{"id":122026,"date":"2025-12-04T09:13:53","date_gmt":"2025-12-04T09:13:53","guid":{"rendered":"https:\/\/my.legal500.com\/guides\/?post_type=comparative_guide&#038;p=122026"},"modified":"2025-12-04T09:13:53","modified_gmt":"2025-12-04T09:13:53","slug":"taiwan-technology-ma","status":"publish","type":"comparative_guide","link":"https:\/\/my.legal500.com\/guides\/chapter\/taiwan-technology-ma\/","title":{"rendered":"Taiwan: Technology M&amp;A"},"content":{"rendered":"","protected":false},"template":"","class_list":["post-122026","comparative_guide","type-comparative_guide","status-publish","hentry","guides-technology-ma","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 Technology M&amp;A 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\">Describe the typical organizational form (e.g., corporations, limited liability companies, etc.) and typical capitalization structure for a VC-backed Start-up in your jurisdiction (e.g., use of SAFEs, convertible notes, preferred stock, etc.). To what extent does it follow U.S. \u201cNVCA\u201d practice? If so, describe any major variations in practice from NVCA in your market. If not, describe whether there are any market terms for such financing VC-backed Start-ups. If venture capital is not common, then describe typical structure for a startup with investors.<\/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><span class=\"TextRun SCXW114128200 BCX8\" lang=\"EN-AU\" xml:lang=\"EN-AU\" data-contrast=\"none\"><span class=\"NormalTextRun SCXW114128200 BCX8\" data-ccp-parastyle=\"List Number\">I<\/span><span class=\"NormalTextRun SCXW114128200 BCX8\" data-ccp-parastyle=\"List Number\">n Taiwan, the typical organizational form for a VC-backed startup is a Taiwanese company limited by shares. This structure provides limited liability to shareholders and <\/span><span class=\"NormalTextRun SCXW114128200 BCX8\" data-ccp-parastyle=\"List Number\">facilitates<\/span><span class=\"NormalTextRun SCXW114128200 BCX8\" data-ccp-parastyle=\"List Number\"> multiple rounds of equity financing. The capitalization structure commonly involves the issuance of preferred shares to venture capital investors, <\/span><span class=\"NormalTextRun AdvancedProofingIssueV2Themed SCXW114128200 BCX8\" data-ccp-parastyle=\"List Number\">similar to<\/span><span class=\"NormalTextRun SCXW114128200 BCX8\" data-ccp-parastyle=\"List Number\"> U.S. practice, granting them preferential rights such as liquidation preferences, anti-dilution protection, and sometimes board representation. However, unlike the U.S., the use of SAFEs is less prevalent in Taiwan; instead, direct equity investments or convertible preferred shares are more common<\/span><span class=\"NormalTextRun SCXW114128200 BCX8\" data-ccp-parastyle=\"List Number\">ly adopted<\/span><span class=\"NormalTextRun SCXW114128200 BCX8\" data-ccp-parastyle=\"List Number\">. While Taiwan\u2019s VC market increasingly aligns with U.S. NVCA standards in terms of term sheet and governance, there are notable variations, such as stricter regulatory oversight on shareholder rights under <\/span><span class=\"NormalTextRun SCXW114128200 BCX8\" data-ccp-parastyle=\"List Number\">the <\/span><span class=\"NormalTextRun SCXW114128200 BCX8\" data-ccp-parastyle=\"List Number\">Company <\/span><span class=\"NormalTextRun SCXW114128200 BCX8\" data-ccp-parastyle=\"List Number\">Act of Taiwan<\/span><span class=\"NormalTextRun SCXW114128200 BCX8\" data-ccp-parastyle=\"List Number\">. Additionally, the legal framework requires more formalities in share issuance and transfer, which can affect deal structuring and timing. Overall, Taiwanese VC-backed startups tend to follow a hybrid model that incorporates many U.S. venture capital practices but <\/span><span class=\"NormalTextRun SCXW114128200 BCX8\" data-ccp-parastyle=\"List Number\">subject to localizations for <\/span><span class=\"NormalTextRun SCXW114128200 BCX8\" data-ccp-parastyle=\"List Number\">complying with<\/span><span class=\"NormalTextRun SCXW114128200 BCX8\" data-ccp-parastyle=\"List Number\"> corporate law and <\/span><span class=\"NormalTextRun SCXW114128200 BCX8\" data-ccp-parastyle=\"List Number\">other <\/span><span class=\"NormalTextRun SCXW114128200 BCX8\" data-ccp-parastyle=\"List Number\">market <\/span><span class=\"NormalTextRun SCXW114128200 BCX8\" data-ccp-parastyle=\"List Number\">practices<\/span><span class=\"NormalTextRun SCXW114128200 BCX8\" data-ccp-parastyle=\"List Number\">.<\/span><\/span><span class=\"EOP SCXW114128200 BCX8\" data-ccp-props=\"{&quot;201341983&quot;:2,&quot;335559685&quot;:709,&quot;335559739&quot;:180,&quot;335559740&quot;:260,&quot;335559991&quot;:709}\">\u00a0<\/span><\/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\">Describe the typical acquisition structures for a VC-backed Start-up. As between the various main structures (including an equity purchase and an asset purchase), highlight any main corporate-law and tax-law considerations.<\/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>Shares acquisition is the most common method for private equity transactions. Share deals are usually subject to a 0.3% securities transaction tax (\u201cSTT\u201d) on the transaction price. Different types of acquisition transactions, such as spin-offs, may trigger various taxes including income tax, VAT, stamp duty, and Land Value Increment Tax. Having said so, Taiwan offers tax incentives\u2014for example, VAT or STT exemptions apply in qualifying spin-offs or share exchanges where at least 65% of the consideration is voting shares.