{"id":110768,"date":"2025-07-31T14:41:08","date_gmt":"2025-07-31T14:41:08","guid":{"rendered":"https:\/\/my.legal500.com\/guides\/?post_type=comparative_guide&#038;p=110768"},"modified":"2025-08-20T15:15:15","modified_gmt":"2025-08-20T15:15:15","slug":"taiwan-restructuring-insolvency","status":"publish","type":"comparative_guide","link":"https:\/\/my.legal500.com\/guides\/chapter\/taiwan-restructuring-insolvency\/","title":{"rendered":"Taiwan: Restructuring &amp; Insolvency"},"content":{"rendered":"","protected":false},"template":"","class_list":["post-110768","comparative_guide","type-comparative_guide","status-publish","hentry","guides-restructuring-insolvency","jurisdictions-taiwan"],"acf":[],"appp":{"post_list":{"below_title":"<div class=\"guide-author-details\"><span class=\"guide-author\">Lee and Li, Attorneys-at-Law<\/span><span class=\"guide-author-logo\"><img src=\"https:\/\/my.legal500.com\/guides\/wp-content\/uploads\/sites\/1\/2019\/03\/Firm-Logo_Lee-and-Li.jpg\"\/><\/span><\/div>"},"post_detail":{"above_title":"<div class=\"guide-author-details\"><span class=\"guide-author\">Lee and Li, Attorneys-at-Law<\/span><span class=\"guide-author-logo\"><img src=\"https:\/\/my.legal500.com\/guides\/wp-content\/uploads\/sites\/1\/2019\/03\/Firm-Logo_Lee-and-Li.jpg\"\/><\/span><\/div>","below_title":"<span class=\"guide-intro\">This country specific Q&amp;A provides an overview of Restructuring &amp; Insolvency laws and regulations applicable in Taiwan<\/span><div class=\"guide-content\"><div class=\"filter\">\r\n\r\n\t\t\t\t<input type=\"text\" placeholder=\"Search questions and answers...\" class=\"filter-container__search-field\">\r\n\t\t\t<\/div>\r\n\r\n\t\t\t\r\n\r\n\r\n\t\t\t<ol class=\"custom-counter\">\r\n\r\n\t\t\t\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">What forms of security can be granted over immovable and movable property? What formalities are required and what is the impact if such formalities are not complied with?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p><em>Forms of security<\/em><\/p>\n<p>Under Taiwanese law, security interests over <u>immovable property<\/u> are created in the form of mortgages under the Civil Code. Security interests over <u>movable property<\/u> may take various forms, including pledges, rights of retention governed by the Civil Code, or those regulated by the Personal Property Secured Transactions Act.<\/p>\n<p><em>Formalities requirements<\/em><\/p>\n<p>For immovable property (mortgages on real estate), security interests must be created in writing form and are effective only upon registration with the land registration authority.<\/p>\n<p>For movable property, formalities differ:<\/p>\n<ol style=\"padding-left: 0\">\n<li>Pledge: Created by agreement and physical delivery of the movable property (collateral). No written contract is required, but physical delivery is mandatory.<\/li>\n<li>Right of retention: Such right is perfected automatically when the creditor lawfully possesses the debtor&#8217;s movable property and the debt is due. There is no need for agreement or registration.<\/li>\n<li>Security interests governed by the Personal Property Secured Transactions Act: Created by a written agreement. Registration is necessary to make the security enforceable against third parties.<\/li>\n<\/ol>\n<p><em>Consequences of non-compliance<\/em><\/p>\n<p>For immovable property:<\/p>\n<p>A mortgage on immovable property is not valid without writing form or registration.<\/p>\n<p>For movable property:<\/p>\n<ol style=\"padding-left: 0\">\n<li>Pledges cannot be created without delivery of possession of an asset.<\/li>\n<li>Right of retention cannot be created without (i) lawful possession a property and (ii) the underlying debt is due.<\/li>\n<li>Security interests under the Personal Property Secured Transactions Act cannot be created without a written contract and are not effective against <em>bona fide<\/em> third parties without registration.<\/li>\n<\/ol>\n<p>In summary, failure to comply with the formalities required for creating security interests over movable property may render them invalid or unenforceable, and deprive them of priority protection.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">What practical issues do secured creditors face in enforcing their security package (e.g. timing issues, requirement for court involvement) in out-of-court and\/or insolvency proceedings?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p><em>Out-of-Court Enforcement<\/em><\/p>\n<p>Legally, enforcement of pledges, mortgage, or right of retention over a debtor&#8217;s property may proceed without court involvement. However, in practice, court involvement often becomes necessary in order to fully satisfy the secured creditor&#8217;s rights.<\/p>\n<p>When the court is involved, common practical issues include:<\/p>\n<ol style=\"padding-left: 0\">\n<li>Timing issue: Court proceedings generally take longer to conclude the enforcement\/foreclosure.<\/li>\n<li>Pricing issue: Court-run auctions tend to generate lower proceeds compared to private auctions.