2017.8.11
Jenny Chen
The Financial Supervisory Commission (hereinafter, the “FSC”) promulgated Articles 8, 10, 14, 15, 19, 20, 22, 24, 29 through 33 as amended and Article 38-1 as added of Regulations Governing Public Tender Offers for Real Estate Investment Trust Beneficiary Securities (hereinafter, the “Regulations”) via the Jin-Guan-Zheng-Jiao-1060025990 Directive of August 11, 2017. The amendments are highlighted below:
Firstly, to confirm that a public tender offeror has sufficient capital to complete the public tender offer, Article 10 as amended of the Regulations additionally stipulates that a public tender offeror shall prove the ability to pay the consideration for a tender offer. This article also provides that such proof shall include performance guarantee provided by a financial institution or a confirmation document indicating that the public tender offeror is capable of paying the consideration for the tender offer and issued by a financial consultant or certified public accountant with securities underwriting qualifications after a reasonable procedure is followed to assess the funding sources.
Secondly, Article 14 as amended of the Regulations provides that to enhance the responsibilities of the trustee of a real estate investment trust fund, it is specifically stipulated that the trust asset assessment committee as organized shall verify and examine important public tender offer information, including the identity and financial condition of the tender offeror, the fairness of the tender offer and the reasonableness of the funding sources for the tender offer, and shall make a recommendation to the fund holders. To provide more verification time to the trust asset assessment committee to facilitate its explanation about its position to the fund holders, the period in which a relevant trustee is required to respond is changed from 10 days to 15 days with additional requirements for the attendance of, and relevant meeting procedures for, a trust asset assessment committee meeting for the sake of compliance.
Thirdly, Article 15 as amended of the Regulations specifically provides that an entrusted entity shall set up a dedicated account for the receipt and defrayal of payment and dedicated funds shall be used for the dedicated purposes. In addition, such entrusted entity shall also perform the duty of care for a public tender offer as a good administrator. Also, the passive qualification that there shall not be any sanction above the level of correction imposed for any public tender offer business in the past year is additionally stipulated. To increase the convenience of a tender offeree’s participation in a public tender offer and enhance market transaction efficiency, a tender offeree is allowed to deposit real estate investment trust beneficiary securities through a custodial bank.
Fourthly, since a public tender offer which involves the approval of another competent authority or effective reporting will require more time for examination, Article 19 as amended of the Regulations extends the limit of an extended tender offer period from 30 days to 50 days. In addition, Article 24 as amended of the Regulations additionally stipulates the justified reasons for which a public tender offeror may apply to the FSC for exempting the one-year restriction in accordance with Subparagraph 3, Article 43-5 of Securities and Exchange Act, which includes the scenarios that the previous public tender offer was not completed as another competent authority failed to provide review report, and the public tender offeror has obtained approval from the competent authority, etc.
Fifthly, information disclosure is enhanced. Article 20 as amended of the Regulations additionally stipulates the matters that shall be reported and announced by a public tender offeror. In addition to satisfying the terms of the public tender offer, such matters shall also include that the public tender offeror has obtained approval documents from other competent authorities or have effectively reported this tender offer before the terms of the public tender offer are met, that the consideration for the tender offer has been wired into a dedicated public tender offer account of the entrusted entity, and that the volume that shall be sold after the terms of the public tender offer are satisfied has reached the maximum volume for the expected tender offer to serve as reference for the sale decision of the fund holders. It is also additionally stipulated that if a public tender offeror fails to pay the consideration for the tender offer at the time specified in the public tender offer prospectus, the offerees may rescind the contract directly without notification. The entrusted entity shall return the real estate investment trust beneficiary securities deposited by the offerees to the original offerees on the next business day to safeguard the rights and interests of the offerees. Articles 29 and 38-1 as amended of the Regulations additionally stipulate the specially noted matters for the contents of a public tender offer prospectus where the opinions of external experts cited in the public tender offer prospectus are provided to investors for reference through information disclosure. The external experts shall also affix their signatures or seals to the portions they are responsible for in the public tender offer prospectus. Article 30 as amended of the Regulations additionally stipulates that a public tender offer shall disclose the basic information about relevant external experts and the tasks they were entrusted to perform.
Sixthly, Article 32 as amended of the Regulations stipulates that if a public tender offeror adopts a multilevel structure of a tender offer, vital information such as the identity of the ultimate fund providers and relevant funding arrangements and plans shall be disclosed. If a public tender offeror is a company and uses the capital of the company to the consideration, the financial reports for the two years prior to the announcement of this public tender offer shall be used to strengthen the analysis and explanation about the reasonableness of the funding sources for this tender offer. A public tender offeror shall also issue a letter of commitment for performing the obligation to pay the consideration for the tender offer and announce all agreements or contractual documents for fund arrangements along with the public tender offer prospectus.