| 2008.01.16 |
Texts of Trust Enterprise Act as Amended on January 16, 2008
[Chinese]
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Texts of Trust Enterprise Act as Amended on January 16, 2008
Article 1. This Act is enacted to improve management and development of trust enterprises and to protect rights and benefits of trustors and beneficiaries.
Article 3. Banks which conduct trust business with the approval of the Competent Authority shall be governed by this Act.
Securities investment trust enterprises and securities investment consulting enterprises which respectively, conduct specific items of a trust business concurrently to their other businesses pursuant to the Securities Investment Trust and Consulting Act and meet certain requirements, or securities firms which concurrently conduct specific items of trust businesses shall apply to the Competent Authority for approval before they are subject to provisions of the Act other than Articles 10 through 15, Articles 38 through 40 and Article 43 of the said Act.
The Competent Authority shall determine the scope of specific items of a trust business mentioned in the preceding Paragraph, qualification requirements for obtaining an approval of the application mentioned in the said Paragraph from the Competent Authority, circumstances that prevent the application from being approved by the Competent Authority and circumstances that make the said authority annul the permit, financial affairs, business management and other regulations which shall be complied with.
Article 4. The term “Competent Authority” as used in this Act, shall mean the Financial Supervisory Commission, Executive Yuan.
Article 7. The term, "related party" of a trust enterprise, as used in this Act shall mean any of the following circumstances:
1.A person holding more than five percent (5%) of the total number of shares issued by a trust enterprise or the total amount of the capital of a trust enterprise.
2.A person serves as a responsible officer of a trust enterprise.
3.A person who has power to decide how to allocate trust property.
4.A sole proprietor business operated by a person mentioned in Subparagraph 1 or Subparagraph 2, a partnership enterprise operated by persons mentioned in any of the said provisions, serving as a responsible person of an enterprise, or acting as a representative of an organization by a person mentioned in any of the said provision.
5.A person mentioned in Subparagraph 1 or Subparagraph 2 solely or collectively holds more than 10% of the total number of shares issued a company or the total amount of the capital of an enterprise.
6.A half (1/2) or above of the total number of directors of the board of directors in a company engage in businesses that are identical to a trust enterprise.
7.An enterprise of which more than five percent (5%) of the total number of shares is held by a trust enterprise.
Article 8. The term, "collective trust funds", as used in this Act shall mean the trust funds which are raised by a trust enterprise from an unspecific majority of people for specific investment purposes by means of issuance of beneficiary certificates or book entry and which are operated by the trust enterprise for the benefit of these unspecific majority of people.
As regards collective trust funds which are set up for purposes of investment in securities as defined by Article 6 of the Securities, if the establishment of collective trust funds meets certain requirements, it shall be processed pursuant to relevant provisions of the Securities Investment Trust and Consulting Act.
Article 9. A trust enterprise's name shall indicate the word, ‘trust.’ This rule does not apply to an entity which conducts a trust business concurrently with the approval of the Competent Authority.
Unless otherwise provided by other laws, a non-trust enterprise shall not use a name which indicates or may mislead the public into believe that it is a trust enterprise.
Political parties or other political organizations shall not invest in or manage a trust enterprise.
Article 10. Except for banks approved by the Competent Authority to conduct a trust business concurrently, a trust enterprise can only be a company limited by shares.
Articles 53 through 56 of the Banking Act of the Republic of China shall apply mutatis mutandis to the establishment of a trust enterprise.
The Competent Authority shall prescribe the minimum amount of paid-in capital by standard for the establishment of a trust enterprise, qualification requirements of a promoter of the said trust enterprise, items which shall be recorded in the constitution of the enterprise, the maximum number of shares held by the same person or same interested party, documents which shall be prepared for an application for establishment permit of a trust enterprise, procedures for the said application, circumstances which prevent the application from being approved and other items which shall be complied with.
