Taiwan Legal And Regulatory Updates - July 2019.

Legal News & Analysis - Asia Pacific - Taiwan - Regulatory & Compliance

3 August, 2019

 

Amendment to the Labor Pension Act – The President published the amendment to the Labor Pension Act (“LPA”) on May 15, 2019.  The highlights of the amendment include: (1) the LPA applies to foreigners with perminant residency; (2) the tax preference applies to (a) employers who actually engage in labor work, (b) self-employed operators; and (c) commissioned workers who volunteerily make payments and claim for pension in accordance with the LPA; (3) the statute of limitations for the surviving dependends to claims the balanace in the deceased’s pension account is ten years; (4) the fine is raised from NT$300,000 to NT$1.5 million for the employers failing to pay severance or pension; and (5) the name, responsible person of the enterprises which violates the LPA and the amount of fine will be published.  (Elvin Peng)

 

Amendment to the Labor Standard Act to introduce dispatched employment system – In May 2019, the Legislative Yuan passed the amendment to the Labor Standard Act to introduce the dispatched employment system.  The amendments include the following: (1) clearly define the dispatch business entity, demand dispatch entity, dispatched labor and dispatch employment contract (Article 2); (2) a dispatch employment contract shall be a contract with an indefinite term (Article 9); (3) dispatched labors can make direct request on the demand dispatch entity for salary on condition that the dispatch business entity failed to pay the salary and the failure continues after the dispatch business entity is fined by the authority (Article 22-1); (4) the demand dispatch entity may not interview or designate the dispatched labor before his/her employment, otherwise the dispatched labor is entitiled to establish the employment relations with the demand dispatch entity within 90 days from the provision of service (Article 17-1); (5) if the dispatched worker suffers from occupational accidents, the demand dispatch entity and the dispatch business entity shall bear the compensation liability jointly (Article 63-1).  (Elvin Peng)

 

The Amendment of the Renewable Energy Development Act—The amended Renewable Energy Development Act was promulgated on May 1 ,2019.  The main amendment includes: (1) The electricity business license (“EB License”) under the Electricity Business Act is no longer required to the renewable energy generation facilities whose capacity are below 2000KW.  Such a facility is only required to obtain the registration pursuant to the Regulation Governing the Establishment of Renewable Energy Facilities before the commencement of opearation.  (2) The renewable energy development fund paid by the enterprises selling non-renewable energy or generators of non-renewable enrgy for own use shall no longer be used for subsidising the cost occurred from Feed-in Tariff (FiT) paid by Taipower (the effective date of the clause to be promulgated).  (3) If the renewable energy generator directly selling electricity to the end-users intends to sell the remaining electricity to the Taipower or terminate the supply to the end users and sell all generated electricity to the Taipower, the Renewable Energy FiT rate of the year that the generator commenced the selling of electricity may still be appitable.  (4) If the capacity agreed to in the electricity agreement over a threshold (to be determined by MOEA), the user shall establish renewable energy facility or retainer of energy, purchase certain capacity (to be determined by MOEA) of renewable energy or certificate of such capacity, or pay the the compensation to the MOEA.  (5) The term of the lease of public land by renewable energy facilities and for cables may not be shorter than the term of the EB License.  (Ellen Peng)

 

Amendments to the Code of Criminal Procedure— On May 24, 2019, the Legislative Yuan passed the amendments to the Code of Criminal Procedure. In accordance with the amendments, the defendant is given the right to directly examine the case files, and a special chapter (articles 93-2 to 93-6) is added to restrict the defendant from leaving the border and going overseas. The highlights of the amendments include: (1) the newly added Article 33 provides that the defendant may request a photocopy of the case files and exhibits by advance payment of fees in the course of the trial; with the permission of the court, the defendant may review the case files and exhibits in the course of the trial if the safety of the documents thereof are assured; (2) Article 93-2 provides that the prosecutors and judges are entitled, when necessary and in compliance with legal requirements, to restrict the defendant from leaving the border and going overseas, so as to ensure the presence of the defendant at the trial, prevent the defendant from fleeing abroad, and hinder the exercise of the state’s penal power.  (Ju-Ya Lu, Esq.)