<\/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\">Describe whether letters of intent \/ term sheets are common in your jurisdiction. Are they typically non-binding or binding? Is exclusivity common? Are deposits \/ break-up fees common?<\/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, letters of intent and term sheets are frequently used in commercial dealings, especially in areas such as mergers and acquisitions, joint ventures, and venture capital investments. These documents serve as preliminary agreements that set out the principal terms and the parties\u2019 intentions prior to finalizing a definitive contract. Typically, letters of intent and term sheets in Taiwan are non-binding regarding the core terms, with exceptions often made for certain clauses like confidentiality, exclusivity, and governing law, which are commonly stipulated as binding. While deposits or break-up fees are less prevalent, they may be incorporated in larger or more complex transactions to compensate parties for the time and effort invested if the transaction does not proceed to closing. Ultimately, whether provisions such as exclusivity or break-up fees are included and enforceable depends largely on the negotiation process and the particular circumstances of the deal.<\/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 common is it to use buyer equity as consideration in purchasing a VC-backed Start-up? Please describe any considerations or constraints within the securities laws of your jurisdiction for using such buyer equity.<\/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>Using buyer equity as a form of consideration when acquiring VC-backed start-ups in Taiwan is feasible but not as common as cash payments, since market norms generally prefer cash or cash equivalents. When the buyer\u2019s equity is publicly offered or listed, issuing shares as payment could invoke securities registration obligations under the securities laws, unless an applicable exemption is available. In cases where the equity is issued through a private placement, the issuance must adhere to private placement regulations, which include restrictions on the categories of eligible investors.<\/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 common are earn-outs in your jurisdiction? Describe common earn-out structures, and prevalence of earn-out related disputes post-closing.<\/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>Earn-outs are utilized in Taiwan\u2019s M&amp;A market to bridge the valuation gaps. The market generally prefers simple purchase price structures that minimize post-closing adjustments, favouring clean and straightforward deals. Nonetheless, earn-outs are gaining traction, especially in transactions involving technology or high-growth firms where future performance is uncertain, as well as in cases where buyers and sellers hold differing views on the company\u2019s future value. While disputes related to earn-outs do arise\u2014often due to varying interpretations of accounting principles or adjustment calculations\u2014, such disputes are usually settled by the parties with fairly limited precedents can be found.<\/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\">Describe any common purchase price adjustment mechanisms in purchasing a VC-backed Startup and\/or are lock-box structures more common.<\/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, lock-box arrangements are preferred for a various reasons. Investors and acquirers in the region tend to value the clarity and straightforwardness that lock-box mechanisms provide, as they help minimize negotiation difficulties and avoid post-closing disagreements related to price adjustments. Additionally, lock-box structures help expedite the closing process, a significant advantage in the context of fast-paced, venture capital-backed startup transactions where timing is crucial.<\/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\">Describe how employee equity is typically granted in your jurisdiction within VC-backed Start-up\u2019s (e.g., options, restricted stock, RSUs, etc.). Describe how such equity is typically handled in a sale transaction.<\/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 Taiwanese startups, stock options are the predominant form of employee equity compensation. These options grant employees the ability to buy company shares at a fixed exercise price after completing a specified vesting schedule. Stock options are popular because they closely tie employee rewards to the company\u2019s success and are relatively easy to administer. Another common approach is the use of restricted stock, where shares are issued upfront but are subject to forfeiture if certain conditions are not met.<\/p>\n<p>When a sale or change of control occurs, many stock option plans include acceleration clauses that either fully or partially accelerate vesting. This mechanism encourages employees to stay engaged throughout the transaction process. From the buyer\u2019s perspective, outstanding stock options are often either assumed or replaced with equivalent options in the new company to maintain employee motivation. Alternatively, employees may receive a cash payout for their vested options, calculated as the difference between the sale price and the exercise price, providing them with immediate financial benefit.