The contents of <em>Tsar &amp; Tsai Lex News</em> are not legal opinions and shall not be taken as legal advice on any particular issue or case. If the reader has any suggestions or questions, please do not hesitate to contact us.

Tsar & Tsai Lex News is aimed at providing the readers and clients

  1. important recent changes in the laws and regulations in Taiwan,
  2. practical views and interpretations on the laws,
  3. important legal news and case developments, and
  4. information on recent activities of Tsar & Tsai Law Firm. If you have any comments or questions, please feel free to contact us (Tel: 886-2-2781-4111; e-mail: Law@TsarTsai.com.tw ).

Editors: Jennifer Lin / Howard Chen

The Financial Supervisory Commission (“FSC”) amended the “Regulations Governing the Go Incubation Board for Startup and Acceleration Firms”, loosening restrictions on raising capital. – On March, 10, 2016, the FSC amended the “Regulations Governing the Go Incubation Board for Startup and Acceleration Firms”. Highlights of the amendment include the following: (1) companies recommended by the OTC may be exempted from the examination conducted by the Innovation and Creativity Examination Committee, so as to encourage companies to apply for listing on the Go Incubation Board; (2) companies may now choose to target only angel investors, whose investment limits are not subject to the NT$150,000 limit; (3) companies may examine the qualifications of prospective investors to determine whether to accept their investments; (4) the total amount that a company may offer for subscription is increased from NT$ 15 million to NT$ 30 million per year; (5) companies may offer preferred stock without creditor’s rights; (6) registration on the Go Incubation Board may be expanded if certain requirements are met. The amendment concerning angel investors is not yet in force; the date on which it will come into force will be announced. (Queenie Chen)

The Ministry of Finance clarified when to declare income tax based on the combined value of land and building─ The Ministry of Finance announced on March 9, 2016 an amendment to the“Operational Guidelines Governing the Declaration of Income Tax Based on the Combined Value of Land and Building”, loosening the requirement of when a taxpayer is required to declare income tax based on the combined value of land and building. Where a taxpayer engages in more than two housing development projects in the previous five years, such taxpayer will be regarded as a profit-seeking enterprise that is required to declare income tax. (Cherry Chen)

The Ministry of Labor amended regulations that broadened the scope of the rule requiring enterprises to establish a management system for occupational safety and health – On February 19, 2016, the Ministry of Labor amended the “Regulations Governing Occupational Safety and Health”, broadening the scope of the rule requiring certain enumerated enterprises to establish a management system for occupational safety and health. Under the new regulation, Class A enterprises (such as electronic parts and components manufacturers, water transportation companies, warehousing companies) with more than 200 workers, and Class B enterprises (such as hotels, medical goods manufacturers, hospitals and clinics) with more than 500 workers, are required to establish a management system for occupational safety and health. (Elvin Peng)

The FSC issued a rulingamending the minimum margin percentage of listed and OTC-listed securities. – On February 26, 2016, the FSC issued a ruling (Ref. No.: Jin-Guan-Cheng-Tou-Zi- 1050006600) regarding Article 61 of the Securities and Exchange Act, amending the minimum margin percentage of listed and OTC-listed securities required for margin purchases and short sales. The percentage is reduced from 120% to 90%. The ruling has been in force since March 1, 2016. (Queenie Chen)

The FSC broadened the scope of permitted investments of real estate investment trust funds. – On March 2, 2016, the FSC issued a ruling (Ref. No.: Jin-Guan-Yin-Piao-Zi- 10540000410) broadening the scope of permitted investments of Taiwan’s Real Estate Investment Trust Funds (“REIT Funds”), subject to the following limitations: (1) the total amount invested in offshore REIT Funds and in beneficial securities and asset-backed securities issued or delivered by other trustees or special-purpose companies, pursuant to the Real Estate Securitization Act or the Financial Asset Securitization Act, together shall not exceed 25% of the net asset value of the fund; (2) the amount invested in a single offshore REIT Fund shall not exceed 5% of the net asset value of the fund; (3) the total amount invested in offshore real estate and in offshore REIT Funds shall not reach 50% of the net asset value of the fund. (Queenie Chen)