<\/li>\n<\/ol>\n<p><em>Insolvency Proceedings<\/em><\/p>\n<p>A secured creditor (i.e., creditor holding a pledge, mortgage, or right of retention over the debtor&#8217;s property) is entitled to a <em>right of exclusion<\/em> and could exercise such secured right independent of the relevant statutory proceedings:<\/p>\n<ol style=\"padding-left: 0\">\n<li>In bankruptcy proceedings, the secured creditor has the <em>right of exclusion<\/em>, allowing creditor to enforce the security interest independently alongside the bankruptcy proceedings.<\/li>\n<li>In reorganization proceedings, the secured creditor&#8217;s claim is prioritized and satisfied before unsecured creditors.<\/li>\n<\/ol>\n<p>A practical issue in bankruptcy proceedings: if the secured creditor cannot fully satisfy the claim through exercising the <em>right of exclusion<\/em>, any remaining claim must be pursued as an unsecured claim within the bankruptcy estate. Without the independent privilege of the right of exclusion, the creditor&#8217;s recovery process may be lengthy and the claim may remain only partially satisfied after the bankruptcy concludes.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">What restructuring and rescue procedures are available in the jurisdiction, what are the entry requirements and how is a restructuring plan approved and implemented? Does management continue to operate the business and \/ or is the debtor subject to supervision? What roles do the court and other stakeholders play?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Restructuring and rescue procedures are primarily regulated by the Company Act. Reorganization procedure is a comprehensive debt-restructuring process designed to help a company recover through reconciling with the stakeholder and making adjustments to its capital structure and operations.<\/p>\n<p>Under the Company Act, when a public reporting company (1) faces financial difficulty, (2) suspends operation, or (3) may have to cease its operation, but still has the capacity for \u00a0rehabilitating may file for reorganization. In addition, a petition for reorganization may be filed with the court by (1) the debtor company, (2) creditors whose claims against the company are equivalent to the value of at least 10% of the total issued shares of the debtor company, (3) shareholders holding more than 10% of total shares, (4) two-thirds or more of the employees, or (5) labor unions.<\/p>\n<p>Once the reorganization procedure is approved by the court, the original management is no longer allowed to continue operating the business. Instead, the court-appointed reorganizer will take control over the business operations. The reorganization plan will be proposed by the reorganizer, but it must be approved by a majority of aggregate votes from each class of creditors and shareholders, and is subject to final approval by the court.<\/p>\n<p>The court oversees and approves key stages of the process, while stakeholders such as creditors and shareholders vote on the restructuring plan and assert their rights. Stakeholders involve themselves in these proceedings through a creditor&#8217;s meeting. The date and location of the first meeting will be announced by the court after it grants the petition. At this meeting, the creditors will negotiate and determine the reorganization plan.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Can a debtor in restructuring proceedings obtain new financing and are any special priorities afforded to such financing (if available)?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Under Company Act, the court-appointed reorganizers, with the consent of \u00a0court-appointed reorganization supervisors, may represent the debtor in \u00a0obtaining \u00a0loans. In addition, the court may approve new financing if it is necessary for the continuation of operations and is expressly included in the reorganization plan.<\/p>\n<p>There is no statutory rule granting super-priority status to new financing. However, in practice, the court may afford such financing preferential treatment over unsecured claims, but only if the financing is critical to maintaining operations and clearly outlined in the reorganization plan.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Can a restructuring proceeding release claims against non-debtor parties (e.g. guarantees granted by parent entities, claims against directors of the debtor), and, if so, in what circumstances?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>In Taiwan, there is no explicit provision under the Company Act or Bankruptcy Act that permits a court-approved restructuring plan to release claims against non-debtor third parties, such as guarantors or directors of the debtor company.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">How do creditors organize themselves in these proceedings? Are advisory fees covered by the debtor and to what extent?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Under the Bankruptcy Act and the Company Act, upon receiving notice, the relevant creditors may report their claims and join creditors&#8217; meeting. They may also coordinate responses and exercise their rights in the relevant procedures.<\/p>\n<p>Creditors shall bear their own advisory fees when engaging independent legal or financial advisors, as there is no express statutory requirement for debtors to cover such costs.