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The term "group enterprise" as used herein means an overall entity formed by all enterprises having a relationship of control or subordination with the applicant company during the fiscal year in which the application is filed and during the immediately preceding fiscal year. In any one of the following circumstances, a relationship of control or subordination is deemed to exist:
- The relationship is a parent-subsidiary one.
- Where the applicant company has direct or indirect control over the personnel, financial, or business operations of another company, or where another company has direct or indirect control over the personnel, financial, or business operations of the applicant company. The following assessment criteria shall be used to determine such relationship:
- One holds the majority of the director positions in the other.
- An appointee of one is hired as general manger of the other.
- One possesses managerial authority over the other under a joint venture agreement entered into therebetween.
- One provides financing facility for the other totaling one-third or more of the latter's total assets.
- One provides endorsements/guarantees for the other totaling one-third or more of the latter's total assets.
- The applicant company and another company are mutually invested in each other, each in a total of one-third or more of the other's total voting shares or total authorized capital, and have direct or indirect control over each other's personnel, financial, or business operations.
In any of the following circumstances, a relationship of control or subordination is deemed to exist between the applicant company and another company; provided that where the applicant company submits evidence proving otherwise, this shall not apply:
- Half or more of the directors, supervisors, and general manager of the applicant company and the other company are the same. Calculation of this figure shall include the spouses, children, and relatives within the second degree of kinship of such persons.
- Half or more of the issued voting shares or authorized capital of the applicant company and the other company are each held or contributed by the same shareholders.
- Where the other company invests in the applicant company under the equity method of valuation, and such other company and its related party(ies) together hold the majority of the total issued voting shares of the applicant company, or where the applicant company invests in the other company under the equity method of valuation, and the applicant and its related party(ies) together hold the majority of the total issued voting shares of such other company.
Calculation of the number of shares held by or the amount of capital contributions to another company made by the applicant company shall include the following shares or capital contributions:
- The shares of or capital contributions to such other company held by or made by a controlled company of the applicant company.
- The shares held by or capital contributions made by a third party on behalf of the applicant company.
- The shares held by or capital contributions made by a third party on behalf of a controlled company of the applicant company.
The terms "parent" and "subsidiary" as used in these Supplemental Rules are defined in accordance with International Financial Reporting Standard 10.
The term "related party" as used in these Supplemental Rules is defined in accordance with Article 18 of the Regulations Governing the Preparation of Financial Reports by Securities Issuers. However, if the regulations issued by the competent authority to govern the preparation of financial reports for the relevant industry provide otherwise, those provisions shall govern.
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Where a public company in a group enterprise, when applying for TPEx listing of its stocks, meets the requirements/conditions under the Taipei Exchange Regulations Governing Review of Securities Traded on the TPEx (the "Regulations") but is deemed by the Taipei Exchange (TPEx) unsuited to have its stocks traded on TPEx because of failure to meet any of the following conditions, the TPEx shall disapprove the TPEx listing of its stocks:
- The principal business or products (referring to those accounting for 30 percent or more of the total operating revenues in each of the most recent two fiscal years) of the applicant company and any other company within the same group enterprise are not mutually competing and have the potential to be marketed independently. Determination of the term "mutually competing" as used here shall be made on the basis of an overall assessment of general factors such as type of enterprise, product substitutability, and target customers.
- Where there are financial or business dealings or transactions between the applicant company and any other company(ies) within the same group enterprise, each such company shall formulate concrete written systems for the operations relating to the financial and business affairs among them and have the same passed by its board of directors.
- The applicant company's financial and business conditions and its operational provisions mentioned above shall be free of irregularities.
- During the fiscal year of application for TPEx listing and during the most recent fiscal year, no more than 70 percent of the applicant company’s purchase amount shall come from any other company(ies) within the same group enterprise. However, this shall not apply where such event results from industry characteristics, market demand and supply conditions, government policy, or any other reasonable cause.