 

Amendments to the Civil Code— On May 24, 2019, the Legislative Yuan passed amendments to the Civil Code, adding voluntary custody system under articles 1113-2 to 1113-10. Highlights of the amendments are as follow: (1) the principal may make an agreement with the mandate that the mandate may act as guardian in place of the guardian chosen by the court when the principal has become subject to the order of guardianship; (2) the principal or mandate may withdraw the voluntary custody agreement prior to the declaration of guardianship ordered by the court; (3) after the declaration of guardianship ordered by the court, the principal may petition the court for termination of the voluntary custody agreement with good causes; (4) the voluntary custody agreement may stipulate that the mandate can purchase or dispose real property for the benefit of the ward, or lease, provide others to use the ward’s living building or its base, or terminate the lease of the premises or its base land where the ward is living, and may make investment of the ward’s property.  (Ju-Ya Lu, Esq.)

 

The Legislative Yuan passed the amendment to the Patent Act (the “Amendment”) on April 16, 2019. The Amendment is promulgated on May 1 by the President Order, highlights of the Amendment include:

 

1. The term of a design patent will be 15 years, extended from 12 years under the previous law.

 

2. An invalidation petitioner must submit supplemental briefs within three months from the date when the invalidation action is filed, and delayed submissions will not be examined. Also, limitations are imposed on patentees who wish to amend the claims during invalidation proceeding.

 

3. Post-grant amendments for a utility model patent is permissible only during the invalidation proceeding, court proceeding, or when there is a pending application for the technical evaluation report. Further, the amendment shall be subject to substantive review regardless whether there is an invalidation action filed against the patent or not.

 

4. A divisional application can be filed within three (3) months (30 days previously) from the receipt of the notice of allowance no matter whether the application is granted during the preliminary examination or reexamination stage. The foregoing also applies to utility model patents.  (Sean Fan)

 

The Legislative Yuan passed the amendment to Articles 87 and 93 of the Copyright Act (the “Amendment”) on April 16, 2019. The Amendment is promulgated on May 1 by the President Order.  After amending the bill, providers of illegal set-top boxes or APPs providing access to infringing websites will face a sentence of up to two years imprisonment or detention, or in lieu thereof or in addition thereto, a fine of not more than five hundred thousand New Taiwan Dollars. There are three conducts in the Amendment which would be deemed as infringement of copyright if he/she:

 

(1) provide the public with the computer program converging the website of such works

 

(2) instruct, assist in, or setting the access for the public to use the computer programs mentioned in (1); or

 

(3) manufacture, import or sell the equipment or devices with the computer programs mentioned in (1).  (Sean Fan)

 

Partied Amendment to Telecommunications Management Act Passed— The structure of the current “Telecommunications Act” was established in 1958 and substantially amended in 1998 due to commitments to WTO accession. In lights of the growth of telecommunication and information technologies and the arrival of 5G era, in which vertical sector applications, such as IoT, IoV, AI and telemedicine etc., will change everyone’s life, the Legislative Yuan passed the amendment to the Telecommunications Management Act on May 31, 2019. The highlights of the amendment are as follows:

 

1. lowering barriers to market entry, i.e. changing the government-chartered system to a registration system to encourage free market participation on one hand (Art. 5); and adopting asymmetric control measures to correct market structure and adjust business practices for significant market providers (SMPs) to maintain fair market competition on the other hand (Arts. 27-35);

 

2. allowing frequency sharing, renting and lending to improve flexible use of rare telecommunications resources on one hand (Art. 58); and allowing networks to be co-constructed, for rent and the combination thereof to lower construction fees for 5G networks on the other hand (Art. 3II); and

 

3. giving 3-year transition period to enable existing operators to adjust their paces at a gradual manner (Art. 83).  (Roam Huang / Trainee Lawyer)

 

The FSC has promulgated on May 31, 2019 “The Penalty Guideline of the Financial Supervisory Commission in Respect of Violations of the PRC Investors Investing in Taiwan”.  Where PRC investors engage in investments in Taiwan violate Article 73(1) of the Act Governing Relations between the People of the Taiwan Area and the Mainland Area, the monetary fines will be imposed pursuant to the guideline set forth in the table below: 

(Unit: NT$)

 

Investment Amount Amount of Monetary Fines
$10 million or less, and the total shareholding held by PRC investor is less than 1% May request the PRC investor to make correction within the prescribed timeframe.  If the correction is made within the prescribed timeframe, no monetary fine will be imposed.   Otherwise, a monetary fine of $120,000 will be imposed.
$10 million or less, and the total shareholding held by PRC investor is 1% or more $120,000 
More than $10 million but $100 million or less  2% of the investment amount
More than $100 million, but $300 million or less  3% of the investment amount
More than $300 million 4% of the investment amount

