Elva ChuangThe Ministry of Economic Affairs (hereinafter, the “MOEA”) amended the Rules for Facilitating Venture Capital Enterprises (hereinafter, the “Rules”) on September 21, 2018 with the effective date retroactive to January 1, 2017. The amendments are highlighted below:
I. The operating types of venture capital enterprises are clarified.
Article 3, Paragraph 1 of the Rules as amended specifically depicts the operating types of venture capital enterprises. The venture capital enterprises within the meaning of the Rules refer to companies or limited partnerships of the following operating types where the paid-in capital of a company or the paid-in capital contribution of a limited partnership exceeds NT$200 million:
1. The management consists of at least two people with expertise in the management of a venture capital enterprise or in an invested industry and with capability in evaluating the enterprises to be invested and in making investment decisions.
2. Manners of investment in an invested enterprise include the acquisition of such invested enterprise’s equity through capital investment, or use of capital to purchase the equity of the invested enterprise from its original shareholders or to invest in a limited partnership to become a limited partner or to purchase the capital contribution of the original limited partners of the invested enterprise.
3. Post-investment management of the invested enterprise, including the provision of all kinds of value-added services or assistance, enterprise visitation, or participation in a board meeting or shareholders’ meeting of the invested enterprise.
II. A venture capital enterprise organized as a limited partnership under Article 23-1, Paragraph 1 of the Statute for Industrial Innovation is not subject to the above NT$200 million restriction.
For a venture capital enterprise organized as a limited partnership under Article 23-1, Paragraph 1 of the Statute for Industrial Innovation with its capital contributed in different years, if the capital contribution amount for each year meets the requirement of such article, such venture capital enterprise may be free from the above restriction that the paid-in capital amount shall reach NT$200 million.
III. A new regulation of the Rules declared that the management team may put their personal capital in the venture capital enterprise they manage.
To align the venture capital enterprises in Taiwan with international practices and in order to attract investment from international investors, Article 3, Paragraph 3 of the Rules is amended to indicate that the management team may put their personal capital in the venture capital enterprise they manage in order to align their interest with that of the other investors of the venture capital enterprise, reduce the risk and reward asymmetry of the investment team and investors of the venture capital enterprise, and contribute to more prudent investment and management of funds by the investment team.