Article 15. If a bank wishes to suspend or terminate its trust business, it shall apply to the Competent Authority for approval.
Articles 58, 59, 61 and 63 through 69 of the Banking Act of the Republic of Chichi shall apply, mutatis mutandis, to the merger, amendment, suspension, dissolution, revocation of approvals, clearance and liquidation of a trust enterprise.
Article 17. A trust enterprise may conduct the following supplementary businesses:
1.Acting as an agent for issuance, transfer and registration of securities, and distribution of stock dividends, interest and bonuses;
2.Providing consulting services in connection with the issuance and the collection of securities;
3.Serving as an attestor for the issuance of securities;
4.Serving as an executor of wills and an administrator of estates of a deceased person;
5.Serving as an agent for the bankruptcy of a company or a supervisor for reorganization of a company;
6.Serving as a trust supervisor;
7.Processing custody services;
8.Handling safe deposit box rental services;
9.Handling agency services for the following items if these items are related to trust services:
(1)Acquisition, administration, disposition and lease of property;
(2)Taking clearance and liquidation of property;
(3)Collection of debts; and
(4)Performance of debts;
10.Acting as an intermediary for the sale and the lease of real estate related to trust businesses;
11.Providing consultation services in connection with investments, financial management and real estate development; and
12.Processing other businesses which are permitted by the Competent Authority from time to time.
Article 18. Types of business to be conducted by a trust enterprise shall be submitted to the Competent Authority for approval; and amendments thereto shall also require such approval. A trust enterprise’s business which is related to foreign exchange shall be approved by the Central Bank of the Republic of China (Taiwan). If the business of the trust enterprise that involves discretionary decision-making in the underlyings utilized, where the trust property is utilized in securities as defined in Articles 6 of Securities and Exchange Act or in futures as defined by Article 3 of Futures Act, and where certain conditions are met, shall apply to the Competent Authority to concurrently operate securities investment consulting services.
A trust enterprise shall not conduct any business other than as approved by the Competent Authority.
Article 18-1. A trust enterprise that engages in a trust business shall specify the scope of its trust business operations, limits on transfer of beneficial rights, and disclosure of risks in a trust agreement and notify the trustor of these information.
The Competent Authority shall prescribe the scope of operations, limits on transfer of beneficial rights, and disclosure of risks as mentioned in the preceding Paragraph, as well as marketing, management of contract conclusion and other regulations that shall be complied with.
Article 20. If the trust property of a trust enterprise is the property which is required to be registered, it shall be registered pursuant to applicable regulations.
If the trust property of a trust enterprise is securities, the trust enterprise shall manage its self-own property and the trust property separately, and commend (securities) in the name of trust property. When it uses the trust property to engage in business transactions, it may act against the third party and Paragraph 2, Article 4 of the Trust Law shall not apply.
If the trust property of a trust enterprise is securities or corporate bonds, the trust enterprise shall commend (securities or corporate bonds) in the name of trust property. In the same way, if the trust enterprise proceeds transfer registration for trust, it shall be regarded as a notifying and issuing company.
Article 20-1. If the trust property of a trust enterprise is securities, the performance of the voting rights of the trust enterprise shall be calculated separately from the trust enterprise’s self-own property and other trust property and the proviso of Article 181 of the Company Act shall not apply.
When a trust enterprise executes the voting rights mentioned in the preceding Paragraph, it shall perform it pursuant to the trust agreement.
Article 22. A trust enterprise shall handle trust activities with the care of a good administrator and in good faith.
The Trust Association of R.O.C. shall draft regulations on obligations and related acts of trust enterprises mentioned in the preceding Paragraph. It shall submit the regulations to the Competent Authority for approval.
A trust enterprise shall periodically publicly announce the property entrusted by political parties and other political organizations and the acquisition and distribution of gains therefrom. Regulations governing such announcements shall be as prescribed by the Competent Authority.
