Chapter 3 Business And Finance |
| Article 36 |
（Scope of investment）A financial holding company shall ensure the sound management of the business activities of its subsidiaries. The business of a financial holding company shall be limited to investment in, and management of, its invested enterprises.
A financial holding company may apply to the Competent Authority for approval to invest in the following enterprises:
1. Financial holding companies;
2. Banking enterprises;
3. Bills finance enterprises;
4. Credit card businesses;
5. Trust enterprises;
6. Insurance enterprises;
7. Securities enterprises;
8. Futures enterprises;
9. Venture capital enterprises;
10. Foreign financial institutions which have been approved for investment by the competent authority; and
11. Other enterprises for which the competent authority determines to be financial related.
The term "banking enterprise" as used in Subparagraph 2 of the preceding paragraph shall include commercial banks, banks for a special business purpose and investment and trust companies; the term "insurance enterprise" as used in Subparagraph 6 of the preceding paragraph shall include an insurance enterprise in the "non-life insurance" category, an insurance enterprise in the "insurance of the person" category, reinsurer, insurance agents and brokers; the term "securities enterprises" as used in Subparagraph 7 of the preceding paragraph shall include securities firms, securities investment trust enterprises, and securities investment consulting enterprises; the term "futures enterprises", as used in Subparagraph 8 of the preceding paragraph shall include futures commission merchants, leverage transaction merchants, futures trust enterprises, managed futures enterprise and futures advisory enterprises.
In the event that a financial holding company applies to invest in any of the enterprises listed in Subparagraphs 1 through 9, or Subparagraphs 10 and 11 of Paragraph 2 hereof, the application shall be deemed approved if the competent authority does not object thereto within fifteen (15) business days or thirty (30) business days, respectively, from the next day following the receipt of such application. Except in the case where a financial enterprise makes investment in accordance with the laws and regulations governing the industry the financial enterprise belongs to, a financial holding company and its directly or indirectly controlled affiliates shall not engage in any investment activity they apply for before it is approved by the competent authority. Violators of the preceding provision shall be subject to fines pursuant to Article 62 herein, and the shares acquired by the violator thereof either before or after the amendment of the Act, shall not carry voting rights and shall not be counted in the total shares issued. In addition, the competent authority shall order the violating financial holding company to dispose the unlawful investment within a prescribed period of time.
If the business or investment of the subsidiary of a financial holding company exceeds that which is permitted by laws and regulations upon establishment of the financial holding company, or the business or investment of a financial institution exceeds that which is permitted by laws and regulations upon its conversion into a subsidiary of a financial holding company, the competent authority shall require such company to make adjustment within a prescribed period of time.
The prescribed period of time mentioned in the preceding paragraph shall not be more than three (3) years. If necessary, the company may apply for an extension of such prescribed period twice, provided, that each extension shall not be more than two (2) years.
The responsible persons or employees of a financial holding company shall not act as the managerial personnel of an enterprises in which the venture capital subsidiary of the financial holding company invests.
The subsidiaries of a financial holding company must apply to the competent authority for prior approval before they undergo a reduction of capital. The regulations governing the required documentation for the application, application procedure, review criteria, and other matters to be complied with shall be prescribed by the competent authority. |
| Article 37 |
（Restrictions on investment）A financial holding company may apply to the competent authority for approval to invest in enterprises other than those prescribed in Paragraph 2 of the preceding Article, provided that the financial holding company and its representative do not act as the director or supervisor of such enterprise, or designate a person to be the managerial personnel of such enterprise, unless it is otherwise approved by the competent authority.
In applying for approval to invest in the aforesaid enterprises, the application shall be deemed approved if the competent authority does not object thereto within thirty (30) business days from the next day following the receipt of such application, provided, that the financial holding company shall not proceed with the relevant investment until such period has elapsed.
The total amount of investment in all of the other enterprises mentioned in Paragraph 1 hereof by the financial holding company shall not exceed fifteen percent (15%) of the financial holding company's net worth.
The shares of any of the other enterprises mentioned in Paragraph 1 hereof held by the financial holding company shall not exceed five percent (5%) of the total issued and outstanding voting shares of such enterprise.