<\/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\">Describe whether there are any common practices for retaining employees post-acquisition (e.g., equity grants, re-vesting of employee equity, cash bonuses, etc.).<\/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>After an acquisition, companies often implement a combination of financial rewards and contractual measures to retain employees. Offering equity grants or re-vesting current employee equity awards is a typical strategy to incentivize the employees and ensure employees\u2019 goals align with those of the new owners. Additionally, cash retention bonuses are commonly provided to encourage employees to stay with the organization during the transition and for a period afterward.<\/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 common are works councils \/ unions in your jurisdiction, among VC-backed Startups or technology companies generally?<\/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\u2019s startup ecosystem, including VC-backed technology firms, works councils and unions are rare. These companies typically feature younger employees, more flexible and dynamic organizational frameworks, and prioritize direct communication between management and staff. As a result, formal labor unions or works councils are uncommon in these environments.<\/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\">Describe Tax treatment of founder \/ key people holdbacks. Are there mechanisms for obtaining capital gains or equivalent more preferable tax treatment even if continued service is a requirement for the holdback to be paid out?<\/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>Equity incentive plans granted to Taiwanese management may have more favorable tax treatment if the shares are issued by a foreign company. For employee stock options, taxation at exercise and disposal is generally similar for domestic and foreign shares. At exercise, the difference between market and exercise price is taxed as &#8220;other income&#8221; at progressive rates of 5% to 40%. Upon disposal, capital gains may incur a 20% alternative minimum tax (\u201cAMT\u201d) only if the individual&#8217;s basic income exceeds NTD 7.5 million. Domestic shares additionally trigger a 0.3% STT. However, dividend taxation differs: dividends from Taiwanese companies are taxed at either a 28% flat rate or progressive rates by election, while dividends from foreign companies are treated as overseas income and subject to 20% AMT only if total basic income exceeds NTD 7.5 million.<\/p>\n<p>Additionally, under Article\u202f19 1 of the Industrial Innovation Statute, for employee stock options or RSUs issued by Taiwanese companies, employees may elect to defer taxation from the date the shares become transferable to the date of actual disposal, provided certain conditions are met (such as the requirement that the employee must continue to serve the company for at least two 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\">Describe whether non-competes \/ non-solicits for key employees \/ founders are common. Describe any legal constraints around such non-competes \/ non-solicits.<\/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, non-compete agreements are fairly common in employment contracts, particularly for key employees and founders within sectors where safeguarding trade secrets, proprietary technologies, or client relationships is crucial. Employers typically aim to protect their business interests by limiting the ability of these individuals to work for competitors or launch rival ventures for a specified period following the end of their employment. Taiwanese courts scrutinize non-compete clauses closely, applying a stringent reasonableness standard. To be deemed enforceable, such clauses must have a reasonable scope and duration, and importantly, provide financial compensation to the employee during the restricted period. Without this compensation, the non-compete provision is likely to be considered unenforceable. Non-solicitation clauses, which restrict former employees or founders from approaching the employer\u2019s clients, customers, or staff, are also widely used. These clauses are generally regarded as less burdensome than non-competes and tend to have a higher likelihood of enforcement.<\/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 typical closing conditions for the acquisition of a VC-backed Startup? How common is a \u201cmaterial adverse effect\u201d concept as a closing condition?<\/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>Typical closing conditions in Taiwan M&amp;A transactions generally encompass a range of safeguards designed to protect the buyer and facilitate a smooth and successful closing. These conditions commonly include obtaining all necessary regulatory approvals from relevant government authorities, securing requisite corporate approvals such as board and shareholder consents, and confirming that there have been no material breaches of representations, warranties, or covenants by the seller. The concept of a \u201cmaterial adverse effect\u201d or \u201cmaterial adverse change\u201d clause is increasingly recognized and used in Taiwanese M&amp;A transactions, including those involving VC-backed startups.<\/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\">With respect to representations and warranties: (a) Is deemed disclosure of the dataroom common? (b) Are \u201cknowledge\u201d qualifiers common? Is it common to make representations that are \u201crisk shifting\u201d (e.g., where sellers cannot completely validate the accuracy of such representations)?