 

The PRC investor will be subject to aggravated penaltiess if they are involved in the following circumstances (provided that such monetary fine shall not exceed the highest amount of the statutory penalty as provided by law):

 

(1) Invest in the restricted or prohibited industry;

 

(2) Act as a director or a supervisor of a company; 

 

(3) The percentage of shareholding held by the PRC investor in a company could effectively control the company in substance or affect the management of the company; 

 

(4) Avoid audit or supervision;

 

(5) Cause material effect to the securities or future market or national security;

 

(6) Any other substantial circumstances.

 

In addition, when a PRC investor violates Regulations Governing Securities Investment and Futures Trading in Taiwan by the Mainland Area Investors for its failure to make reporting or the information reported is untrue or incomplete, the guideline for monetary fines are set forth in the table below; provided, that if the violation is minor, the FSC may request the PRC investor to make correction.  Where the correction is made within the prescribed timeframe, no penalty will be imposed.  Otherwise, the PRC investor would be subject to penalty. 

(Currency/Unit: NT$/10,000)

 

Violation No reporting is made or the reporting is untrue or incomplete  Fail to report or make correction within prescribed timeframe for the first time Fail to report or make correction within prescribed timeframe for the second time Fail to report or make correction within prescribed timeframe for the third time
First time violation  6 18 72 250
Second time violation in 2 consecutive years  18 72 250 250
Third time violation in 2 consecutive years  72 250 250 250
Fourth time violation in 2 consecutive years  250 250 250 250

((Li-chen Wang)

 

The Financial Supervisory Commission and the Ministry of Justice have jointly promulgated the “Regulations Governing Anti-Money Laundering and Counter-Terrorist Financing for Financial Technology Innovative Experimentation” (the “Regulation”)─ By virtue of the financial technology innovative experimentation, the respection anti-money laundering and counter-terrorist financing measures adopted by different types of enterprises may not be consistent with each other.  The competent authorities therefore promulgated the “Regulations Governing Anti-Money Laundering and Counter-Terrorist Financing for Financial Technology Innovative Experimentation” on March 15, 2019.  There are 15 articles in the Regulations, and highlights thereof include: (1) the carrying out of innovative financial technologies experimentation by financial institutions is not subject to the Regulations; (2) the Regulations provides for measures that should be taken to confirm the identity of the participants and to enforce ongoing customer due diligence, to identify the situations where the enterprise should refuse to establish business relationship or to undertake transactions, and to determine the extent of enforcement based on a risk-based approach; (3) the Regulations prescribes procedures for conducting business and establishing trading counterparties; (4) the Regulations provides for the requirement to establish anti-money laundering and internal control and audit systems, as well as the requirement to maintain transaction records; (5) the Regulations provides that the competent authority may, at any time, dispatch personnel or entrust appropriate agencies (organizations) to conduct inspections.  (Ju-Ya Lu, Esq.)

 

The FSC on April 30, 2019 issued an amended ruling to permit ETF feeder fund underlying domestic or foreign ETF.  Where a securities investment trust enterprise (“SITE”) has already engaged in management of EFT feeder fund, it may apply with the SFC for approval to raise the feeder fund (managed by such SITE) underlying domestic or foreign ETF on the condition that the SITE has complied with the investment strategies that has been recognized and approved by the FSC, by virtue of the “incentive and encouragement requirements for SITEs”.  (Li-chen Wang)

 

Ministry of Labor announced that the supervisory/administrative workers with monthly wage of  NT$150,000 or more may be subject to Article 84-1 of the Labor Standard Act – On May 23, 2019, the MOL issued an official letter to announce that the exempt employees under Article 84-1 of the Labor Standard Act may include the supervisory/administrative workers whose monthly wage are NT$150,000 or above.  (Elvin Peng)

 