The combined total of shares of any of the other enterprises mentioned in Paragraph 1 hereof held by the financial holding company and its subsidiaries shall not exceed fifteen percent (15%) of the total issued and outstanding voting shares of such enterprise, with exceptions to the following:
1. Higher shareholding by the subsidiary of the financial holding company is allowed pursuant to the laws and regulations governing the industry the subsidiary belongs to; or
2. Such other enterprise is not listed on the Taiwan Stock Exchange or Taipei Exchange, and among the financial holding company and its subsidiaries, only the venture capital subsidiary invests in the enterprise, and the investment does not exceed a specific amount.
The specific amount mentioned in Subparagraph 2 of the preceding paragraph and investment-related matters to be complied with shall be prescribed by the competent authority.
Where the shares of any of the other enterprises mentioned in Paragraph 1 hereof held by a financial holding company and its subsidiaries do not comply with the provisions in Paragraph 5 hereof prior to the enforcement of the amendment to the Act on December 30, 2008, the competent authority shall require such financial holding company to make adjustment within a prescribed period of time after the date of enforcement of the amendment.
The prescribed period of time mentioned in the preceding paragraph shall not be more than two (2) years. If necessary, the financial holding company may apply for an extension of such prescribed period once, provided, that each extension shall not be more than one (1) year.
With respect to the application of a financial holding company to the competent authority for approval to invest in an enterprise mentioned in Paragraph 1 hereof or Paragraph 2 of the preceding Article, the regulations governing the required documentation for the application, application procedure, review criteria, and other matters to be complied with shall be prescribed by the competent authority. |
| Article 38 |
（Limitations on shares held by subsidiaries）A Subsidiary of a Financial holding company or an enterprise in which the Subsidiary holds more than twenty percent (20%) of the total issued shares with voting rights or holds Controlling Interest shall not hold shares of the Financial holding company. |
| Article 39 |
（Short-term fund utilization items）The use of short-term funds by a Financial holding company shall be limited to:
1.Savings or trust funds;
2.The purchase of government bonds or financial bonds;
3.The purchase of treasury bills or negotiable certificates of deposit;
4.The purchase of bank guarantees or acceptances that are rated at or above a credit rating set by the competent authority, or, the purchase of commercial bills that are rated at or above a credit rating set by the competent authority; or
5.The purchase of financial products as may be approved by the competent authority which are related to the products in the above four subparagraphs.
Investments by a Financial holding company in real estate must be approved by the competent authority and such real estate may only be for purposes of the financial holding company's own use.
Article 249, Paragraph 2, and Article 250, Paragraph, 2, of the Company Law shall not apply to the issuance of corporate bonds by a Financial holding company; the competent authority may establish other conditions, terms, and requirements [with respect to the issuance of corporate bonds by a financial holding company]. |
| Article 40 |
（Capital adequacy ratio）Guidelines for a Financial holding company's capital adequacy ratio and the evaluation and calculation thereof shall be as prescribed by the FSC.
If the actual capital adequacy ratio is lower than that required by the guidelines referred to in the preceding paragraph, the FSC may request the Financial holding company to increase the amount of its capital, restrict its distribution of surplus, suspend or limit its investments, set limits on the remuneration of its directors and supervisors or impose other necessary requirements or restrictions. Such guidelines therefore shall be as prescribed by the FSC. |
| Article 41 |
（Requirements on financial ratios）To assure a sound financial structure of a Financial holding company, the FSC may, if necessary, set maximum or minimum financial ratio requirements for a Financial holding company.
If the actual financial ratio of a Financial holding company does not comply with such maximum or minimum limit prescribed by the FSC in accordance with the preceding paragraph, the FSC may request the Financial holding company to increase the amount of its capital, restrict its distribution of surplus, suspend or limits its investments, set limits on the remuneration of its directors and supervisors or impose other necessary requirements or restrictions.
The guidelines therefore shall be as prescribed by the FSC. |
| Article 42 |
（Obligation on confidentiality）Unless otherwise provided by law or regulations of the FSC, a Financial holding company and its Subsidiary(ies) shall keep its customer's personal data, transaction information and other relevant information confidential.
The FSC may ask a Financial holding company and its Subsidiary(ies) to establish relevant confidentiality measures in writing for the protection of the information referred to in the preceding paragraph, and to give public notice of such confidentiality measures through the Internet or by other methods designated by the FSC. |
| Article 43 |
（Cross-selling regulations ）A financial holding company shall apply to the competent authority for prior approval before its subsidiaries may engage in cross-selling activities among themselves and shall ensure that such activities will not harm the interests of customers.