<\/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;\"><h4>A. Is deemed disclosure of the dataroom common?<\/h4>\n<p>The application of \u201cdeemed disclosure\u201d of the dataroom, whereby all information made available in the virtual dataroom is considered disclosed to the buyer for the purposes of qualifying the seller\u2019s representations and warranties, remains subject to the parties\u2019 negotiation and agreement. Typically, only information specifically referenced in a disclosure schedule should serve to qualify the representations and warranties. It is less common that the parties agree to blanket deemed disclosure of the entire dataroom without limitations.<\/p>\n<h4>B. Are \u201cknowledge\u201d qualifiers common? Is it common to make representations that are \u201crisk shifting\u201d (e.g., where sellers cannot completely validate the accuracy of such representations)?<\/h4>\n<p>Yes, the use of \u201cknowledge\u201d qualifiers in representations and warranties is common, particularly for matters where the seller may not have full visibility or control. The definition of \u201cknowledge\u201d is subject to negotiation, and the individual(s) whose knowledge is considered relevant is typically limited and need to be specified in the transaction documents.<\/p>\n<p>It is also common for certain representations to be \u201crisk shifting,\u201d particularly where the seller cannot fully verify the underlying facts. In such cases, sellers often seek to qualify these representations by knowledge, materiality, time period, or by reference to information disclosed in the disclosure schedules, etc.<\/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\">Describe the typical parameters of seller indemnification, including: (a)\tCoverage (fundamental, specified, general reps, covenants, shareholder issues, pre-closing Tax, specific indemnities, employment classifications, etc.) (b)\tLiability limit (c)\tSurvival periods<\/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;\"><h4>a. Coverage (fundamental, specified, general reps, covenants, shareholder issues, pre-closing Tax, specific indemnities, employment classifications, etc.)<\/h4>\n<p>The coverage of seller indemnification generally includes:<\/p>\n<ul>\n<li>Fundamental representations and warranties (including title of ownership and certain operations-related representations and warranties): Breaches of which are often subject to broader indemnification and less restrictive limitations.<\/li>\n<li>Specified representations and warranties: Specific indemnities are usually negotiated for addressing particular issues which may lead to a greater exposure (e.g., tax liabilities, pending litigation, environmental contamination) identified during due diligence.<\/li>\n<li>General\/non-fundamental representations and warranties: Indemnification for breaches of which is usually subject to more restrictive limitations.<\/li>\n<li>Covenants or agreements: Indemnification may also cover breaches of pre- and post-closing covenants.<\/li>\n<li>Shareholder issues: Indemnities may cover issues relating to shareholder approval and related party transactions, etc.<\/li>\n<li>Pre-closing tax liabilities: Indemnification typically covers pre-closing taxes, including any tax audits or assessments.<\/li>\n<li>Employment classifications and labor issues: Indemnities may be provided for misclassification of employees, unpaid social security contributions, or other labor law violations arising prior to closing.<\/li>\n<\/ul>\n<h4>b. Liability limit<\/h4>\n<p>For breaches of general representations and warranties, the seller\u2019s liability is typically capped at a percentage of the purchase price. For breaches of fundamental and specified representations and warranties, seller\u2019s liability is often uncapped or subject to a higher cap. Nevertheless, the actual liability limit is subject to negotiation and may be influenced by the bargaining power of the parties and the results of due diligence on a case-by-case basis.<\/p>\n<p>Definitive agreements often include a de minimis threshold (claims below a certain amount are disregarded) and a basket (aggregate claims must exceed a certain threshold before indemnification is triggered), with the basket being either \u201ctipping\u201d (once exceeded, all claims are indemnifiable) or \u201cdeductible\u201d (only the excess is indemnifiable).<\/p>\n<p>Certain losses (e.g., consequential or punitive damages) may be expressly excluded from indemnification.<\/p>\n<h4>c. Survival periods<\/h4>\n<p>The survival period for general representations and warranties is typically 12 to 24 months post-closing, while the fundamental representations and warranties usually survive for a longer period, often up to the expiration of the applicable statute of limitations. Additionally, survival for tax-related indemnities is usually tied to the statutory tax assessment period, which is generally up to 7 years in case of tax evasion due to fraud or other misconduct.<\/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\">Describe background law that might impact the negotiation of indemnification, including those that may constrain recoverability of losses (e.g., can lost profits or multiples be awarded as damages? Is mitigation required?).