- During the fiscal year of application for TPEx listing and during the most recent fiscal year, no more than 50 percent of the applicant company's operating revenue or operating profit shall come from any other company(ies) within the same group enterprise; nor shall more than 50 percent of the applicant company's operating revenue be derived by utilizing key technologies or assets of any other company(ies) within the same group enterprise. However, this shall not apply where such event results from industry characteristics, market demand and supply conditions, government policy, or any other reasonable cause, and the aforesaid ratio furthermore does not exceed 70 percent.
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A parent company shall apply for TPEx listing of its stocks pursuant to the Regulations. Where a subsidiary in its application for TPEx listing of its stocks meets the requirements under the Regulations but is deemed by the TPEx unsuited to have its stocks traded on TPEx because of failure to meet any of the following requirements, the TPEx shall disapprove the TPEx trading of its stocks:
- The subsidiary shall annex to its application the financial report of the parent company and all subsidiaries of the parent company prepared under the accounting principles of the home country of the parent company, together with an audit opinion issued by a certified public accountant in the Republic of China stating the differences between the accounting principles applicable in the Republic of China and those applicable in the home country of the parent company and the effect(s) of such differences on the financial statement; provided, this restriction may be lifted if the applicant company submits its application for TPEx listing pursuant to the "net worth, operating revenue, and cash flow from operating activities" standard in Article 3, paragraph 1, subparagraph 2 of the Regulations, or to Article 3, paragraph 2 or 4 of the Regulations, or to the Taipei Exchange Supplemental Directions for Applications by Private Institutions Participating in Public Infrastructure Projects for TPEx Listing; or if during the fiscal year of application for TPEx listing and during the most recent fiscal year, the amount of purchase/sales transactions between it and its parent company is less than 10 percent of its total purchase/sales amount.
- Its profitability shown in the annexed financial report shall meet the requirements under Article 3, paragraph 1, subparagraph 2 of the Regulations; provided, this profitability restriction may be lifted on the basis of industry characteristics, market supply and demand conditions, government policies, or other reasonable causes.
- (Deleted)
- The total number of shares of the applicant company held by the parent company and all of its subsidiaries, and by those companies' directors, supervisors, representatives, and greater than 10 percent shareholders, and by related party(ies) thereof, shall not in total exceed 70 percent of its total issued shares. However, if any of the aforesaid relevant persons of the applicant company is neither a directly nor an indirectly interested party with respect to the parent company, that person's shareholding in the applicant company shall be excluded from the calculation.
- When a subsidiary of a TPEx (or TWSE) listed company or a TPEx (or TWSE) primary listed company in Taiwan applies for TPEx listing, the TPEx (or TWSE) listed parent company's pro forma operating revenue or operating income as stated on the pro forma financial reports for the most recent four quarters, excluding the financial data of the applicant company and reviewed by a CPA, do not show a decline of 50 percent or more against the same-period financial reports, and the parent company has not had any major transfer of clients or business for the most recent two accounting years. This provision, however, need not apply when the parent and its subsidiary operate different types of business, belong to different industry categories, or offer different types of products and there is no competition between them, or if caused by another reasonable cause.
- When a subsidiary applies for TPEx listing pursuant to the proviso of the preceding subparagraph, with regard to any activities of equity ownership dispersion conducted by the parent company to reduce its shareholding in the subsidiary within the 3 years before the application for TPEx listing, such activities shall have been done in a manner in which the pre-emptive subscription right is given to the parent's original shareholders or other manner not detrimental to the interests of the parent's shareholders. Subparagraph 10 of the Standards for Determining Unsuitability for TPEx Listing under Article 10, Paragraph 1 of the Taipei Exchange Rules Governing the Review of Securities for Trading on the TPEx shall apply mutatis mutandis to the review of such applications by subsidiaries.
The proviso of subparagraph 5 of the preceding paragraph does not apply if the applicant company is a company held by a domestic TPEx (or TWSE) listed investment holding company.
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These Supplemental Directions shall not apply to public enterprises.
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These Supplemental Directions, and any amendments hereto, shall take effect upon review and recordation by the competent authority after passage by the TPEx's board of directors.
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