sets out the duties of public agencies to maintain the security of their information systems. Public agencies must put in place information security policies and appoint chief information security officers. Act §§10-11. They are also required to report information security incidents to any superior agency, if any, and the Executive Yuan. Act §14.

Private Sector Information Security

Regulation of the private sector is generally limited to designated critical infrastructure operators.[3] Act Chapter III §§16-18. To designate a private entity as a critical infrastructure operator subject to regulation under the Act, the operator’s sectorial regulator will consult with personnel from public agencies, private sector representatives, and experts. For example, the Ministry of Economic Affairs will designate which power plants are critical infrastructure in consultation with the public agencies, the private sector, and experts because the Ministry of Economic Affairs is the sectorial regulator for energy producers. Act §16(1).

Like public agencies, designated critical infrastructure operators will be required to implement information security policies. Act §16(2). Implementation of information security policies must be reported to the critical infrastructure operator’s sectorial regulator. Act §16(3). For example, a designated power plant would be required to report its information security policy to the Ministry of Economic Affairs.

A designated critical infrastructure operator’s sectorial regulator is required to audit the critical infrastructure operator’s implementation of its information security policy. Act §16(4). This audit requirement was introduced during the legislative process in response to the Executive Yuan’s original draft that controversially gave government agencies the power to conduct on-site inspections.

A designated critical infrastructure operator will also be required to file an improvement report in the event that a deficiency or need for improvement in its information security policy is identified. Act §16(5). Sectorial regulators are required to issue regulations governing information security policies as well as related auditing, reporting, and compliance requirements. Act §16(6).

Article 18 of the Act requires designated critical infrastructure operators to set up reporting and response mechanisms for security incidents. Act §18(1). In the event of a security incident, the critical infrastructure operator must first report the incident to its sectorial regulator and then file a separate post-incident improvement report regarding the security incident at a later date.[4] Act §§18(2)-(3). In turn, the sectorial regulator has a duty to report security incidents to the Executive Yuan. In the case of significant security incidents, the sectorial regulator is also required to send the critical infrastructure operator’s improvement report to the Executive Yuan. Act §18(3). The Executive Yuan or sectorial regulator has the power to announce significant security incidents and the response thereto to the public. Act §18(5).

Fines of NT$100,000 to NT$1 million (c. US$3,300 to US$33,000) can be imposed on designated critical infrastructure operators for the following categories of violations:

  1. violation of rules governing information security policies;
  2. failure to implement a reporting and response mechanism for security incidents; or
  3. failure to file reports on the investigation, handling, and remediation of security incidents or the filing of an incomplete security incident report. Act §20(1)(1)-(3).

Failure to report a security incident will result in a fine of NT$300,000 to NT$5 million and an order to report. This fine can be imposed multiple times if the critical infrastructure operator does not comply with the order to report. Act §21.

Like many Taiwanese laws, the Cyber Security Act sets out broad principles and leaves many of the key details to regulations issued by the regulator. As of this writing, the Executive Yuan’s Department of Cyber Security has drafted six regulations under the Act. Of these, four are relevant to designated critical infrastructure operators:

  1. The Cyber Security Act Enforcement Rules,
  2. The Regulations for Classification of Cyber Security Responsibility,
  3. The Regulations for Reporting and Responding to Cyber Security Incidents, and
  4. The Regulations for Inspecting Implementation Status of Special Non-official Agencies’ Cyber Security Maintenance Programs.

These draft regulations have been announced for public comment on the Executive Yuan’s online platform for public policy (in Chinese). The public comment period ends on 23 August 2018. The Department of Cyber Security has already revised the draft regulations once following a series of seminars held in April and May of this year for public agencies, critical infrastructure operators, and experts to provide preliminary commentary. The 7 May seminar in Taipei for potential critical infrastructure operators was of particular interest. A complete transcript (in Chinese) of the seminar may be found here along with transcripts of other seminars for experts and public agencies.

The Department of Cyber Security has indicated in the Taiwanese media that that Act will take effect in two phases. The Department expects that the Act will come into force for public agencies starting around 1 January 2019. It further expects to put the Act into force for private entities including designated critical infrastructure operators in June 2019.