<\/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 Civil Code of the Republic of China (Taiwan) is the primary source of law governing contractual damages. When negotiating indemnification provisions governed by Taiwan law, certain principles shall be considered, as they may affect the scope and recoverability of losses.<\/p>\n<p>Under Article 216 of the Civil Code, unless otherwise provided by the law or contract, the damages shall refer to the actual damage suffered and the loss in profit. The loss in profit includes the profit which can be anticipated to be gained from the decided projects, mechanism or other particular circumstances. That said, the exclusion of consequential damages from the scope of liability is generally permissible.<\/p>\n<p>Under Article 217 of the Civil Code, the injured party has a statutory duty to mitigate its losses. If the injured party fails to take reasonable steps to mitigate damages, the amount of recoverable damages may be reduced accordingly by the court.<\/p>\n<p>Parties are generally free to agree on the scope and limitation of indemnification, provided, however that, under Article 222 of the Civil Code, any liabilities stemming from willful misconduct or gross negligence cannot be waived in advance.<\/p>\n<p>While Article 250 of the Civil Code permits the provision of liquidated damages, Article 252 provides that courts have the discretion to reduce the agreed amount if it is deemed excessively high. This may impact the enforceability of certain indemnification provisions if they are structured as liquidated damages.<\/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 common is Warranty &amp; Indemnity (W&amp;I) insurance \/ representations and warranties insurance (RWI)? Describe any common issues that arise in connection with obtaining such insurance for an acquisition of a VC-backed Startup. Is Tax coverage obtainable from RWI\/W&amp;I policies? Are there any common exclusions?<\/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>Warranty &amp; Indemnity (W&amp;I)\/ Representations and Warranties Insurance (RWI) is not yet as prevalent in Taiwan comparing to other markets such as the U.S. However, in recent years, there has been a gradual increase in securing W&amp;I\/ RWI, particularly in cross-border transactions involving private equity or VC-backed startups. Most policies are underwritten by international insurers. According to relevant data estimated by insurers, in Asia, the average coverage amount for W&amp;I\/ RWI is usually 25% to 35% of the transaction value.<\/p>\n<p>As startups often have less robust corporate governance and incomplete documentation, which insurers may view as heightened risks, it may lead to higher premiums, broader exclusions, or even refusal to underwrite.<\/p>\n<p>Tax coverage is generally available under W&amp;I insurance or separate insurance policies, but it may be subject to significant limitations. Coverage typically applies to potential tax liabilities arising from breaches of tax warranties or under specific tax indemnities. Identified tax exposures are usually excluded unless otherwise negotiated.<\/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\">Briefly describe the antitrust regime in your jurisdiction, including the relevant thresholds for filing. Describe whether there has been any heightened scrutiny of technology companies.<\/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>If a combination may result in a combined market share or revenue of the parties participating in such combination exceeding the prescribed filing thresholds, a prior approval from the Taiwan Fair Trade Commission (TFTC) shall be obtained. No heightened scrutiny specifically applies to technology companies.<\/p>\n<p>The term \u201ccombination\u201d refers to any of the following circumstances:<\/p>\n<ol>\n<li>Mergers;<\/li>\n<li>The holding or acquisition of at least one-third of the voting shares or equity interest in another enterprise;<\/li>\n<li>The transfer or lease of all, or a substantial part, of an enterprise\u2019s business or assets;<\/li>\n<li>Entering into an arrangement with another enterprise for joint operation on a regular and ongoing basis, or managing another enterprise\u2019s business pursuant to a contract of entrustment; or<\/li>\n<li>Exercising direct or indirect control over the business operations or personnel of another enterprise.<\/li>\n<\/ol>\n<p>A notification to the TFTC is required for a combination under any of the following conditions:<\/p>\n<ol>\n<li>If, as a result of the combination, any of the participating enterprises will hold at least one-third of the market share;<\/li>\n<li>If any of the participating enterprises holds at least one-quarter of the market share prior to the combination; or<\/li>\n<li>If the combined turnover of the participating enterprises in the preceding fiscal year, calculated on a group-wide or consolidated basis, exceeds the thresholds prescribed by the TFTC, as follows:<\/li>\n<\/ol>\n<p>a. The aggregate global turnover of all participating enterprises in the preceding fiscal year exceeds NTD 40 billion, and at least two of the participating enterprises each had a turnover in Taiwan of at least NTD 2 billion in the preceding fiscal year;<\/p>\n<p>b. For a combination among non-financial enterprises, one of the participating enterprises had a turnover in Taiwan of at least NTD 15 billion in the preceding fiscal year, and another participating enterprise had a turnover in Taiwan of at least NTD 2 billion in the preceding fiscal year; or<\/p>\n<p>c. For a combination between financial enterprises, one of the participating enterprises had an annual turnover of at least NTD 30 billion, and another participating enterprise had an annual turnover of at least NTD 2 billion.