<\/p>\n<p>The relevant fees of court-appointed officers\u2014including reorganizers, supervisors, or trustees\u2014are paid by the debtor or the bankruptcy estate. Any advisory fees must be approved by the creditors and incorporated into the restructuring plan.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">What is the test for insolvency? Is there any obligation on directors or officers of the debtor to open insolvency proceedings upon the debtor becoming distressed or insolvent? Are there any consequences for failure to do so?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>In Taiwan, the primary test for insolvency under the Bankruptcy Act is the inability to pay debts as they become due. If the debtor&#8217;s total assets are insufficient to satisfy all liabilities, such condition may also trigger a debtor to petition for bankruptcy.<\/p>\n<p>In the event that the debtor is a company limited by shares, the board of directors may be fined between NT$20,000 and NT$100,000 under the Company Act for the failure to file for bankruptcy when such company becomes insolvent.<\/p>\n<p>In addition, if a debtor delays filing for bankruptcy and engages in dishonest conduct\u2014such as concealing assets, falsifying accounting records, or making preferential payments\u2014responsible individuals may be subject to civil liability for damages under the Civil Code and may also face criminal liability under the Bankruptcy Act or the Criminal Code.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">What insolvency proceedings are available in the jurisdiction? Does management continue to operate the business and \/ or is the debtor subject to supervision? What roles do the court and other stakeholders play? How long does the process usually take to complete?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>In Taiwan, insolvency proceedings are primarily governed by the Bankruptcy Act. Once the bankruptcy petition is approved, the debtor loses control over the bankruptcy estate. A court-appointed trustee will then take over the administration of assets and the operations of the debtor company.<\/p>\n<p>The court supervises bankruptcy proceedings. It approves petitions, appoints trustees, sets deadlines for claim registration, convenes creditors&#8217; meetings, and resolves disputes, if any. Creditors participate by filing claims in order to vote in creditor meetings.<\/p>\n<p>In practice, bankruptcy proceedings often last between 2 and 5 years, or even longer, depending on the complexity of the estate, number of creditors, and whether other relevant lawsuits are involved.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">What form of stay or moratorium applies in insolvency proceedings against the continuation of legal proceedings or the enforcement of creditors\u2019 claims? Does that stay or moratorium have extraterritorial effect? In what circumstances may creditors benefit from any exceptions to such stay or moratorium?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>In Taiwan, the Bankruptcy Act does not incorporate an automatic stay mechanism similar to other jurisdiction. Moreover, there is no statutory stay triggered upon the filing of a bankruptcy petition. Creditors&#8217; enforcement actions are restricted only after the court has formally declared bankruptcy. There is no interim moratorium between filing and declaration unless the debtor obtains a provisional injunction or asset preservation order in accordance with the relevant applicable laws.<\/p>\n<p>A stay order is territorial in scope and does not have automatic extraterritorial effect. It is worth noting that Taiwan has not adopted the UNCITRAL Model Law on Cross-Border Insolvency.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">How do the creditors, and more generally any affected parties, proceed in such proceedings? What are the requirements and forms governing the adoption of any reorganisation plan (if any)?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>In bankruptcy proceedings, creditors and other affected parties may participate in proceedings through the following mechanisms: filing and register their claims, attending and voting at creditors&#8217; meetings, contesting \u00a0the trustee&#8217;s verification of the debtor&#8217;s assets inventory and list of creditors, and electing supervisors to oversee the trustee&#8217;s administration.<\/p>\n<p>In reorganization proceedings, an application may be initiated by the company, qualified shareholders, creditors, labor unions, or two-thirds of employees. Creditors and shareholders are grouped into voting classes and invited to submit claims. The reorganization plan must be approved by a majority of aggregate votes from each class of creditors and shareholders and subsequently confirmed by the court to become binding.<\/p>\n<p>If a class rejects the plan, the court may still confirm it through a cram-down approach mechanism, provided that the plan is deemed fair, equitable, and conducive to the company&#8217;s recovery.