[1] There is perception among experts in Taiwan that Taiwan’s dispersed regulatory model for data protection has hampered effective enforcement of the Personal Information Protection Act.

[2] This definition of critical infrastructure is quite similar to the one given in the US Code of Federal Regulations 31 C.F.R. § 800.208.

[3] The other ‘private sector’ entities subject to regulation under the Act are state enterprises and publicly funded foundations. Act §6.

[4] The reporting requirement is similar to that in Article 14 of the EU’s 2016 NIS Directive.

Merger control FAQ (part 4 – process insights)

This article is the fourth and final in our series on merger control in Taiwan. This installment covers issues related to the primary regulatory agency and other insights into the application and approval process. For the first article on basic questions related to covered transactions and market share filing thresholds, click here. For the second article on relevant market definition, click here. For the third article on procedural issues, click here.

1. What is the nature of the agency which reviews merger transactions?

Taiwan’s Fair Trade Commission (the “FTC”) is an independent commission under the executive branch of the Taiwan government. An important consequence of the FTC’s being an independent commission is that unfavorable FTC rulings may be directly appealed to the administrative courts, and need not be heard first by other bodies under the executive branch.

2. What is the typical or recommended approach in dealing with the reviewing agency?

Generally speaking it is advisable to contact the FTC to discuss matters which are likely to pose competition issues as early as practicable. Confirmation of smaller, more discrete points may often be obtained through anonymous conversations between one of the transaction participant’s Taiwan counsel and the FTC.

It is also worth noting that in global transactions involving foreign merger control authorities, the FTC will often consider interpretations and guidance from such authorities on issues that are the same or similar to those faced in Taiwan.

3. What level of confidentiality does a merger control filing enjoy?

Merger control filings are confidential until the time at which the FTC either (i) seeks public opinion in respect of the proposed transaction or (ii) approves or disapproves the transaction. If public opinion is sought, the FTC will publish the relevant participants’ names and products and services as well as a general description of the transaction on its website. Upon an unconditional approval of a transaction, the FTC will issue a news release containing basic information on the participants, a description of the transaction structure, the relevant market definition used by the FTC, and the FTC’s competition impact assessment. If the FTC’s transaction approval is conditional, the agency will issue a formal decision letter. This letter may contain additional details including portions of the merger control filing.

The FTC’s published transaction approvals usually do not contain transaction participants’ specific business data. If specific participant information needs to be disclosed, the FTC will ask for the relevant participant’s approval prior to making any such disclosure.

A transaction participant may also actively request confidential treatment of particular information in the merger control application materials. The FTC typically respects such requests.

4. If the statutory waiting period expires without a challenge, is there any possibility of a post-closing challenge?

No, there is no possibility of a post-closing challenge, provided that the information in the merger control filing remains accurate and complete and all procedural filing requirements were properly followed.

5. Are there ways to protect a transaction from post-closing challenge?

The best protection against post-closing challenges is the receipt of a formal FTC response letter either approving the proposed transaction or confirming that review is not required, each after submission of a complete merger control filing.

If the participants believe that a proposed transaction does not exceed the market impact thresholds outlined in part 1 of this FAQ, the participants may submit a request for written confirmation from the FTC that a merger control filing need not be made with respect to the transaction. This confirmation request should be accompanied by basic market share and sales revenue figures. Should the FTC concur that no merger control filing is required, it will typically issue the requested confirmation within approximately 30 business days of the submission of the confirmation request. While not legally binding on the FTC, so long as the information on which the confirmation was based was accurate at the time of the consummation of the relevant transaction, such a confirmation would be extremely persuasive evidence that filing was not required.