<\/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\">Briefly describe the foreign direct investment regime in your jurisdiction, including the relevant thresholds for filing. Describe whether there has been any heightened scrutiny of technology companies.<\/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>Investments made by foreign investors (excluding the PRC investors, as defined below) in Taiwanese companies are subject to prior approval from the Department of Investment Review (DIR), Ministry of Economic Affairs of Taiwan under the Statute for Investment by Foreign Nationals. Generally, foreign investors can invest in most business sectors in Taiwan, except for some sensitive areas (e.g., defense, telecommunications) listed on the \u201cnegative list\u201d promulgated by the regulator, which are prohibited or restricted. While foreign investments in the prohibited areas are not allowed, investments in the restricted areas are subject to special permits or licences from relevant authorities.<\/p>\n<p>A PRC investor, on the other hand, refers to any individual, juristic person, organisation, or any other institution from Mainland China (a \u201cMainland Person\u201d) that invests in Taiwan. A PRC investor also includes any company located in any third area other than the PRC or Taiwan and invested in by Mainland Person(s) whereby (i) the shares held or capital contributed directly or indirectly by Mainland Person(s) in aggregate exceed 30% of the total number of shares or the total amount of capital contribution of the third-area company, or (ii) any Mainland Person has control over the third-area company.<\/p>\n<p>PRC investments are subject to the Measures Governing Investment Permits to the People of the Mainland Area, which are much stricter than the regulations for investments by foreign investors. PRC investors are only allowed to invest in the business areas with certain restrictions and limitations on the \u201cpositive list\u201d promulgated by the regulator, and the investments in Taiwanese companies by PRC investors are subject to the DIR\u2019s prior approval.<\/p>\n<p>Many technology sectors are prohibited or restricted from accepting PRC investment, especially those involving semiconductors, telecommunications, information and communication technology (ICT), defense-related technologies, and critical infrastructure.<\/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\">Briefly describe any other material regulatory regimes \/ approvals that may apply in the context of an acquisition of a technology company.<\/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>Technology companies operating in regulated sectors (e.g., telecommunications, financial services such as electronic payment services, healthtech, or critical infrastructure) may require sector-specific regulatory approvals from or notifications with the authorities.<\/p>\n<p>In addition, regulations concerning personal data protection and national security shall be carefully considered, as they govern the transfer of sensitive data and core national technologies.<\/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\">Briefly describe any common issues that arise with respect to intellectual property, in the context of an acquisition of a technology company.<\/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>Disputes often arise regarding the ownership, validity, and transferability of intellectual property. Due diligence should confirm the scope, ownership, encumbrances, validity, and enforceability of the target company\u2019s intellectual property portfolio. For the intellectual property licenses granted to the target, it is crucial to identify any restrictions, change-of-control provisions, or termination rights that may be triggered by the acquisition. It is also important to investigate on whether the target company is involved in any ongoing or threatened intellectual property litigation and infringement claims.<\/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\">Briefly describe the regulatory regime for data privacy in your jurisdiction and highlight any common issues that arise in the context of an acquisition of a technology company.<\/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\u2019s primary data privacy legislation is the Personal Data Protection Act (PDPA), which regulates the collection, processing, and use of personal data by both government agencies and non-government entities. The PDPA sets out requirements for consent, notification, data security, and the rights of data subjects. It also imposes restrictions on the cross-border transfer of personal data, requiring that the recipient jurisdiction provide adequate protection or that other safeguards are implemented.<\/p>\n<p>In the context of acquisition of a technology company, it is often difficult for the acquirers to assess the target company\u2019s compliance with the PDPA, particularly regarding the adequacy of data security measures. Acquirers may inherit the liability for the target company\u2019s past non-compliance with the PDPA, including unauthorized data collection or breaches, which can result in penalties.