Article 25. A trust enterprise cannot use trust property to conduct the following transactions:
1.Purchase securities or notes issued or underwritten by the trust enterprise or its related party;
2.Purchase properties of the trust enterprise or its related party;
3.Sales of trust property to the trust enterprise or its related party;
4.Other interested transactions regulated by the Competent Authority.
The term that a trust company is not entitled to the right to utilize the trust property and is specified in a trust agreement shall not be restricted by the preceding Paragraph. A trust enterprise shall fully notify the trustor of transaction circumstances as regards the trust property with itself, or transaction circumstances with respect to the trust property between it and an interested party. If a beneficiary is identified, the trust enterprise shall also notify the beneficiary of the said information.
Paragraph 1 does not apply to bonds issued by the government.
Article 26. A trust enterprise shall not use trust property to process businesses of extending credit provided in Article 5-2 of the Banking Act of the Republic of China.
A trust enterprise shall not use trust property to borrow money. This rule does not apply to a trust of land, when the purpose of the borrowing is to develop the land, and all the beneficiaries have consented to such borrowing or a beneficiaries’ meeting has passed a resolution to borrow money.
The resolution of a beneficiaries’ meeting can only be executed if the number of beneficiaries, two third (2/3) or above of the total number of beneficial rights, attends the meeting and one half (1/2) of the voting rights of the beneficiaries attending the meeting consents to such a resolution.
Article 27. A trust enterprise shall not conduct the following acts, except those acts which are conducted pursuant to the trust agreement, or an act of which the trust enterprise has notified the beneficiary in advance and to which it has acquired the written consent from the beneficiary:
1.Use trust property to purchase securities or notes brokered by such an enterprise’s banking department.
2.Use trust property as deposits by depositing such trust property with its banking department or that of a related party, or for a transaction related to foreign exchange with the said banking department.
3.Engage in transaction with itself or its related party other than transactions specified in Article 25, paragraph 1.
The preceding Paragraph does not apply to the term of a trust agreement, which states that a trust company is not entitled to the right to utilize the trust property. A trust enterprise shall fully notify the trustor of transaction circumstances as regards the trust property with itself, or transaction circumstances with respect to the trust property between it and an interested party. If a beneficiary is identified, the trust enterprise shall also notify the beneficiary of the said information.
The transactions related to foreign exchange as mentioned in Paragraph 1, Subparagraph 2, shall be subject to laws and regulations related to foreign exchange. A trustor shall be fully informed of risks related to foreign exchange. If a beneficiary is identified, he/she shall also be notified of the said information.
A trust enterprise shall formulate written policies and procedures with respect to control measures of interested transactions.
Article 32-1. A trust enterprise that engages in the management and the employment of collective investment trust funds, raises collective trust funds, or formulates a trust agreement which concerns a majority of trustors or beneficiaries, could draft a term in the trust agreement. Such a term states that a beneficiaries’ meeting shall resolve the execution of rights of a trustor and of a beneficiary.
A trust agreement shall specify procedures of convening a beneficiaries’ meeting, methods of reaching a resolution, calculation of voting rights, regulations of meetings and other items which shall be complied with.
The Trust Association of R.O.C. shall draft a model on items that are specified in a trust agreement and shall be complied with in a beneficiaries’ meeting, and submit the model to the Competent Authority for approval.
Article 32-2. A beneficiary who/which holds 3% or above of beneficial rights may, with written reasons, request to a trust enterprise that engages in the management and the employment of collective investment trust funds, raise collective trust funds to read, copy or photostat documents which were edited pursuant to Article 31 of the Trust Law.
The trust enterprise shall not reject the request mentioned in the preceding Paragraph if any of the following circumstances occurs:
1.The request is not made for the purpose of ensuring rights of a beneficiary.
2.The request obstructs the execution of a trust activity or impairs mutual interest of beneficiaries.
3.A person who/which makes the request engages in a business or operates an enterprise which is competitive to a trust business.