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">How do creditors and other stakeholders rank on an insolvency of a debtor? Do any stakeholders enjoy particular priority (e.g. employees, pension liabilities, DIP financing)? Could the claims of any class of creditor be subordinated (e.g. recognition of subordination agreement)?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>In Taiwan, the ranking of creditors and other stakeholders in insolvency is governed primarily by the Bankruptcy Act. They are generally ranked in the following order:<\/p>\n<ol style=\"padding-left: 0\">\n<li>Bankruptcy Trustee: The costs and expenses incurred by the trustee in bankruptcy proceedings. These are preferential debts that take priority to any forms of secured or unsecured debts.<\/li>\n<li>Tax authorities: Overdue taxes. These are also preferential debts that take priority to any forms of secured or unsecured debts (other than the costs and expenses incurred by the bankruptcy trustee).<\/li>\n<li>Secured creditors: For example, a pledgee and mortgagee who may claim a preferential payment on the amount of proceeds derived from the pledged\/mortgaged property. However, if an employer undergoes suspension of business, liquidation, or bankruptcy, the order of payment for the worker\u2019s claims will be the same as secured creditors. These include: (a) unpaid wages under the employment contract for a period not exceeding six months; (b) retirement pension owed by the employer; and (c) severance pay owed by the employer in accordance with the Labor Standards Act or the Labor Pension Act.<\/li>\n<li>Unsecured creditors. For unsecured creditors, they have to duly register their claims within the designated time period, in order to be eligible for repayment on a <em>pro rata\u00a0<\/em>basis.<\/li>\n<li>Shareholders. The residual or surplus will be distributed among the shareholders or contributors in accordance with the rights attached to their shares\/contributions.<\/li>\n<\/ol>\n<p>As for subordinated claims, the Bankruptcy Act does not explicitly regulate this matter, and it is not commonly seen in practice. The Company Act states that if a debtor company is under an affiliated group, and a controlling company has directly or indirectly caused the debtor company to conduct against its ordinary business practice then claim by such controlling company shall be subordinated against other claims. This provision reflects the principles of the &#8220;deep rock doctrine&#8221;, also known as the equitable subordination rule.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Can a debtor\u2019s pre-insolvency transactions be challenged? If so, by whom, when and on what grounds? What is the effect of a successful challenge and how are the rights of third parties impacted?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Under the Bankruptcy Act, a court-appointed trustee may request the court to revoke any gratuitous or non-gratuitous acts committed by the debtor prior to the bankruptcy ruling. This applies if a gratuitous act is prejudicial to the creditors&#8217; rights, or if a non-gratuitous act is prejudicial to the creditors&#8217; rights and both the debtor and the beneficiary were aware of the prejudice at the time of the transaction.<\/p>\n<p>Furthermore, the trustee may annul the following security collateral and repayment acts carried out by the debtor company within 6 months before the bankruptcy ruling:<\/p>\n<ol style=\"padding-left: 0\">\n<li>Security collateral for outstanding debts, except for those which the debtor promised such security 6 months before the bankruptcy ruling.<\/li>\n<li>Repayment of debts that are not yet due.<\/li>\n<\/ol>\n<p>The trustee&#8217;s powers to revoke gratuitous or non-gratuitous acts, and nullify the security collateral or repayment acts shall lapse 2 years after the bankruptcy ruling. Moreover, the interests of third parties shall be restored to the state prior to the debtor&#8217;s act being nullified or voided.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">How existing contracts are treated in restructuring and insolvency processes? Are the parties obliged to continue to perform their obligations? Will termination, retention of title and set-off provisions in these contracts remain enforceable? Is there any ability for either party to disclaim the contract?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p><em>With Regard to Existing Contracts<\/em><\/p>\n<p>Once the petition for reorganization or bankruptcy is approved by the court, the court-appointed reorganizer or trustee (as the case may be) will assume management of the company during the reorganization or bankruptcy proceedings. A court-appointed reorganizer or trustee retains the discretion to either continue or terminate the contracts. However, in a reorganization procedure an exception applies to long-term contracts, which requires the reorganizer to obtain prior consent from the court-appointed reorganization supervisor before continuing to perform such long-term contracts. If the conditions mentioned above are met, in practice, the contracts will be performed by both parties.<\/p>\n<p><em>With Regard to Termination, Retention of title and Set-off provisions in these Contracts<\/em><\/p>\n<p>Termination is generally enforceable.