<\/p>\n<p>If the acquisition involves transferring personal data outside Taiwan, parties must ensure compliance with cross-border transfer requirements under the PDPA.<\/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\">Briefly describe any common issues that arise with respect to employment laws, in the context of an acquisition of a technology company (e.g., contractor misclassification).<\/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>If the acquisition is structured as merger or asset transfer (rather than share purchase or share swap under which the employer remains to be the target company), the acquiror must notify the employees of the target company who will be retained by the acquirer at least 30 days before the completion of the transaction. Employees who receive the retention notice shall inform the acquirer of their acceptance or rejection of the retention offer within 10 days. Failure to respond will be considered as consent to retention. Those employees who are not retained or declined to retention shall be dismissed by the target company, and the target company shall pay the severance pay or pension, as applicable to these employees. Mass redundancies must be carried out in compliance with the Act for Worker Protection of Mass Redundancy, including, without limitations, requirements for advance notice, consultation procedures with employee representatives or labor unions, and the timely submission of reports to the competent labor authority.<\/p>\n<p>When acquiring a technology company, due diligence on certain employment matters is essential to identify potential risks and ensure compliance with applicable laws:<\/p>\n<ol>\n<li>The Labor Standards Act sets out minimum standards for working conditions, including working hours, overtime, leaves, and termination procedures. Technology companies may have flexible or non-standard working arrangements that do not fully comply with the LSA or require the approval from the labor-management conference of the target company or the labor authorities. Conducting thorough due diligence in these areas may help identify issues and mitigate risks.<\/li>\n<li>The enforceability of non-compete clauses is limited under Taiwan law and shall meet statutory requirements (e.g., reasonable scope, duration, and compensation). It is necessary to review existing agreements to ensure compliance and assess the risk of key employees\u2019 departing post-acquisition.<\/li>\n<li>It is critical to employee-related intellectual property of the target company are properly owned, transferable, and free from encumbrances. Under Taiwan\u2019s Patent Act and Copyright Act, inventions and works created in the course of employment generally belong to the employer, but explicit written agreements provide greater certainty.<\/li>\n<li>Employee bonuses and employee stock option plans (ESOPs) are typically addressed in the acquisition agreement and may be accelerated, cashed out, rolled over into the acquirer\u2019s equity plans, or cancelled, depending on the negotiation.<\/li>\n<\/ol>\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\">Briefly describe any recommendations for dispute resolution mechanisms for M&amp;A transactions in your jurisdiction and highlight any common issues that arise in the context of an acquisition of a technology company.<\/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>Arbitration is frequently chosen as the dispute resolution mechanism for cross-border M&amp;A transactions, particularly where one or more parties are foreign entities. The Taiwan Arbitration Act recognizes the enforceability of arbitration agreements and arbitral awards, both domestic and international. Arbitration offers confidentiality, flexibility, and the ability to select arbitrators with relevant expertise, which is particularly valuable in technology sector transactions.<\/p>\n<p>For purely domestic transactions, parties may opt for litigation before the Taiwan courts.<\/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\">Briefly describe any special corporate or stamping formalities that transaction parties should make sure to plan for in your jurisdiction (notarization, etc.).<\/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 relevant corporate actions required for the mergers and acquisitions typically include board resolutions and, in most cases, shareholders\u2019 resolutions. The approval thresholds for such resolutions may vary depending on the transaction type and the company\u2019s articles of incorporation. In most cases, board and shareholders resolutions require majority vote in a quorate meeting.<\/p>\n<p>Generally, Taiwan law does not require the M&amp;A transaction documents to be notarized for their validity or enforceability. However, if the transaction involves the transfer of certain types of assets (e.g., real property), notarization or registration with the relevant authorities may be required.<\/p>\n<p>Transaction documents shall be duly executed by authorized representatives of the parties. In general, no specific requirements for signature formalities for the transaction documents under Taiwan laws and the parties are free to agree on the from and manner of execution.<\/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\">4950<\/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\/122026","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=122026"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}