4.A person who/which makes the request is to notify the third party of the information that is to be read, copied or photostated by the person making the request, or within two years before the said request is made, has a record of notifying the third party the information that was read, copied or photostated by the person making the said request.
Article 34. A trust enterprise shall post a reserve fund to secure its indemnity obligations, restitution interest or other obligations to trustors and beneficiaries, while indemnity obligations, restitution interest or other obligations are resulted from the trust enterprise’s violation of a trustee’s obligations.
The required amount of such a reserve fund shall be as prescribed and promulgated by the Competent Authority; it shall not exceed the paid-in capital of the trust enterprise or of the institution conducting a trust business concurrently.
The reserve fund described in Paragraph 1 shall be deposited with the Central Bank of the Republic of China (Taiwan) in cash or government bonds within one (1) month after obtaining the business license.
A trustor or beneficiary shall have a priority right against the reserve fund described in Paragraph 1.
Article 43. If a trust enterprise, due to obvious adverse changes in its business or financial status, fails to pay its liabilities when due or it is likely that the trust enterprise damages a trustor’s or beneficiary’s interests, the Competent Authority may order it to transfer the trust agreement and its trust property to another trust enterprise designated by the Competent Authority.
If a trust enterprise is unable to continue to engage in a trust business due to a dissolution, suspension, shut down, or cancellation or revocation of approvals, it shall consult and let another trust enterprise assume its trust business and such assumption shall be approved by the Competent Authority.
If the trust enterprise does not process pursuant to the preceding Paragraph, the Competent Authority shall designate another trust enterprise to assume the trust business of the original trust enterprise.
If the items which are mentioned in the preceding three paragraphs and are transferred or assumed are collective trust funds or beneficiary securities raising business, a trust enterprise which assumes such items shall announce these items. If the assumed items are other trust businesses, the foresaid trust enterprise shall request an opinion of a beneficiary; in the case that the beneficiary does not consent to such an announcement or does not show any indication whether he/she/it consents to the announcement, then his/her/its trust agreement is deemed to be terminated.
Article 44. In addition to punishments provided for by this Act, in the event that a trust enterprise violates this Act or an order promulgated pursuant to the Act, the Competent Authority may order the trust enterprise to take corrective measures and to improve within the specified period of time; and depending on the seriousness of the violation, it may impose the following punishments:
1.Order the trust enterprise to terminate or suspend the position of its responsible person;
2.Suspend a part or all of the business;
3.Cancel the business license; and/or
4.Other necessary measures.
Article 53. If a trust enterprise violates Article 43, Paragraph 1 concerning the disposition of a trust business by failing to transfer the trust agreement or trust property to another trust enterprise designated by the Competent Authority, its responsible person shall be imposed with a fine of One Hundred and Eighty New Taiwan Dollars (NT$ 1,800,000) or above but not more than Nine Million New Taiwan Dollars (NT$ 9,000,000).
Article 56. Any of the following violations shall be punishable by a fine of not less than Six Hundred Thousand New Taiwan Dollars (NT$600,000) but not more than Three Million New Taiwan Dollars (NT$3,000,000);
1. Violation of Article 11;
2. Violation of Article 18-1, Paragraph 1;
3. Violation of Article 20, Paragraph 1;
4. Violation of Article 29, Paragraph 2;
5. Violation of Article 32, Paragraph 2;
6. Violation of Article 32-2, Paragraph 2;
7. Violation of Article 38 that applies mutatis mutandis to Article 50 of the Banking Act of the Republic of China;
8. Violation of Article 39;
9. Violation of Article 41; or
10.A trust enterprise violates Article 42, Paragraph 1, that applies mutatis mutandis to Article 45 of the Banking Act of the Republic of China.
Article 58-3. After a trust enterprise is punished pursuant to this Chapter, it shall be corrected within the prescribed period of time. If it has not corrected before the expiration of the said period, it shall, per violation, be imposed with the original amount of the fine.