November 2022
Teresa Huang and Sean Tang
Under Article 35, Paragraph 1 of the Medical Care Act, medical juridical persons shall not be unlimited liability shareholders of a company or partners of a partnership. In the case that a medical juridical person is a limited liability shareholder of a company, the total investment and the investment in a single company or the ratio of investment may not exceed a certain restriction. Under Paragraph 2 of the same article, the investment restriction in the preceding paragraph shall be set by the central competent authority. On November 8, 2005, the Department of Health (which has been restructured as the Ministry of Health and Welfare) of the Executive Yuan announced the investment restrictions under Article 35, Paragraph 1 of the Medical Care Act on such a basis (hereinafter, the “Original Announcement”), which has been applicable to date. Recently, to ease the restrictions on investment by medical juridical persons, the Ministry of Health and Welfare (hereinafter, the “MOHW”) pre-announced on September 21, 2022 the draft “Restrictions on Investment by Medical Juridical Persons under Article 35, Paragraph 1 of the Medical Care Act” (hereinafter, the “Draft”), which is highlighted below:
1. Eased restrictions on the total investment by a medical juridical person:
Under Article 1 of the Original Announcement, the total investment by a medical juridical person is subject to the following restrictions: (1) a medical juridical person shall not invest if its total net value does not reach the “required capital amount”; (2) a medical juridical person may invest 40% of the portion of its total net value that exceeds its “capital amount” if its total net value is greater than its “capital amount” but is less than twice its capital amount; and (3) a medical juridical person may invest 60% of the portion of its total net value that exceeds twice its “capital amount” if its total net value exceeds twice its “capital amount.” Article 2 of the Draft appropriately eases the restrictions on the total investment of medical juridical persons by changing the above term “capital amount” to “property necessary to achieve the purpose of its establishment as stipulated in Article 32 of the Medical Care Act.”
2. Eased restriction on the amount of investment in a single company by a qualified medical juridical person:
Under Article 2 of the Original Announcement, the amount of investment by a medical juridical person in a single company shall not exceed 20% of the paid-in capital of the company without any exception. Article 3 of the Draft additionally provides that this restriction does not apply if any of the following circumstances are met, subject to the MOHW’s approval: (1) the main business technology used by the subject of the investment is provided by the medical juridical person; (2) the intellectual property developed by the medical juridical person is used as the consideration for the purchase of the shares of a biotech and pharmaceutical company; (3) the medical juridical person accommodates the national blood self-sufficiency policy, the processing and reuse of medical and industrial wastes, international medical service, digital medicine, precision medicine, regenerative medicine, or other businesses invested under government policies. To wit, medical juridical persons that meet the above qualifications will no longer be subject to the restriction that the amount of investment in a single company shall not exceed 20% of the paid-in capital of the company.
3. Specific stipulation of investment not defined under Article 35 of the Medical Care Act:
Article 4 of the Draft specifically provides that the unconditional donation of shares or capital contribution accepted by a medical juridical person is not an investment stipulated under Article 35 of the Medical Care Act.
The pre-announcement period of the Draft is 60 days and will expire on November 21, 2022. In the absence of other major changes to the content of the Draft, it is expected to go into effect by the end of 2022. This requires special attention to related operators.
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