Securities investment trust enterprises can now offer and issue exchange-traded funds (“ETF”) by using the dual currency trading mechanism of the Taiwan Stock Exchange. – On February 16, 2016, the FSC issued a ruling (Ref. No.: Jin-Guan-Yin-Tou-Zi-1040051559) allowing securities investment trust enterprises to offer and issue ETFs by using the dual currency trading mechanism provided by the Taiwan Stock Exchange. Highlights include: (1) foreign currency ETFs, before going public, may be purchased with New Taiwan Dollars; (2) for primary market transactions, foreign currency ETFs are to be transacted in that foreign currency; (3) for secondary market transactions, beneficiary certificates denominated in New Taiwan Dollars may be converted into another currency, and vice versa (the unit conversion ratio is 1 to 1). RMB-denominated ETFs will be listed for trading in the initial stage. (Ref. No.: Tai-Cheng-Jiao-Zi- 1050002539) (Queenie Chen)

A postpartum female worker may work at night if she has no need to breastfeed her child at night. – Paragraph 5 of Article 49 of the Labor Standard Law prohibits female workers from working at night during the breastfeeding period. In practice, to avoid violating this provision, some enterprises prohibit all postpartum female workers from working at night for a full year after giving birth, adversely affecting female workers’ right to work. The Ministry of Labor recently issued a ruling stating that if a postpartum female worker does not need to breastfeed her child at night, she may choose to work at night in accordance with applicable rules, after signing documents reflecting her willingness to do so. (Elvin Peng)

Article 177-1 of the Insurance Act has come into force, allowing insurance enterprises and other specified entities to collect, process or use personal information, such as medical records, medical treatment or health examination of individuals, with the written consent of such individuals. ─ The Executive Yuan announced that, on March 15, 2016, Article 177-1 of Insurance Act would come into force. This provision empowers insurance enterprises and other specified entities to collect, process or use personal information such as medical records, medical treatment or health examination of individuals, with the written consent of such individuals. The method of written consent, among other things, will be subject to the regulations to be announced by the competent authority. (Leonard Chen)

The FSC clarified that the policy of information sharing among subsidiaries of financial holding companies, for anti-money laundering and counter-terrorism purposes, falls within the exception to the confidentiality obligation provided under Paragraph 1, Article 42 of the Financial Holding Company Act. ─ On March 3, 2016, the FSC clarified that the establishment of a policy of information sharing among subsidiaries of financial holding companies, for anti-money laundering and counter-terrorism purposes pursuant to Article 37 of the “Implementation Rules of Internal Audit and Internal Control System of Financial Holding Companies and Banking Industries”, falls within the exception to the confidentiality obligation provided under Paragraph 1, Article 42 of the Financial Holding Company Act. However, in order to avoid interference with criminal investigations, such information sharing shall not include documents, pictures, information or things relating to a reported transaction suspected to be in violation of the Money Laundering Control Act. (Leonard Chen)

The Ministry of Economic Affairs (MOEA) issued a ruling clarifying the method of notifying shareholders upon adoption of a resolution approving a share swap under the Business Mergers and Acquisitions Act. — On March 22, 2016, the Ministry of Economic Affairs (MOEA) issued a ruling stating that, according to the Business Mergers and Acquisitions Act, after the adoption of a resolution approving a share swap, a company shall, 30 days before the record date of the share swap, give public notice thereof and notify each shareholder and each pledgee of shareholders as registered in the shareholders’ roster. Such notice shall include the following matters: (1) the main points of the resolution adopted by the shareholders’ meeting or the Board of Directors, (2) that the transfer of shares shall be effected on the record date of the share swap, and (3) that shareholders shall file their shares with the company one day before the record date of the share swap, and that those shares not filed shall become null and void. Where shares of listed companies, or of companies with shares deposited with the Taiwan Depository & Clearing Corporation, are not in circulation and otherwise have no impact on shareholders’ rights, such companies may notify shareholders of the share swap by way of public notice only. (Alex Cheng)

