Commentary on the Draft Amendment of the Law on Business Mergers and Acquisitions in Taiwan


On December 30, 2021, the Executive Yuan of Taiwan (ROC) adopted the draft amendment to ” Business Mergers and Acquisitions Act” (hereinafter referred to as “the Law”); it was subsequently approved by the Legislative Yuan in third reading on May 25, 2022. The law is reiterated as follows, which are separately explained below:

  1. Increase transparency of information on mergers and acquisitions;
  2. Add the right of appreciation of dissidents who vote against;
  3. Whale Relaxationminnow fusion;
  4. Clarify the intangible fixed assets items;
  5. Grant individual shareholders of Startups a tax deferral on dividend income.

(1) Increase transparency of information on mergers and acquisitions;

When carrying out mergers and acquisitions of companies, the current law, article 5, paragraph 3, stipulates that when the directors of the company have their interests in the merger and acquisition transactions, they must explain to the board of directors and the meeting of shareholders agrees with the material content based on their interests and the reasons for or against the resolution of the merger and acquisition. The draft amendment is amended to indicate that the company must disclose the director’s declaration of interests in the notice of shareholders’ meeting, and the content may be posted on the website designated by the securities regulatory authority. securities or the company.

(2) Add the right of appreciation of dissenters who vote against

Taking into account the law in force, article 1 provides that only shareholders who abstain from the right to vote can ask the company to buy back shares before or during the general meeting. However, the draft amendment is based on the interpretation of Judicial Yuan Interpretation No. 770 and further expands

the extent of the right of appreciation of the dissenters. Even if they vote against the M&A proposal at the shareholders’ meeting, they can ask the company to repurchase all the shares.

(3) Whale Relaxationminnow fusion

In order to increase the flexibility and efficiency of mergers and acquisitions, articles 18, 29 and 36 of the bill to amend the law will be amended to make the scope of application of the Whale-minnow merger (known as “the great whale eats the little shrimp”). The current law adopts parallel provisions for “share exchange” and “corporate division”, i.e. the issue of new shares must not exceed 20% of the total shares of the acquiring company, and the cash value or property payment does not exceed 2% of the net worth of the acquiring company. However, the draft amendment adopts the “either one” approach, and the relevant provisions are changed to “not pay more than 20% of the net value of shares, cash or property”. The proposed amendment increases the percentage of net worth. The reason for this is that when the law was first enacted, it was based on the simplified merger and acquisition procedures of Article 413-3 of the old Japanese Commercial Law. However, Japan revised it in the Company Law (会社法) in 2005, so refer to the relevant text of the amendments to the new Japanese law.

(4) Clarification of intangible assets

Considering the company’s goal to strengthen its competitiveness and expand the market, legislators often use mergers and acquisitions as an important means. Therefore, when the company undertakes mergers and acquisitions, its acquisition cost is higher than the acquisition premium of the fair value of the net assets acquired, and the identifiable intangible assets must be accounted for according to the financial accounting rule ( eg, IFRS and IAS, etc.), and the balance should be accounted for as goodwill. The draft amendment adds article 40-1 relating to the amortization of intangible assets and specifies the types of identifiable intangible assets, including commercial rights, copyrights, trademark rights, patents, integrated circuit design rights, plant breeders’ rights, fishing rights, mining rights, water use rights, trade secrets, computer software and various franchises. Secondly, relax the standard for calculating the amortization of intangible assets acquired in the context of a merger-acquisition according to the legal period of enjoyment or 10 years, which allows the acquirer to more easily estimate his tax cost.

(5) Granting to individual shareholders of Startups, a tax deferral on dividends

To promote incentives for the acquisition of individual shareholders of Startups, the draft amendment adds article 44-1, so that the dividend income of individual shareholders of Startups can be deferred until the 3rd year after the acquisition. of the following year, and the tax will be paid on average in 3 years. However, the recognition of the aforementioned startups must be based on companies that have not been registered for more than 5 years and have not issued shares publicly.

Furthermore, the definition of “assignment” in paragraph 3 of the same article refers to a sale, a gift, an inheritance, a capital reduction and cancellation of shares, a liquidation of a company or a change of ownership of shares due to other reasons. The tax year in which the shares are transferred as consideration for a merger or spin-off.

Paragraph 5 of the same article specifies the definitions of “merging date resolution(決議合併日)” and “split date(分割日)”, which are based on the “recording date(註冊登記日)” to the first resolution of the general meeting on the “merger date(合併日)” or “split date”. If the company is by article 19 “single merger(簡易合併)” or item 37 “Single split(簡易分割)” of the Act, the “date of the first resolution of the board of directors (董事會首次決議通過日)” will be used as a judgment criterion.

Finally, paragraph 7 of the same article specifies the “request procedures”, “documents to be presented” and “when the acquiring company is a foreign company”, the taxation procedures for the implementation of the “payment deferred” will be formulated by the Ministry of Finance separately to standardize.


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