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Frequently asked questions on merger control in Taiwan

by Gregory Buxton and Teresa Wang

We receive regular inquiries from foreign clients as to whether a particular transaction requires making a merger control filing in Taiwan. The following is the first installment of a multi-part series in which we explore commonly asked questions related to merger control in Taiwan. This first installment covers basic questions related to the scope and coverage of Taiwan’s merger control regulations.

1. Does Taiwan have merger control regulations?

Yes. Taiwan’s Fair Trade Act (the “FTA”) includes merger control provisions. The FTA empowers Taiwan’s Fair Trade Commission (the “FTC”) to prohibit transactions it determines would have a net-negative market impact, after weighing the transaction’s anti-competitive or other adverse effects on the Taiwan market against any countervailing economic benefits.

2. Does Taiwan have pre-merger reporting requirements?

Yes. The FTA requires pre-merger notification if a regulated transaction meets certain market impact thresholds.

3. Do global transactions require filing in Taiwan?

Yes, provided that the transaction: (i) falls within one or more of the categories of regulated transactions and (ii) meets certain market impact thresholds, as set forth in the FTA.

4. What types of transactions are covered by the FTA?

The FTA applies to typical merger and acquisition transactions such as statutory mergers and share or asset purchases. Share and asset purchases for less than the entirety of a target business may be deemed regulated transactions under the FTA.  With respect to share purchases, any transaction resulting in the acquirer holding one-third or more of the voting shares of the target would be covered by the FTA.  Likewise, an asset purchase of a principal or major portion of the assets of a target would fall within the scope of the FTA. The FTA’s regulatory purview also extends to other business combinations including joint ventures and various other arrangements whereby one entity has de facto or contractual control over the operations of another.

5. What are the relevant market impact thresholds?

The FTA requires filing if any one of the following conditions exists with respect to a regulated transaction:

  • upon consummation of the proposed transaction, the combined entity would control one-third of the relevant market in Taiwan;
  • prior to the consummation of the proposed transaction, one of the participants in the transaction controls one-fourth of the relevant market in Taiwan;
  • during the immediately preceding fiscal year, (A) one of the transaction participants had sales revenue in Taiwan exceeding NT$15 billion (~US$465.5 million) and (B) the other participant had sales revenue in Taiwan exceeding NT$2 billion (~US$62.1 million)[1]; or
  • during the immediately preceding fiscal year, (A) one of the transaction participants had global sales revenue exceeding NT$40 billion (~US$1.32 billion) and (B) two participants each had sales revenue in Taiwan exceeding NT$2 billion (~US$62.1 million).

6. Are there any exemptions to the FTA filing requirements?

Yes. Common restructuring transactions are exempted from the FTA filing requirements.  Such transactions include:

  • the merger of (i) a parent enterprise (the “Parent”) with (ii) another enterprise, 50% or more of the voting interests of which is held either directly by the Parent or indirectly by a wholly-owned direct subsidiary of the Parent;

  • the merger of enterprises 50% or more of the voting interests of which are held directly or indirectly (not illustrated below) by the same Parent;

  • a transfer by a Parent of (i) all or a principal part of its business or assets or (ii) all or any part of its business that could be operated separately, to another newly established enterprise wholly-owned by the Parent; and the redemption of shares from certain shareholders by an enterprise (pursuant to certain provisions in the Company Law or the Securities and Exchange Law) resulting in any remaining shareholder(s) holding more than one-third of the outstanding shares of the enterprise.

In the coming months, we expect to publish additional installments of this FAQ.  Future installments will cover questions related to the definition of “relevant market” as well as filing procedures and content.  For more information on mergers and acquisitions in Taiwan, please contact Gregory A. Buxton at gbuxton@winklerpartners.com.


[1] Note that different sales revenue thresholds apply to financial holding companies.

 

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