Where the total market share of enterprises participating in a concerted action does not reach 10%, it is presumed that the concerted action does not affect market order. — On March 1, 2016, the FTC issued a ruling stating that, under Article 14 of the Fair Trade Act, where the total market share of enterprises participating in a concerted action does not reach 10%, it is presumed that the concerted action has no impact on market functions with regard to production, trade in goods, or supply and demand of services. This presumption is not applicable if a concerted action of enterprises seeks to restrict the price, quantity, trading counterpart or trading territory of goods or services.

Controversies Relating to the Ministry of Labor’s Amendment to the “Enforcement Rules of the Labor Standards Act”

Elvin Peng

To promote the five-day work week, starting from January 1, 2016, the statutory working hours have been reduced from 84 hours every two weeks to 40 hours per week. To coordinate the reduction of working hours, the Ministry of Labor published the amendment to Articles 20-1 and 23 of the Enforcement Rules of the Labor Standards Act (the “Enforcement Rules”), which prescribe that overtime refers to the part of working hours that exceeds 8 hours per day or the part that exceeds 40 hours per week. The amended Enforcement Rules also reduce workers’ public holidays from 19 days per year to 12 days. Many labor organizations claim, however, that these amendments to the Enforcement Rules deprive workers of their overtime pay and compensatory leave that workers had enjoyed under the old version of the Enforcement Rules.

When the above amendments to the Enforcement Rules were sent to the Legislative Yuan, the Social Welfare and Environmental Hygiene Committee of the Legislative Yuan, in response to the concerns of labor organizations, resolved on March 28, 2016 to recommend the plenary session of the Legislative Yuan to reject and send back the proposed amendments to the Ministry of Labor, pursuant to Article 62 of the Legislation Yuan Duty and Power Exercise Act. Consequently, on April 8, 2016, the plenary session of the Legislative Yuan passed a resolution to send back the amendments to the Ministry of Labor.

The Legislative Yuan’s main reasons to decline the amendments were: (1) the amended overtime rules violate the principle of ordinary working hours and its legislative purpose under Article 30 of the Labor Standard Act; and (2) the reduction in the number of public holidays implicates the people’s rights and obligations, and as such the principle of legal reservation (as stated in Article 5 of the Central Regulation Standard Act, which requires that matters involving the people’s rights and obligations are to be set forth in statute) requires such important matters to be set forth in statute, not in administrative regulations such as the Enforcemetn Rules. Nevertheless, examining the above reasons given by the Legislative Yuan closely, one might question whether the amendments were really in contravention of Article 30 of the Labor Standard Act and the principle of legal reservation under Article 5 of the Central Regulation Standard Act. First, there is no change as to the calculation methods of overtime under the amendments in question. The amendments merely alter the working hours from “84 hours every two weeks” to “40 hours per week” to reflect the change in statutory working hours. Second, Article 37 of the Labor Standard Act authorizes the competent authority to prescribe the number of holidays and since the competent authority reduced the number of holidays pursuant to Article 37, it is questionable that the reduction in the number of public holidays in the amendments violates the principle of legal reservation.

Under Article 62 of the Legislation Yuan Duty and Power Exercise Act, after an administrative order is reviewed and found to violate, alter or contravene laws, or to have included matters which should be prescribed by statute, the issuing administrative authority shall make an amendment to or repeal the administrative order within two months following the notice of amendment or repeal issued by the plenary session of the Legislative Yuan, otherwise the administrative order will be invalid.