When the subsidiaries of a financial holding company engage in cross-selling activities, their respective business, service personnel and services shall be made easily identifiable by the customers. Except for customers' names and addresses, the subsidiaries of the financial holding company shall comply with provisions of the "Personal Data Protection Act" with regard to jointly collecting, processing, and using the personal basic data and dealing or transaction records of customers.
The regulations governing the requirements for the application for approval mentioned in Paragraph 1 hereof, required documentation, application procedure, scope of businesses allowed, sharing of information, sharing of facilities, premises, or personnel management and other matters to be complied with shall be prescribed by the Competent Authority.
When the subsidiary of a financial holding company signs a product or service contract with a customer, the subsidiary shall explicitly disclose the important clauses of the contract and associated transaction risk, and note on the contract, by the nature of the product or service, whether the transaction is protected by deposit insurance, Insurance Guaranty Fund, or other protection mechanisms in place. The aforesaid contract shall be submitted to the competent authority or an institution designated by the competent authority for reference and posted on the websites of the financial institutions unless it is otherwise stipulated by other laws. |
| Article 44 |
（Restrictions and regulations applying mutatis mutandis to secured credits）The bank subsidiary or insurance subsidiary of a financial holding company shall not extend unsecured credit to the following persons; Article 33 of the Banking Act shall apply, mutates mutandis to secured credit extension [to such person].
1.A responsible person or major shareholder of the financial holding company;
2.An enterprise solely invested in by or a partnership invested in by a responsible person or major shareholder of the financial holding company or an organization in which such responsible person or major shareholders concurrently acts as the responsible person or representative;
3.A company of which more than half of the directors concurrently act as the directors of the financial holding company or its subsidiary(ies); or
4.The financial holding company's subsidiary and the responsible persons and major shareholders of such subsidiaries. |
| Article 45 |
（Counterparties of and restrictions on transactions other than credit extension ）When a financial holding company or its subsidiary(ies) engages in transactions other than credit extension with the following persons, the terms of such transactions shall not be more favorable than those offered to similarly situated customers, and such transactions require the resolution adopted by the attendance of two-thirds or more of all directors of the company and the concurrence of three-quarters or more of the directors present:
1.A responsible person and major shareholder of the financial holding company;
2.An enterprise solely invested in by or a partnership invested in by a responsible person or major shareholder of the financial holding company or an organization in which such responsible person or major shareholders concurrently acts as the responsible person or representative;
3.An affiliate and its responsible person and major shareholder of the financial holding company; or
4.The financial holding company's bank subsidiary, insurance subsidiary, securities subsidiary, and any such subsidiary's responsible persons.
Transactions other than credit extension mentioned in the preceding paragraph shall consist of the following:
1.Investment in or purchase of securities issued by any of the persons mentioned in the preceding paragraph;
2.Purchase of real estate or other assets from any of the persons mentioned in the preceding paragraph;
3.Sale of securities, real estate or other assets to any of the persons mentioned in the preceding paragraph;
4.Entering into agreements regarding payment of money or provision of services with any of the persons mentioned in the preceding paragraph;
5.[Arrangements involving] any of the persons mentioned in the preceding paragraph acting as an agent or broker of a financial holding company or its Subsidiary(ies) or providing other services which charge commission or fees; and
6.Engaging in transactions with third parties having a interest with any of the persons mentioned in the preceding paragraph or engaging in transactions with third parties in which transaction, persons mentioned in the preceding paragraph are involved.
The securities mentioned in Subparagraphs 1 and 3 of the preceding paragraph shall not include negotiable certificates of deposits issued by a bank subsidiary. When a financial holding company's bank subsidiary engages in the transactions described in Paragraph 2 with any of the persons mentioned in Paragraph 1, the amount of such transactions with any single related party shall not exceed ten percent (10%) of the net worth of the bank subsidiary, and the aggregate amount of transactions with all related parties shall not exceed twenty percent (20%) of the net worth of the bank subsidiary. |
| Article 46 |
（Reporting obligations）Where the aggregate transactions taking place between all subsidiaries of a financial holding company and any of the following counterparties reach a certain amount or a certain percentage, the financial holding company shall, within thirty (30) days after the end of each quarter in each fiscal year, report to the competent authority, and disclose the same via public announcement, the internet, or other means designated by the competent authority:
1. Same natural person or same juridical person.
2. Same natural person and his/her spouse and relatives by blood within the second degree of kinship, as well as enterprises in which the principal or his/her spouse is the responsible person.
