Research on Chinese-invested enterprises’ Mergers and Acquisitions of Taiwanese Companies

• Main Authors: Sun, Jeng-Chyang, 孫正強
• Other Authors: Yu, Min-Teh
• Format: Others
• Language: zh-TW
• Published: 2016
• Online Access: http://ndltd.ncl.edu.tw/handle/77636031078517179930

碩士 === 國立交通大學 === 管理學院高階主管管理碩士學程 === 104 === The scale of cross-strait economic activities has been growing since 1987. In 2008, cross-strait economy embarks on a period of complete openness. Among all related phenomena emerged in this period, Chinese investment in Taiwan creates a new landscape in economy. To put it specifically, Chinese investment can be realized in several different ways, including investing on the stocks of listed and OTC companies in Taiwan through institutional investors, establishing branch offices in Taiwan, participating in the business operation in invested companies, and merging and acquiring Taiwanese companies. Regarding the practice of Chinese investment in Taiwan, as regulated in the Article 73 of the Act Governing Relations Between the People of the Taiwan Area and the Mainland Area, any individual, juristic person, or other institution of the Mainland Area, are not allowed to conduct investing activities without receiving approval by the competent authority. Ministry of Economic Affairs, R.O.C., is the competent authority for Chinese investment in Taiwan and its Investment Commission is the main institute responsible for practically examining Chinese investment in Taiwan. With the above mentioned regulations imposing limitations, however, Taiwan market and technology industry still keep attracting Chinese investment to flow into Taiwan. Different from general foreign investment, the attitude towards Chinese investment needs to be deliberate and conservative because of cross-strait political tensions and possibility of changes in the future. This study discusses Chinese investment in Taiwan from the aspect of company acquisition by reviewing current regulations on Chinese investment in Taiwan. The generally defined term of mergers and acquisitions (M&A) refers to all operations relating to the transfer and cooperation of the control power in enterprises; the strictly defined term means merely the M&A regulated by law; the strictest refers to the one solely defined in Company Act. This study adopts the strict definition of M&A to review Chinese investment in Taiwan. From the perspective of English and U.S. laws, the limitations imposed on foreign investment M&A can be reviewed from two dimensions, protection of minority shareholders as well as maintenance of national interests. In the USA there are limiting law, Foreign Investment Negative List, and national security law while in the UK its law put more emphasis on the protection to shareholders. From Taiwan’s perspective, for the Chinese-invested enterprises which one Chinese investment amount or cumulated amount accounts for 10% or more shares of listed or OTC companies in Taiwan, they should apply to get approval as per the regulations made by related competent authority. Moreover, different Chinese industries and business are set with different ratio limitation on investing in Taiwan’s security market. In addition, except getting the approvals of MOEAIC and what regulated otherwise, Chinese-invested enterprises can hold and execute the voting power in listed and OTC companies but not allowed to practically control or influence their business management and should delegate agents or representative in Taiwan to attend management meetings. As for Chinese-invested enterprises’ merging and acquiring non-listed and non-OTC companies in Taiwan, they need to obtain Investment Commission’s approval. As a whole, Chinese investment in Taiwan has tremendous influences on national security and interests and therefore currently Taiwan still keeps a high level of alertness on Chinese investment in Taiwan. Although with the above limitations, many practical demands and cases of Chinese-invested enterprises’ M&A are still present in the market, such as Magic Amah and Dinghsin Metal’s being acquired 100% by Chinese-invested enterprises and also BOE’s acquiring JEAN, which are typical cases in the past few years. Also, after getting the approvals of MOEAIC, Colorful Group, a computer channel enterprise in China, acquired total 46.2% of Chaintech’s shares through indirect shareholding, gaining over half seats on Board of Directors. A Shenzhen enterprise, Luxshare, acquired 25% shares of the Taiwan OTC company - SpeedTech’s 25% shares through its subsidiary – Hong Kong ICT-LANTO LIMITED and gained half seats on Board of Directors. There are still quite a few cases which Chinese-invested enterprises practically control listed and OTC companies in Taiwan through indirect investment. After reviewing Taiwan’s future economic development as well as worldwide openness progress, this article perceives that a more flexible attitude should be taken towards Chinese investment. The suggestions outlined in this article are as follows: 1) Improve the examination system of the M&A from Chinese investment. Use a more flexible attitude to face large-scale M&A and to achieve the balance in regard to time effect, enterprise effect as well as national interests. 2) Utilize various policies to lead Chinese investment to flow to the industries not relating to national security. 3) Maintain the balance of cross-strait economic relations and prevent huge changes from happening and jeopardizing cross-strait enterprise interest and national interest. 4) Open moderately for Chinese investment to merge and acquire the listed and OTC companies in Taiwan, except the industries relating to national security. Avoid Chinese investment entering Taiwan through third-part indirect investment to dodge authority’s governance so as to secure more effective management and information disclosure. In this way, shareholder equities can be guaranteed and increased, Taiwan’s capital market can be activated and, furthermore, the goal of Taiwan’s becoming fund-raising center in Asia can be realized. Keywords: Chinese investment, cross-strait economy, mergers and acquisitions (M&A), Chinese investment limitations, English and U.S. regulations on M&A, procedures of M&A.