Given the above, as the Ministry of Labor has not modified the amendments to the Enforcement Rules, such amendments are still in force, and enterprises should handle the employee’s leave-taking matters in accordance therewith. However, if the Ministry of Labor fails to revise its amendments by June 8, such amendment will become invalid automatically, in which event enterprises should apply the old version of the Enforcement Rules before its amendment on December 9, 2014, meaning that the number of statutory public holidays will be 19 days rather than 12 days. Given that the statutory working hours have already been shortened, the costs for employers will surely rise if the number of public holidays returns to 19 days. The government should put forward another proposal as soon as possible to balance the rights of employees and employers.

Firm News

  • Joseph Tsai recently donated US$30 million to Yale Law School, in memory of his father Dr. Paul Tsai. Dr. Tsai had obtained an L.L.M. and an S.J.D. from Yale Law School in 1954 and 1957, respectively. The donation will be used to support the continued development of the China Center at Yale Law School, and the center’s name will be changed to Paul Tsai China Center.
  • The Intellectual Property Court found that the EVOH product of Chang Chun Petrochemicals Co., Ltd. did not infringe upon the patents of Nippon Synthetic Chemical Industry Co., Ltd. – With respect to the patent infringement lawsuit commenced in the Intellectual Property Court by Nippon Synthetic Chemcial Industry Co., Ltd. (“NSCI”), claiming that Chang Chun Petrochemicals Co., Ltd. (“CCPC”) infringed NSCI’s patent (patent no. 1356069) with CCPC’s EVOH product. On February 22, 2016, the court of first instance at the Intellectual Property Court held that NSCI’s patent lacked inventiveness and therefore NSCI’s patent infringement claim was denied. Tsar & Tsai acted as counsel to CCPC in this case.
  • The Taiwan Intellecutal Property Office agreed with the patent invalidation claim filed by CCPC and invalidated NSCI’s patent. – CCPC sought to invalidate NSCI’s patent (patent no. 1356069), claims 1 to 4. On March 22, 2016, the Intellectual Property Office determined that the said claims in the patent were invalid on the ground that the claims lacked inventiveness.

Recognitions

  • Tsar & Tsai was named the winner of “Coporate LiveWire – Global Award 2016” in the area of antitrust law.
  • Tsar & Tsai was named the “Most Innovative Law Firm of 2016, Taiwan” by Acquisition International.
  • Asialaw Leading Lawyers announced the following partners of Tsar & Tsai as leading lawyers in their respective fields in 2016:
    • Banking & Finance: Jackie Lin / Janice Lin
    • Capital Market: Jackie Lin
    • Corporate / M&A: CY Huang / Janice Lin / James Cheng / Richard Chuang
    • Dispute Resolution & Litigation: Edgar Chen / Jennifer Lin / Lillian Chu / SK Chen / James Cheng
    • IP: Jennifer Lin / Joyce Ho
    • Construction & Real Estate: Lillian Chu
    • Insurance: CY Huang
  • Jennifer Lin was named by Who’s Who Legal Magazine as a Leading Patent Lawyer in 2016; Jackie Lin was named a leading M&A lawyer in 2016, the only one so named in Taiwan.
  • Tsar & Tsai was named by Acquisition International as 2016’s “Best Cross-Border IP Law Firm – Taiwan” and “Best in Pharmaceutical IP Law – Taiwan”.
  • Joyce Ho was selected as a trademark 2016 leading practitioner by Eromoney’s Expert Guide.

Seminars

  • Joyce Ho, HP Lo and Yen-Ling Liu will attend the “INTA 2016 Annual Meeting” on May 21, 2016, held by the INTA in Orlando.
  • Janice Lin will attend the “British Academy seminar” on June 3-7, 2016, held by the British Academy and NTU in London.
  • Randy Tsai and Sophia Hsieh will attend the “IIS-Global Insurance Forum” on June 12-15, 2016, held by the International Insurance Society in Singapore.