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Lexgroup Newsletter (Issue No. 210)
Issue date:October 22, 2014
Covering legal news from: October 1 to October 15, 2014
Chief Editor: Mike Lu
Lexcel Partners
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Act for Industrial Innovation
1. Amendments to Industrial Innovation Act
The Executive Yuan passed amendments to the Industrial Innovation Act on 2 October
2014. We summarize below:
(1) R&D expenses
Within 3 years from R&D activities, companies may opt to deduct 10 percent of R&D
expenses from income each year for business income tax purposes. (Article 10)
(2) Tax deferral related to technologies
Individuals or companies who transfer or license patents or know-how as consideration
to subscribe for other companies' shares may defer the income tax payment until the 5th
year following the next year of the subscription. (Article 10-1)
(3) Tax deferral related to employees' shares
Employees who acquire shares by way of (i) profits distributed in the form of shares, (ii)
subscription of new shares by cash, (iii) treasury shares, (iv) employee stock option
certificates or (v) restricted stocks, may defer their income tax payment until the 5th year
following the next year of acquisition, provided that their income (calculated by the
current stock price) subject to deferral is capped at NT$5 million. In addition, income
tax shall be levied if employees transfer their shares within the deferral period.
When employees acquire shares as aforesaid but are not allowed to transfer them within
a certain period, the NT$5 million cap is determined by the current stock price on the
next day following the expiration of such a period. Under this circumstance, the
deferral period shall not include the period in which transfer of shares is prohibited.
(Article 19-1)
(4) Termination
The effectiveness of the amendments to Articles 10, 10-1 and 19-1 will terminate on
December 31, 2019.
Reported by: Kang-Shen Liu
Labor
2. Ruling for Explanation of Labor Standard Act
On October 7, 2014, the Ministry of Labor issued a ruling to clarify "regular wages during
maternity leave" that a pregnant woman shall be entitled to under Paragraph 2, Article
50 of the Labor Standard Act. Such wages shall be calculated on the basis of the last
month's wage she obtained or will obtain before her delivery divided by thirty; however,
the average daily wage for the past 180 days shall prevail if this is higher.
Reported by: David Tsai / Robin Huang
3. Amendments to the Enforcement Rules of Labor Union Act
On October 6, 2014, the Ministry of Labor announced amendments to the Enforcement
Rules of the Labor Union Act. We summarize below:
(1) Condition of independent personnel, budget and accounting systems of factories
and sites-type labor union are to be provided.
(2) The organizational area of regional confederated labor union organizations are
limited to the administrative area of special municipalities, counties/cities.
(3) Provision of the incremental standard of numbers of a labor union director.
(4) Labor union staff or members fired or discharged by an employer may retain their
staff or member position in the union through specific provision stated in the charter
of the labor union or resolution made by members or members’ representatives.
(5) Membership fees may now be withheld from salary upon consent of individual union
members.
Provision of new reasons for leave for union affairs.
Reported by: David Tsai / Robin Huang
Food and Drugs Administration
4.
Amendment to Regulations Governing Advertising and Promotion of Formula
Foods for Infants or Older Infants
On October 1, 2014, the Ministry of Health and Welfare (MOHW) announced the
amendment of the Regulations Governing Advertising and Promotion of Formula Foods
for Infants or Older Infants. As a result, only scientific medical journals or documents
exclusively for the use of medical personnel may contain advertising of formula foods for
infants or older infants. In addition, special exhibitions, the offering of coupons and
“seal opening discounts,” as well as bundled selling are prohibited from being used for
promotional purposes. The changes will take effect on January 1, 2015.
Reported by: Jolene Wang / Crick Liang
5.
Draft Amendment to Regulations for Registration of Medicinal Products
The MOHW announced on September 29, 2014 a draft amendment to the Regulations
for the Registration of Medicinal Products. The draft amendment cancels Article 46,
Paragraph 3 stipulating the batch quantity required for Bioavailability and
Bioequivalence tests, the same being already set forth in the Regulations for
Bioavailability and Bioequivalence Studies.
Reported by: Jolene Wang / Crick Liang
Insurance
6. FSC Issued a Draft Amendments to "Guideline to Supervise and Receive the
Insurance Industry"
Following amendments to the Insurance Act, the Financial Supervisory Commission
("FSC") has proposed amendments to the "Directions for Conservatorship and
Receivership of Insurance Companies"("Directions"). We summarize below:
(1) To add the duties and rights of a receiver. By reference to the practical
experiences of bankers and insurance companies, the Directions require that the
receiver apply with the competent authority to discontinue the public company status
of insurance companies. (Article 9)
(2) Requiring the receiver to propose an executive plan, apply for an approval with the
competent authority and apply to refund deposits. (Article 10)
(3) If necessary, the receiver may propose a temporary insurance plan and execute it
after the approval of the competent authority.
Reported by: David Tsai/ Angela Chang
Securities
7. Amendments to "Regulations Governing the Offering and Issuance of Securities
by Securities Issuers"
The FSC issued a press release on 8 October 2014 concerning amendments to the
Regulations Governing the Offering and Issuance of Securities by Securities Issuers.
The Taiwan Stock Exchange Corporation or GreTai Securities Market will be authorized
to handle issuers' applications for initial public offerings of stocks and equity increases
for cash before initial exchange listing. Issuers shall also declare that they will not
receive any rebates from underwriters regarding underwriting fees.
Reported by: Kang-Shen Liu / Angela Lin
Banking
8. Draft Amendment to Directions for Banks Conducting Financial Derivatives
Business
On October 7, 2014, the FSC issued a press release stating that draft amendments to
the "Directions for Banks Conducting Financial Derivatives Business" (Draft) will be
announced soon. This Draft aims at relaxing regulations for derivatives and enhancing
risk management for bank and client protection. We summarize below:
(1) Banks may provide structured products linked to gold.
