February 2023
Weke Chen
On January 3, 2023, the Legislative Yuan passed the Partial Amendments to the Act Governing Electronic Payment Institutions (hereinafter, the “Act”) after three readings.[1][2] These Amendments were later promulgated through a Presidential Decree on January 19 of the same year.[3] One significant addition to the Act was the requirement for electronic payment institutions to provide a legal opinion or certification report, can be reviewed by an attorney, as a part of their application for approval. In addition, if an electronic payment institution is deemed unlikely to operate soundly, the competent authority may order it to set aside an amount of provision or increase its capital. Detailed information regarding this matter can be found below:
I. A new provision has been added to the Act to stipulate that an application document for approval of an electronic payment institution may now be attached with an attorney’s legal opinion or certification report on a trust deed, performance guarantee contract, or a template
Prior to this amendment, Article 11, Paragraph 1 of the Act, required the founders or responsible persons applying for approval to engage exclusively in the business of an electronic payment institution shall submit specific documents to the competent authority, including “a description of the clearing and settlement mechanism for the business transactions of an electronic payment institution (Subparagraph 11),” “a description of the safeguard mechanism for funds received from users, the trust deed, the performance guarantee contract or a template therefor (Subparagraph 12),” “an assessment to ensure the budget is sufficient to meet the needs of the information system and to operate business properly in the next five years (Subparagraph 13),” etc., which shall only be certified by a certified public accountant (CPA).
The Amendments to Article 11, Paragraph 1, Subparagraph 12 of the Act now allow attorneys to issue a legal opinion or certification report on the payment guarantee mechanism description, trust deed, performance guarantee contract, or a reviewed template thereof. This empowers applicants to examine the completeness and appropriateness of the contract, based on a qualified professional’s opinion tailored to their needs.
II. Another new provision has been added to stipulate that if an electronic payment institution violates laws, regulations, or its charters, or if its conduct potentially undermines its sound operation, the competent authority may order it to set aside a certain amount of provision or to increase its capital.
Previously, Article 38, Paragraph 1 of the Act only allowed the competent authority to take limited measures when a dedicated electronic payment institution violates laws, regulations, or charters, or when its conduct may potentially undermine its sound operation. These measures included reversing resolutions adopted in the electronic payment institution’s statutory meetings, revoking its licensed business, or imposing sanctions on relevant personnel, without any moderate and flexible provisions and any provisions that could aid in enhancing the institution’s solvency.
However, with the addition of Article 38, Paragraph 1, Subparagraph 5 through the Amendments, the competent authority may impose sanctions more flexibly and require an electronic payment institution to set aside a certain amount of provision or to increase its capital. Furthermore, Paragraph 4 was concurrently added to the same article, authorizing the competent authority to designate an organization to provide business counseling to an electronic payment institution with operational deficiencies.
The Amendments to the Act will come into effect on March 1, 2023.[4] Electronic payment institutions are advised to pay close attention to the relevant developments and strengthen the soundness of their operations.
[1] See the newsletter titled Draft Amendments to Articles 11 and 39 of the Act Governing Electronic Payment Institutions of the Financial Supervisory Commission at https://www.fsc.gov.tw/ch/home.jsp?id=96&parentpath=0,2&mcustomize=news_view.jsp&dataserno=202301030004&dtable=News
[2] See the Yuan-Zhong-1777 Bill Relations Document of the Legislative Yuan and Proposal Nos. 29288 and 28934-1 of Legislators – the draft Amendments to Article 11 of the Act Governing Electronic Payment Institutions prepared by Legislator Kuo-wen Kuo and 18 other legislators of the Legislative Yuan, the draft Amendments to Article 38 of the Act Governing Electronic Payment Institutions prepared by Legislator Chia-pin Chung and 18 legislators of the Legislative Yuan , and a comparative table on the provisions of the current law at: https://lci.ly.gov.tw/LyLCEW/agenda1/02/pdf/10/06/14/LCEWA01_100614_00295.pdf
[3] See the Hua-Zhong-Yi-Jing-Zi-11200004641 Presidential Decree on January 19, 2023 at: https://www.president.gov.tw/Page/294/48642
[4] EXECUTIVE YUAN Order is hereby given, for designating the enforcement date of the promulgated amendment on Article 11 and 38 of “The Act Governing Electronic Payment Institutions” to be 1st, March 2023, at: https://gazette.nat.gov.tw/egFront/detail.do?metaid=138803&log=detailLog
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