<\/p>\n<p>The retention of title and set-off provisions in the original contracts generally remain enforceable, provided they meet the conditions stipulated by the Company Act or the Bankruptcy Act.<\/p>\n<p>For the retention of title provision, the Company Act requires when a counter party enforces such right, a reorganizer must obtain prior consent from the reorganization supervisor. In a bankruptcy proceeding, such provisions are enforceable by the debtor company if (1) the bankrupt company has not yet received the goods, and (2) the court-appointed trustee chooses to pay the full purchase price and demand delivery of the goods.<\/p>\n<p>For the set-off provision, the reorganizer must also obtain prior consent from the reorganization supervisor before performing such right. As for the set-off provision under the Bankruptcy Act, they remain enforceable as long as such rights arose prior to the commencement of the bankruptcy proceedings.<\/p>\n<p><em>Disclaimer of Executory Contract<\/em><\/p>\n<p>Lastly, in principle, parties may not unilaterally refuse to perform without legal basis. Any disclaimer or modification of contractual obligations is subject to approval by the reorganizer or trustee, and in certain cases, by the court or supervisory authority.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">What conditions apply to the sale of assets \/ the entire business in a restructuring or insolvency process? Does the purchaser acquire the assets \u201cfree and clear\u201d of claims and liabilities? Can security be released without creditor consent? Is credit bidding permitted? Are pre-packaged sales possible?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>In Taiwan, there are different requirements for the sale of assets or the entire business in reorganization and bankruptcy proceedings.<\/p>\n<p>In reorganization proceedings, the reorganizer must include any proposed sale of the assets in the reorganization plan, which must be approved by both the stakeholders&#8217; meeting and the court.<\/p>\n<p>As for bankruptcy proceedings, asset sales are carried out by the trustee, usually through public auction unless otherwise directed by resolutions adopted at the creditors&#8217; meeting.<\/p>\n<p>In both bankruptcy and reorganization proceedings, the disposal of assets is generally conducted through court-supervised auction procedures. Through court-supervised auction procedures and pursuant to the auction rules under the Compulsory Execution Act, assets sold through judicial auction are, in principle, transferred to the purchaser free and clear of any encumbrances. That is, the purchaser acquires the asset without being subject to the debtor&#8217;s existing liabilities or third-party claims, unless otherwise provided by law.<\/p>\n<p>Lastly, neither the Bankruptcy Act nor the Company Act expressly prohibits credit bidding or pre-packaged sales. In principle, such mechanisms may be allowed, provided they are approved by the court.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">What duties and liabilities should directors and officers be mindful of when managing a distressed debtor? What are the consequences of breach of duty? Is there any scope for other parties (e.g. director, partner, shareholder, lender) to incur liability for the debts of an insolvent debtor and if so can they be covered by insurances?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Under the Company Act, directors in general owe fiduciary duties to the company. A breach of these duties may lead to directors incurring personal liability to the company. Furthermore, once under reorganization or declared bankrupt, the incumbent directors lose their authority to manage the company&#8217;s affairs, and such authority is vested in the \u00a0court-appointed reorganizers or trustees. However, in both proceedings, directors must still remain mindful of their actions, as they may face criminal liability for any of the following acts:<\/p>\n<ol style=\"padding-left: 0\">\n<li>Concealing, destroying, or removing the property of the debtor company, or the disposing of such property in a manner prejudicial to creditors.<\/li>\n<li>Refusing to transfer assets or to respond to questions raised by the court-appointed reorganizer, reorganizer supervisor, and trustee.<\/li>\n<li>Fabricating debts or acknowledging fictitious liabilities.<\/li>\n<\/ol>\n<p>Shareholders are typically not liable for corporate debts. However, if they abuse the corporate structure to evade liabilities, they may be held liable under the doctrine of &#8220;piercing the corporate veil&#8221;. This only applies to companies limited by shares or limited companies. In addition, if the debtor company is under an affiliated group, a controlling company may be held liable if it has caused its subordinate, the debtor company, to conduct any business which is contrary to normal business practice, but fails to provide appropriate compensation upon the end of the fiscal year.<\/p>\n<p>Despite the foregoing, the Company Act stipulates that a company may purchase liability insurance for its directors. In practice, such policies often exclude coverage for fraud, criminal conduct, or known wrongful acts.