The Financial Supervisory Commission (“FSC”) made an administrative interpretation to regulate financial institutions and financial related entities regarding entering into cooperation agreements with juristic persons of the Mainland area ─ For regulating the cross-strait banking activities, the FSC issued an administrative interpretation (Ref. No.: Jin-Guan-Yin-Fa–Zhi No.10801036730) on matters in relation to signing cooperation agreements between domestic financial institutions and financial related entities and juristic persons or organizations of the Mainland area.  The highlights thereof include: (1) before financial institutions or financial related entities sign an cooperation agreement with juristic persons or organizations of the Mainland area, the matter shall be submitted to the board of directors (or the administrative committee) for discussion and approval, and the financial institutions should comply with paragraph 1 and 2 of Article 33-1 of the Act Governing Relations between the People of the Taiwan Area and the Mainland Area (i.e. the permission of the competent authority should be obtained) and with the relevant laws and regulations; (2) the signing of the contractual documents for specific business affairs within the scope of such a cooperation agreement may be handled by in accordence with its internal levels of authotity the financial institutions and the stratification of responsibilities, legal compliance matters, information security and risk management in relation to matters of cooperation or business executions should be incorporated into the internal control system; (3) whereas the financial institution is a public company, they should, after the board of directors approves the draft of cooperation agreement, inform the competent authority of the matter and make public announcement thereof pursuant to paragraph 3 of Article 36 of the Securities and Exchange Act; if the financial institutions is not a public company, they should announce such information over the company website within two days after the board of directors approves the draft of cooperation agreement.  (Ju-Ya Lu, Esq.)

 

Only when the Company Act expressly provides that the company may prescribe a higher quorum or super majority for resolution of the meeting of the shareholders or the board of directors, the company is allowed to prescribe a higher threshold in the articles of incorporation —The Ministry of Economic Affairs issued an administrative interpretation on May 8, 2019, stating that since it is hard to expect the new shareholders or creditor of a company to inspect company’s Articles of Incorporation (AOI) and to realize there is a higher quorum or super majority for voting required by the AOI than those provided for in the Company Act, the company is allowed to prescribe a higher quorum or super majority in the AOI in accordance with such Article of the Company Act, only when the Company Act expressly stipulates that the AOI is allowed to prescribe a higher quorum or super majority for the resolution of the meeting of shareholders or the board of directors (for example, paragraph 4 of Article 13, paragraph 1 of Article 29 , paragraph 3 of Article 185, paragraph 4 of Article 277, etc.),.  In the event that a company fails to meet the requirements set forth above, its AOI should be amended accordingly in the next general shareholder meeting. (Yen Chen)

 

The administrative interpretation in relation to distributing surplus earning in the form of new shares for the first three quarters or half fiscal year in accordance with Article of 228-1 of the Company Act -Paragraph 2 of Article of 228-1 of the Company Act provides that the proposal of surplus earning distribution or loss off-setting for the first three quarters or half fiscal year, together with the business report and financial statements, shall be forwarded to supervisors for their auditing, and be submitted to the board of directors (“BOD”) thereafter for approval. Paragraph 4 of said Article provides that a company distributing surplus earning in the form of new shares to be issued by the company in accordance with the provision of paragraph 2 shall follow the provisions of Article 240; if such surplus earning is distributed in the form of cash, it shall be approved by a meeting of the BOD.  In this regards, the Ministry of Economic Affairs issued an administrative interpretation on April 9, 2019, stating that in the case that a company issuing new shares for the first three quarters or half fiscal year in accordance with Article of 228-1 of the Company Act, the BOD resolving the proposal of surplus earning distribution or loss off-setting should forward the resolution together with the business report and financial statements to supervisors for their auditing. If supervisors have no further comments, such proposal shall be submitted to the shareholders’ meeting for approval pursuant to Article of 240 of the Company Act and does not have to be resolved by BOD again. (Yen Chen)

 

The Ministry of Economic Affairs amend the allowable percentage of equity capital contributed by service provided by promoters of a close company in lieu of cash -Article of 356-3 of the Company Act provides that equity capital of a close company contributed by the promoters in the form of properties needed in the business of a close company, technical know-how, or service in lieu of cash, provided that equity capital to be contributed by service shall not exceed a certain percentage of the total shares issued by a close company.  The Ministry of Economic Affairs issued an administrative interpretation regarding the percentage of equity capital to be contributed by service on June 4, 2019, stating that, for the companies whose paid-in capital is less than NT$30 millions, the equity capital contributed in the form of service shall not exceed 50% of issued and outatanding shares; for those companies whose paid-in capital is equal or more than NT$ 30 millions, the equity capital contributed in the form of service shall not exceed 25% of the issued and outstanding shares. (Yen Chen)

 

 

For further information, please contact:  

 

C. Y. Huang, Partner, Tsar & Tsai Law Firm

CYHuang@TsarTsai.com.tw