Changes in Law and Regulations

Government or Corporate Shareholder Cannot Designate both Directors and Supervisors of the Same Company

Regulations Governing Loaning of Funds and Provision of Endorsements/Guarantees by Public Companies Amended

Securities Transaction Tax Exempted for Sale and Purchase of Offshore Securities Issued by Domestic Enterprises

Calculation Basis Fixed for Income from Employee Bonus Shares

Tax Paid for Foreign Employees by Profit-Seeking Enterprises Deemed Salary Expenses

Rules on Transfer of Chinese Employees to Taiwan by Multinational Companies Relaxed

Legal News and Case Development

TIPO Revoked Registration of “SWISS ARMS and Device”

FTC Imposed Penalties on Concerted Action by Paper Manufacturers

Supreme Court Conditionally Admitted Information from the Internet as Evidence

Commentary

The FSC Relaxed Regulations on Cross-Straight Investment in the Banking, Securities and Futures and Insurance Industries

Changes in Law and Regulations

Recent Firm Activities

Government or Corporate Shareholder Cannot Designate both Directors and Supervisors of the Same Company – On February 6, 2010, the Financial Supervisory Commission (“FSC”) issued an administrative interpretation stating that a company’s directors and supervisors shall not be designated by the same government or corporate shareholder and/or their related parties.  However, this rule will not apply to the current directors and supervisors designated by the same government or corporate shareholder and/or their related parties until their current terms expire (Katie Wu).

Regulations Governing Loaning of Funds and Provision of Endorsements/Guarantees by Public Companies Amended – On March 19, 2010, the FSC promulgated the amended Regulations Governing Loaning of Funds and Making of Endorsements/Guarantees by Public Companies.  The important amendments include: (1) permitting cross provision of endorsements/guarantees between companies that are at least 90% directly or indirectly owned by the same public company; provided, however, that cross provision of endorsement/guarantees between companies that are 100% owned by the same public company shall not exceed 10% of the net asset value of the public company; (2) a public company shall stipulate in its internal rules the cap on the total endorsements/guarantees provided by it and its subsidiaries and the cap on the total endorsements/guarantees provided by it and its subsidiaries to a single enterprise; if the total amount of permitted endorsements/guarantees by a public company and its subsidiaries exceeds 50% of the public company’s net asset value, an explanation on the necessity and reasonableness of such endorsements/guarantees shall be provided to the shareholders’ meeting; (3) in case of loaning of funds between a public company and its parent or subsidiaries or between the public company’s subsidiaries, the public company may authorize its chairman to provide a loan in installments or provide a revolving loan under certain conditions; (4) the loan provided to a single enterprise by a public company or its subsidiary shall not exceed 10% of the net asset value thereof based on its most recent financial statements.  However, this rule does not apply in the case of a loan to a 100% directly or indirectly owned foreign company (Jo-Lin Huang).

Securities Transaction Tax Exempted for Sale and Purchase of Offshore Securities Issued by Domestic Enterprises – On March 23, 2010, the Ministry of Finance (“MOF”) issued an administrative ruling that transactions of convertible bonds and depository receipts issued by domestic companies abroad are exempted from securities transaction tax in Taiwan (Trinity Lin).

Calculation Basis Fixed for Income from Employee Bonus Shares – On March 12, 2010, the MOF issued an administrative ruling that starting from January 12, 2010, a company that issues employee bonus shares shall apply the “market price” on the employee bonus shares delivery day for calculation of employees’ salary income.  The “market price” of employee bonus shares shall be as follows: (1) for listed or OTC-traded stocks: the closing price on the delivery day; (2) for emerging stocks: weighted average trading price on the delivery day; (3) for non-listed, non-OTC-traded and non-emerging stocks: the book value per share based on the most recent audited and certified financial reports within one year prior to the delivery day (Trinity Lin).

Tax Paid for Foreign Employees by Profit-Seeking Enterprises Deemed Salary Expenses – On March 12, 2010, the MOF issued an administrative ruling that the taxes paid by an employer for their foreign employees may be filed as salary expenses, provided that (i) there are employment contracts or other documents to prove that the employer’s payment of employees’ taxes is part of their service compensation; and (ii) the employer have withheld the withholding tax on the employees’ salary income and filed the withholding or withholding-exempt forms for various income. However, if there is no such proof that the employer’s payment of employees’ tax is part of their service compensation, such payment should not be deemed the employer’s expenses or losses for the employers’ tax purposes and shall be regarded as a gift to such foreign employees and the foreign employees shall pay income tax accordingly (Trinity Lin).

Rules on Transfer of Chinese Employees to Taiwan by Multinational Companies Relaxed – On April 2, 2010, the Ministry of Interior announced the amendment to the Regulations on Application by Multinational Corporation for Internal Transfer of Mainland Area Employees to Work in Taiwan.  The amendment relaxed the extension period for duration of stay from one year to three years and permitted the Chinese employee’s spouse and children to extend their duration of stay for the same length of time as the Chinese employee’s duration of stay in Taiwan.  The amendment permits the responsible person or management of the multinational company’s Taiwan branch office or subsidiary to be the guarantor for the Chinese employee applying to come to Taiwan. The Taiwan branch office or subsidiary of a multinational company could also undertake to be the guarantor of the Chinese employee by declaring such commitment at the time of the Chinese employee’s application for entry into Taiwan.  The amendment further permits the issuance of multiple entry permits by the competent authority and deletes the requirement that the Chinese employee shall report and register with the local police department within 15 days of entering into Taiwan (Cecilia Liu).