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Do restructuring or insolvency proceedings have the effect of releasing directors and other stakeholders from liability for previous actions and decisions? In which context could the liability of the directors be sought?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Neither the Bankruptcy Act nor the Company Act expressly stipulates the release of directors or other stakeholders from liability for their prior actions. As mentioned above, directors and other stakeholders may still be held liable for their conduct even after the company undergoes restructuring or is declared bankrupt.<\/p>\n<p>In principle the court-appointed reorganizer or trustee may initiate litigation against the directors and other stakeholders while undergoing their respective proceedings. Moreover, if the matter involves a \u00a0director&#8217;s breach of regular fiduciary duty, the director may still be subject to claims by shareholders, or in serious cases, may even be disqualified from acting as a director for a period of three years.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Will a local court recognise foreign restructuring or insolvency proceedings over a local debtor? What is the process and test for achieving such recognition? Does recognition depend on the COMI of the debtor and\/or the governing law of the debt to be compromised? Has the UNCITRAL Model Law on Cross Border Insolvency or the UNCITRAL Model Law on Recognition and Enforcement of Insolvency-Related Judgments been adopted or is it under consideration in your country?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Taiwanese courts generally do not automatically recognize or enforce foreign bankruptcy proceedings against local debtors.<\/p>\n<p>Subject to certain conditions, an order by foreign restructuring proceedings for the enforcement of assets located in Taiwan may be recognized by a Taiwanese court through a recognition procedure which will be decided on a case-by-case basis. Whether a recognition would be granted by a Taiwan court depends on whether the foreign court had competent jurisdiction, whether due process was provided to the affected parties, whether the judgment is consistent with Taiwan&#8217;s public order and good morals, and whether there is reciprocity between Taiwan and the foreign jurisdiction.<\/p>\n<p>Recognition does not strictly depend on the debtor&#8217;s center of main interests (COMI) or the governing law of the debt, although these factors may be taken into account when evaluating jurisdictional legitimacy.<\/p>\n<p>Taiwan has not adopted the UNCITRAL Model Law on Cross-Border Insolvency or the Model Law on Recognition and Enforcement of Insolvency-Related Judgments. Currently there are no legislative efforts underway to introduce these frameworks, although they have been the subject of academic discussion.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">For EU countries only: Have there been any challenges to the recognition of English proceedings in your jurisdiction following the Brexit implementation date? If yes, please provide details.<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Taiwan is not an EU member state as referred to in this question.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Can debtors incorporated elsewhere enter into restructuring or insolvency proceedings in the jurisdiction? What are the eligibility requirements? Are there any restrictions? Which country does your jurisdiction have the most cross-border problems with?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>The Company Act and Bankruptcy Act do not explicitly address whether foreign-incorporated debtors may enter bankruptcy or reorganization proceedings in Taiwan.<\/p>\n<p>According to court precedents, foreign debtors may qualify for bankruptcy proceedings only if they have a representative or administrator in Taiwan.<\/p>\n<p>Eligibility for corporate reorganization requires that a debtor company not only has a representative or administrator in Taiwan but also be a public reporting company in Taiwan. Therefore, foreign debtors are not eligible to enter into restructuring proceedings in Taiwan.<\/p>\n<p>While no official data identifies jurisdictions most frequently involved in cross-border insolvency cases with Taiwan, such matters are most likely to arise in relation to the People\u2019s Republic of China, due to the frequency of the economic interaction.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">How are groups of companies treated on the restructuring or insolvency of one or more members of that group? Is there scope for cooperation between office holders? For EU countries only: Have there been any changes in the consideration granted to groups of companies following the transposition of Directive 2019\/1023?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>In Taiwan, each company within a corporate group is treated as an independent legal entity in restructuring or insolvency proceedings. Taiwanese law does not provide for consolidated or group insolvency proceedings.