Draft Amendment to Parts of the “Regulations Governing the Offering and Issuance of Securities by Securities Issuers” — Shelf Registration for Issuing New Shares (Taiwan)

Teresa Huang and Weke Chen

The Financial Supervisory Commission (“FSC”) announced on October 26, 2021, a partial draft amendment to the “Regulations Governing the Offering and Issuance of Securities by Securities Issuers” (hereinafter referred to as “Regulatory Measures”, and whose draft amendment as “Regulatory Measures Draft”), revising the current situation where each issuance of new shares for capital increases requires a declaration to authorities. The draft amendment of Regulatory Measures introduced shelf registration, a system implemented abroad for many years, while adjusting the current shelf registration system regarding the issuance of corporate bonds, allowing issuers fulfilling certain conditions to issue via installments within and under certain periods and declaration quota so that there’s no need to re-declare.[1] The Securities and Futures Bureau (“SFB”) expressed that the Regulatory Measures Draft will increase the speed for new stocks entering the market, where an approximately 2-month reduction in funding time is expected.[2] This article briefly explains the material provisions of the Regulatory Measures Draft as follows:

1. The Reason for Shelf Registration

Currently, an issuer must follow Article 12 of the Regulatory Measures, whereby each declaration letter and matter to be included shall be reported to the FSC along with the additional attachment before raising and issuing new shares.  The Regulatory Measures Draft allows issuers to file declarations after deciding the total amount of new shares to be issued and the scheduled issuance period through the board of director’s special resolution for the issuance of new shares via shelf registration to the FSC, which may be completed within the proposed issuance period (Article 19–1 of the Regulatory Measures Draft). However, if statutory conditions for termination are met, the issuer’s shelf registration shall cease immediately and announce such a termination; in addition, the issuer shall not declare any issuance of new shares for capital increases in cash before the termination of the issuer’s shelf registration (Article 19–3 of the Regulatory Measures Draft).

2. Eligibility for Shelf Registration

A public offering company may issue new shares via shelf registration only if it (1) has been listed or over-the-counter for at least three years; (2) has a market value above 2 billion at the time of declaration; (3) has not been penalized by the FSC in declaration year and past two fiscal years; (4) has not been in situations where the raise and issuance of securities are returned, revoked, or abolished by the FSC in declaration year and past two fiscal years; (5) has appropriately executed its plan to issue new corporate bonds and increase capital in cash in declaration year and past two fiscal years are; and (6) its appointed lead underwriter has not been punished by the FSC for its handling of matters related to raising and issuing securities in the declaration year and past two fiscal years (Article 19–1 of the Regulatory Measure Draft).

3. Obligations on Shelf Registration

To protect investors, as for the follow-up issuance after the initial shelf registration, the issuer is obligated to (1) provide a prospectus; (2) have experts issue their opinions; (3) follow the Company Act’s announcement rule, (4) collect the amount in full and report the follow-up issuance to the FSC. On top of that, the Regulatory Measures Draft stipulates conditions for follow-up issuance’s revocation and termination, announcement deadline, and the compensation liability that the issuer is liable for in the event of a violation against relevant regulations. (Article 19–2 of the Regulatory Measures Draft).

4. Others

Pursuant to the newly amended shelf registration system, the rules of the supplementary document shall include cases regarding the issuance of new stocks via shelf registration. Additionally, the shelf registration declaration letter, follow-up issuance after the initial shelf registration letter, and an additional promissory statement concerning the truth and transparency of any relevant documents for the issuance of new shares via shelf registration are newly added documents. (Article 75, Attachments 1-1, 3-1, 3-2 of the Regulatory Measures Draft).

For other relevant information, please refer to the announcement on the Executive Yuan Gazette Online on October 26, 2021: https://gazette.nat.gov.tw/egFront/detail.do?metaid=127699&log=detailLog


[1] Len-Yu Liu, “【Expert’s perspective】Shelf Registration Of New Shares Is Worth Promoting”,《Economy Daily News》, https://money.udn.com/money/story/12952/5275045 (last visited on December 13, 2021)

[2] Meng-Lun Wang, “〈1,245 Listed and OTC Companies Can Adopt ”Shelf Registration” For Cash Capital Increase Next Year〉, 《Liberty Times》, https://ec.ltn.com.tw/article/breakingnews/3709302 (last visited on December 13, 2021)