6. What are the consequences of failing to notify the FTC of a qualifying transaction?

Under the Fair Trade Act 2017, in cases in which the parties involved (a) fail to notify the FTC of a transaction that is in excess of the relevant market impact thresholds or (b) close a transaction without proper notification to the FTC or before the expiry of the applicable waiting period, the FTC may (a) prohibit the transaction, (b) require the enterprises involved to split or for one or more of the enterprises to divest itself partially of the shares or assets of the other or make any other necessary dispositions, or (c) require the enterprises to remove certain persons from their positions. Such violations may also carry administrative penalties of between NT$200,000 and NT$5 million.

In the event that an enterprise violates an order of disposition made by the FTC, the FTC may order dissolution of the enterprise or the suspension or termination of the enterprise’s operations in Taiwan.

For more information on mergers and acquisitions in Taiwan, please contact Gregory A. Buxton at gbuxton@winklerpartners.com.

Options for employers to add more flexibility to work hours

The 2018 amendments to the Labor Standards Act (LSA), while intended to provide more flexibility in favor of employers in Taiwan, have nevertheless raised some questions regarding the distribution of work hours for employees. The new amendments contain provisions allowing for the adjustment of mandatory rest days, meaning that, in certain situations, workers may work a maximum of twelve consecutive days. This ideally gives employers more options for covering shifts in case of an emergency or in cases in which time limits for project-based work require employees to work more than the current limit of six consecutive days. However, it’s not immediately clear from the English language information currently available just how such a flexible schedule may be legally implemented. Below, we outline a few ways in which an employee or multiple employees at a company in Taiwan may be permitted to work more than six consecutive days.

1. The Four Week Work Hour Adjustment System

This method of redistributing work hours may be used by companies belonging to one of 42 different industries designated by the Ministry of Labor (MOL). The criteria for determining whether a company belongs to one of these designated industries are its primary economic activities and output value (e.g. the company’s income). The Four Week Work Hour Adjustment System requires that employees be given at least two mandatory rest days every two weeks, and eight rest days in every four week period. In order for a company to use this system to determine work hours for its shift workers, it must first obtain the approval of the relevant labor union, or if there is no labor union, the approval of a labor-management conference.

2. Adjustment of the employee’s mandatory rest day

Whereas the other three options in this list are existing means of adjusting work hours, the following method is a new amendment to the LSA.

According to Article 36 Paragraph 4 of the LSA, an employer may adjust an employee’s mandatory rest day in a seven day period. Such an adjustment may only be carried out by certain businesses/industries designated by the MOL and must also meet the conditions for adjustment of mandatory rest days, based on each designated industry’s needs. These include extenuating circumstances related to time (e.g. seasonal hours, national holiday hours, etc.), location (e. g. work on the ocean or in the mountains), the nature of the work (e.g. work conducted overseas, in response to weather conditions, etc.), and special situations (e.g. holding extraordinary meetings or events). Of course, approval of the labor union or labor-management conference must be obtained before such changes can be made. Companies with more than 30 employees that adjust their employees’ mandatory rest day must report this to the local labor authority.

3. Categories of workers exempt from work hour restrictions

Article 84-1 of the LSA provides that specific types of workers that meet certain criteria may negotiate with their employers to set their own working hours, rest days, national holidays, and (if female) night shift hours. The agreement between such workers and their employers shall be submitted to the local labor authority for its approval.

4. Force Majeure

According to Article 40 of the LSA, “an employer may require workers to suspend all leaves of absence” if “an act of God, an accident, or an unexpected event requires the continuation of work.” The interpretation of the last two factors is quite narrow, with “accident” intended to mean any human-caused incident, such as war or a financial crisis, and “unexpected event” read to be any event that is unpredictable, not routine, and whose degree of seriousness is extremely severe.

If none of the above applies, employers are still able to adjust mandatory rest days to help cover shifts as long as the employee still receives one day off in seven.

As evidenced above, some flexibility in work hour adjustment is possible; however, the government has stressed that the methods we describe above to allow employees to work more than the current limit of six consecutive days are exceptions rather than the rule and are therefore subject to increased scrutiny by the authorities. Any employer wishing to make such changes should consult with their local labor authority before implementing such a plan.

For more information on Taiwan employment matters, please contact Christine Chen at cchen@winklerpartners.com or on +886 (0) 2 2311 8307.

 

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