Foreign-registered companies are likely to have difficulty listing in Taiwan’s bourses as financial authorities are tightening review of major shareholders of Chinese origin.
The move was made to dampen initial public offerings (IPO) and followed revelations that some Chinese shareholders have sought to circumvent restrictions in Taiwan regarding Chinese capital by changing their citizenship.
Officials from the Financial Supervisory Commission’s securities bureau, Taiwan Stock Exchange and the GRETAI Securities Market held a meeting with securities houses and accounting firms yesterday, but none would reveal their conversations.
However, securities officials reportedly told underwriters and accounting firms to stop filing IPO applications on behalf of foreign companies in which Chinese shareholders exercise substantial control by providing more than 30 percent of the capital.
The commission has made it clear that firms with major Chinese shareholders who obtained their foreign citizenship after 2008 will be considered Chinese citizens for the purposes of Taiwan’s regulations, as will companies with operations mainly in China.
The stricter review will affect more than 30 firms with IPO plans in Taiwan, securities brokers said, expressing worries over lawsuits as customers have spent huge amounts of money on efforts to get listed.
The Taiwan Stock Exchange said on Wednesday that it is no longer likely to achieve its goal of having 20 to 25 IPOs this year after the commission rejected Cayman Islands-registered China Crystal New Material Holdings Co’s (中國晶體新材料控股) application to trade its shares under the F-stock group on the GRETAI Securities Market two weeks ago.
“Setting shell companies in third places like the Cayman Islands will not remove the Chinese capital label,” securities officials told local media, adding that the 30 percent cap is aimed at encouraging Taiwanese companies based in China to seek listings in local bourses rather than to benefit Chinese investors.
The commission on Thursday approved plans by China Communications Media Group Co (中國通科技) to list on the Emerging Stock Market reportedly only after the Chinese smartphone software provider agreed to install a Taiwanese chairperson and give control of two-thirds of the board to Taiwanese directors.
Securities officials declined to comment if board requirements will become a universal policy except to say it is one of the considerations in reviewing listing applications by foreign-registered companies that have Chinese capital.
Foreign-registered companies with major investors from China controlling more than a 30 percent stake in the company can seek special approval for listing in Taiwan, but there is no precedence yet since the introduction of the F-stock category on the local bouse in 2008.
Instead, Chinese firms can apply to be listed under the planned T-stock group in local capital markets once Taiwan and China remove regulatory barriers, securities officials said, without giving a timeframe.
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