3. Same affiliate.
The transactions mentioned in the preceding paragraph include:
1. Credit extension;
2. Guarantee or endorsement of short-term notes or bills;
3. Transaction of notes, bills, or bonds with reverse repurchase agreement;
4. Investment in or purchasing securities issued by any party mentioned in the preceding paragraph;
5. Transactions of financial derivatives; and
6. Other transactions as prescribed by the competent authority.
The certain amount, certain percentage, content and format of reporting and disclosure referred to in Paragraph 1 hereof, and other matters to be complied with shall be prescribed by the competent authority. |
| Article 47 |
（Public disclosure and certification of financial statements）At the end of each year, a financial holding company shall prepare consolidated financial statements, an annual report and a business report, and submit such documents, along with the resolutions for the surplus earnings distribution or loss make-up, and other particulars as designated by the competent authority to the competent authority within fifteen (15) days after the ratification of the same by a shareholders' meeting. The competent authority shall prescribe other particulars to be included in the annual report.
A financial holding company shall publicly disclose its balance sheets, income statements, statements of changes in shareholders' equity, and statements of cash flows, and other particulars designated by the competent authority to be included in the financial statements described in the preceding paragraph in a local daily newspaper published in such financial holding company's place of business or by other means as designated by the competent authority. However, a financial holding company that has complied with Article 36 of the Securities and Exchange Act is exempt from the above disclosure requirement.
The balance sheets, income statement, statements of changes in shareholders' equity and statements of cash flows included in the financial statement prescribed in Paragraph 1 shall be audited and certified by a certified public accountant.
Where a financial institution converts into a financial holding company, its undistributed surplus earnings will be listed as the capital reserve of the financial holding company after the conversion, but its distribution will not be restricted by Article 241, Paragraph 1 of the Company Act.
Where a financial institution has issued preferred shares, upon the conversion of such a financial institution into a financial holding company, the financial holding company shall assume the rights and obligations of such special shares, and, in the year that such financial institution converts into a financial holding company, the financial holding company shall distribute dividends in accordance with the statements and books prepared by its board of directors and audited by its supervisors for that year and Articles 228 through 231 of the Company Act shall not apply thereto. Article 2, Paragraph 1, Subparagraph 1, of the Employee Welfare Fund Act shall not apply to a financial holding company that has converted from a financial institution. |
| Article 48 |
(deleted). |
| Article 49 |
（Profit-seeking enterprise income tax return filing）Where a financial holding company holds more than ninety percent (90%) of the outstanding issued shares of a domestic subsidiary, such financial holding company may, for the tax year in which its such shareholding in the subsidiary has existed for the entire twelve (12) months of the tax year, elect to be the taxpayer itself, and jointly declare and report profit-seeking enterprise income tax and the ten percent (10%) tax surcharge on surplus retained earnings of a profit-seeking enterprise in accordance with the relevant provisions of the Income Tax Act. Other tax matters should be handled separately by a financial holding company and its domestic subsidiary. |
| Article 50 |
（Adjustment of income and payable tax）With regard to transactions between a financial holding company and its Subsidiary, or, between a financial holding company or the subsidiary of a financial holding company, and domestic or overseas individuals, profit-seeking enterprises, or educational, cultural, social welfare, charitable or [other] groups, where the amortization of income, cost, expenses, profits and losses are based on a non-arm’s-length arrangement for purposes of avoiding or reducing the obligations of a taxpayer, the financial holding company or subsidiary has improperly, for itself or others, sought to avoid or reduce tax obligations by means of the acquisition of shares, asset transfer, or other fraudulent arrangements, an auditing agency may, upon report to and approval of the competent authority, adjust such income and tax payable based on normal business practices or [other relevant] information for purposes of the accurate calculation of the income and taxes payable by the relevant taxpayer. However, the above shall not apply to transactions between a financial holding company and a domestic subsidiary in which the financial holding company holds over ninety percent (90%) of the outstanding issued shares.
The consolidated tax reporting provisions of the preceding Article shall not be applied to a financial holding company or its Subsidiary for the year in which an auditing agency, in accordance with the provisions of the preceding paragraph, has adjusted the income and tax payable for such financial holding company or subsidiary. |