<\/p>\n<p>In practice, courts and trustees may consider the economic interdependence among group members, particularly where operational or financial relationships are closely intertwined. In certain cases, courts or trustees may undertake efforts to enhance coordination to the extent feasible.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Is your country considering adoption of the UNCITRAL Model Law on Enterprise Group Insolvency?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Taiwan has <em>not<\/em> formally adopted the United Nations Commission on International Trade Law (UNCITRAL) Model Law on Enterprise Group Insolvency. The draft amendment to Taiwan&#8217;s Bankruptcy Act (also known as the Debt Clearance Act) likewise has not adopted or directly incorporated the UNCITRAL Model Law on Enterprise Group Insolvency.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Are there any proposed or upcoming changes to the restructuring \/ insolvency regime in your country?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Since its enactment in 1935, the Bankruptcy Act has undergone three amendments, but its overall legislative framework and system have remained fundamentally unchanged. Given the significant changes in social infrastructure and economic activities over the decades, the existing law no longer regulates economic order effectively and does not meet the demands of modern society and international practices. Accordingly, following the Judicial Yuan\u2019s 2025 annual policy\/agenda, Taiwan is overhauling the Company Restructuring Act and the Bankruptcy Act. The plan is to merge the two laws into a single statute \u201cDebt Clearance Act.\u201d This reform aims to address issues such as patchwork procedures, incongruous regulations, and inefficiencies in debt resolution, allowing for better adjustment of rights and obligations between debtors and creditors.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Is your jurisdiction debtor or creditor friendly and was it always the case?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Our jurisdiction is generally creditor-friendly, as reflected in the low approval rate of \u00a0bankruptcy petitions in practice. A significant proportion of bankruptcy cases are dismissed, indicating a system that favors the protection of creditors. Furthermore, the legal framework places emphasis on creditor involvement and their rights throughout the proceedings. This situation has been consistent for at least the past decade.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Do sociopolitical factors give additional influence to certain stakeholders in restructurings or insolvencies in the jurisdiction (e.g. pressure around employees or pensions)? What role does the State play in relation to a distressed business (e.g. availability of state support)?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>In Taiwan, sociopolitical factors significantly influence certain stakeholders in restructuring and insolvency proceedings. For example, to protect employees, the Labor Standards Act grants workers top priority in repayment during bankruptcy.<\/p>\n<p>Although there is no explicit statutory provision under Taiwanese law requiring the government to provide direct subsidies to distressed businesses, support may nonetheless be available through other policy instruments or administrative measures. For example, during the COVID-19 pandemic, Taiwan implemented the &#8220;Relief 5.0&#8221; policy to help businesses overcome difficulties. This demonstrates that the government is willing to adopt flexible policy planning in response to social needs when enterprises face challenges.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">What are the greatest barriers to efficient and effective restructurings and insolvencies in the jurisdiction? Are there any proposals for reform to counter any such barriers?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Under Taiwan\u2019s current law, one of the main problems causing delays in bankruptcy proceedings is the restrictive design of the existing insolvency system. The Debt Clearance Act aims to address these issues and expedite the bankruptcy process by introducing new regulations such as increased court intervention, service by publication, and measures to reduce procedural costs. These reforms are intended to make the use of bankruptcy procedures more efficient for companies in the future.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\r\n<div class=\"word-count-hidden\" style=\"display:none;\">Estimated word count: <span class=\"word-count\">4686<\/span><\/div>\r\n\r\n\t\t\t<\/ol>\r\n\r\n<script type=\"text\/javascript\" src=\"\/wp-content\/themes\/twentyseventeen\/src\/jquery\/components\/filter-guides.js\" async><\/script><\/div>"}},"_links":{"self":[{"href":"https:\/\/my.legal500.com\/guides\/wp-json\/wp\/v2\/comparative_guide\/110768","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/my.legal500.com\/guides\/wp-json\/wp\/v2\/comparative_guide"}],"about":[{"href":"https:\/\/my.legal500.com\/guides\/wp-json\/wp\/v2\/types\/comparative_guide"}],"wp:attachment":[{"href":"https:\/\/my.legal500.com\/guides\/wp-json\/wp\/v2\/media?parent=110768"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}