(2) The requirement that a bank conducting financial derivative business shall satisfy
certain long term credit rating will be removed.
(3) New sophisticated high-risk products shall be submitted to and approved by the
board of directors.
(4) The remuneration system of associated personnel shall not be directly connected to
the sales performance of a specific product, and non-financial indicators shall be
adopted. This remuneration system shall be approved by the board of directors.
(5) Banks shall establish pricing policies of derivatives.
(6) Banks shall submit the trading limit of clients to the Joint Credit Information Center.
(7) If the derivatives product agreement executed by or the transaction document
provided to the non-institutional investors are in English, a Chinese translation shall
be provided.
(8) Product suitability systems shall also be applied to professional clients other than
institutional investors. The Draft authorizes the Bankers Association of the
Republic of China to enact the regulations governing product suitability and
disclosure of product risks applicable to non-institutional investors.
(9) Banks shall not solicit non-institutional investors to finance derivatives transactions.
(10)Banks may engage, with an issuer of stock appreciation rights, in trading of financial
derivatives linked to the Taiwan stock equity of the issuer, and shall act in
accordance with the "GreTai Securities Market Regulations Governing
Over-the-Counter Trading of Financial Derivatives by Securities Firms".
Reported by: Stacy Lo/ Mark Chen
Financial Holding Company Act
9. Explanation of Article 45 of the Financial Holding Company Act
The FSC issued a ruling on September 30, 2014. This allows that transactions between
a securities subsidiary of a financial holding company acting as the market maker of
open-end funds beneficiary certificates to perform its duty to offer or bid with a
counterparty under Article 45 of the Financial Holding Company Act, and foreign
currency call loans between securities firms and banks (which fall under Article 45 but
not limited to the entities under the same financial holding company) according to the
Regulations Governing Foreign Exchange Business of Securities Enterprises can be
generally authorized to the management to handle. This is subject to such authorization
being approved by at least three-quarters of the directors present at a board of directors
meeting attended by at least two-thirds of the directors.
Reported by: Stacy Lo / Angela Lin
Securities firms
10. Ruling for Securities Firms
On
September
26,
2014,
the
FSC
issued
a
ruling
(Ref.
No:
Jin-Guan-Zheng-Quan-Zi-1030038568) that where a securities firm acts as the market
maker to trade for market making or hedging purposes, it will be exempted from the
requirement of internal due process before proprietary trading (paragraph 1, Article 31 of
Regulations Governing Securities Firms) and restriction from trading within 2 hours after
a research report of a securities firm is issued to the public (paragraph 2, Article 36-1 of
Regulations Governing Securities Firms). Such an arrangement is intended to cope
with the establishment of a trading platform for beneficial certificates of open-ended type
securities investment trust funds.
Reported by: Jeffrey Liu / Judy Tai
Securities firms
11. Amendments to Rulings relating to Securities Firms' Investment in Venture
Capital Enterprises
On
October
3,
2014,
the
FSC
issued
three
rulings
(Ref.
No:
Jin-Guan-Zheng-Quan-Zi-1030037578, Jin-Guan-Zheng-Quan-Zi-10300375781 and
Jin-Guan-Zheng-Quan-Zi-10300375782) to amend the regulations governing securities
firms' investments in various types of venture capital enterprises ("VC"). We
summarize below:
(1) To impose limits on the investment ratio/amount investing in the reinvested
companies by the VC where the VC is under the control of a securities firm; and
(2) To remove restrictions on the joint-holder and investment objective of the VC.
Reported by: Jeffrey Liu / Judy Tai
SICE
12. Amendment to the "Scope and Types of Foreign Securities for which an Operator
of Investment Consulting Business for Foreign Securities may Provide Consulting
Services"
On October 2, 2014, the FSC issued a ruling (Ref. No. Jin-Guan-Yin-To-Zi1030039622) to amend Point 2 of the "Scope and Types of Foreign Securities for which
an Operator of Investment Consulting Business for Foreign Securities may Provide
Consulting Services". The major amendment is to relax restrictions so that only
non-professional institutional investors are prevented from using consultant services for
securities of the China securities markets.
Reported by: Jeffrey Liu / Caitlyn Kao
Insurance
13. Proposed amendment to International Financial Business Act approved by
Executive Yuan
The Executive Yuan approved a proposal to amend the International Financial Business
Act on October 2, 2014 to allow the establishment of an offshore insurance branch
("OIU") by insurance companies. This would allow insurance companies to establish
OIUs to sell insurance policies, without being subject to approval from the Insurance
Bureau, to offshore individuals and legal entities. They would also enjoy similar tax
incentives as an OBU/OSU. We summarize below:
(1) The following types of insurance business in foreign currencies would be permitted
to be sold by an OIU: (i) life insurance to offshore individuals and legal entities as
policyholders and insured; (ii) real estate insurance to offshore individuals and legal
entities as policyholders for offshore real estate; (iii) any offshore re-insurance
policies; and (iv) any other insurance business as approved by the competent
authorities.
(2) An OIU would be exempt from the Foreign Exchange Control Act and Insurance Act;
and
(3) An OIU would enjoy exemption from business income tax, business tax, stamp duty
and withholding tax.
Reported by: Stacy Lo / Angela Lin
Editors:
Mike Lu
Stacy Lo
Jeffrey Liu
Kang-Shen Liu
David Tsai
(Partner)
(Partner)
(Partner)
(Partner)
(Partner)
Counselors:
Echo Yeh
Sue Su
Shih-Jung Lee
Jolene Wang (Lexcel Partners IP)