Tsar & Tsai is selected by the Legal 500 as the Best Firm in Taiwan for the following fields: banking and finance, capital markets, corporate and M&A, dispute resolution, insurance, intellectual property, project and energy, real estate and construction, telecommunications and tax.

On April 16, 2010, Janice Lin, Partner of Tsar & Tsai, participated in the Capital Markets Forum hosted by Jun He Law Offices in Beijing.

On April 19 and 20, 2010, Tsar & Tsai, together with Townsend, Townsend & Crew LLP hosted Seminar on Intellectual Property Rights in Taiwan and the US in both Hsinchu and Taipei.  Joyce Ho, Partner of Tsar & Tsai, was the host for the Hsinchu session on April 19.  Jeanne Wang hosted the Taipei session on April 20.  Jeanne Wang also gave a speech on Observations on Recent Decisions by Taiwan’s IP Court during both the Hsinchu and Taipei sessions.

On March 31 and April 23, 2010, Jennifer Lin and Joyce Ho, Partners of Tsar & Tsai, spoke at the Institute for Information Industry on Reacting to New Patent Licensing Operating Models.

On April 30, 2010, June Su participated in the 2010 Taiwan Telecom Summit – Go Beyond 3G in Taipei.

On May 1 to 5, 2010, Jackie Lin, Partner of Tsar & Tsai, will attend the 2010 Chambers Asia Awards and the Inter-Pacific Bar Association 2010 Annual Meeting in Singapore.

On May 22 to 26, 2010, Joyce Ho, Partner of Tsar & Tsai, and Kevin Wei will attend the 132^nd International Trademark Association Annual Meeting in Boston.

On June 6 to 9, 2010, CY Huang, Partner of Tsar & Tsai, will attend the 46^th Annual Meeting of International Insurance Society in Madrid.

On June 20 to 23, 2010, Richard Chuang, Counsellor of Tsar & Tsai, will participate in the Chinese International Economic Cooperation Association’s Trade and Investment Delegation to the Great Britain.

TIPO Revoked Registration of “SWISS ARMS and Device” – Victorinox Swiss Army, Inc. and Swiss Army Brands, Ltd. successfully opposed the “SWISS ARMS and Device” mark registered by San Swiss Arms AG on the ground that such mark is similar to the “SWISS ARMY” mark registered by them.  The Taiwan Intellectual Property Office (“TIPO”) ruled in favor of such opposition and revoked the “SWISS ARMS and Device” mark.  The “SWISS ARMY” mark is a mark which is well-known in the relevant industries and among the consumers in Taiwan.  Considering that the “SWISS ARMY” mark is a trademark more familiar with the consumers such mark has been used in diversified goods, and the goods and services designated by the two marks are identical or closely related/similar in function, sales channel, manufacturers and potential consumers, TIPO ruled in favor of the opposition and revoked the registration of the opposed mark in all registered classes.  Tsar & Tsai represented Victorinox Swiss Army, Inc. and Swiss Army Brands, Ltd. in this case (Joyce Ho/Kevin Wei).

FTC Imposed Penalties on Concerted Action by Paper Manufacturers – On April 14, 2010, the Fair Trade Commission (“FTC”) issued a decision against three major local industrial-use paper suppliers, Cheng Loong Corp., Long Chen Paper Co., Ltd. and YFY Packaging Inc., for engaging in a concerted action to raise the price of papers for industrial-use between November 2009 and March 2010 which is in violation of Article 14 of the Fair Trade Act.  The FTC thus imposed penalties of NT$ 5 million on Cheng Loong Corp., NT$3 million on Long Chen paper Co., Ltd. and NT$2 million on YFY Packaging Inc.  The FTC determined that these three companies collectively own 90% of the market share of the local market for supply of materials for grade one industrial-use papers.  During the aforesaid period, there were major differences on these three companies’ cost of purchasing recycled papers, product focus, ability to handle the cost pressure, and ratio of import and export of products.  However, all the three companies raised their listing prices for industrial-use papers jointly and cannot provide reasonable explanations on the reason for such joint price increase.  The FTC thus determined that such joint price increase was carried out to avoid price competition in the relevant market (Connie Huang).

Supreme Court Conditionally Admitted Information from the Internet as Evidence – The Supreme Court recently held that the information obtained from the internet can be used as evidence.  However, since documents downloaded from the internet are different from written documents in nature, it is difficult to confirm the contents or the publication time of said information.  Hence, unless the parties do not dispute over the authenticity of the evidentiary documents downloaded from the internet, the party who introduces documents downloaded from the internet to prove its allegation shall bear the burden of proving the authenticity of the documents downloaded from the internet (Ray Hsu).

COMMENTARY  -- The FSC Relaxed Regulations on Cross-Straight Investment in the Banking, Securities and Futures and Insurance Industries

By Tze-Jeng Lin

Tsar & Tsai Law Firm

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