萬國法律事務所

Under Taiwan’s current Company Act, any issuance of corporate bonds must be placed in trust at a financial institution. On May 24, 2012, the Economic Committee of the Legislative Yuan preliminarily approved draft amendments to parts of the Company Act. In the draft, Article 248, Paragraph 1, Item 12 of the Company Act has been amended to remove the trust requirement for private placements of corporate bonds.

In most cases, corporate bonds are offered to the general public, which includes unsophisticated investors. The trust requirement was created to protect such unsophisticated investors. However, in the private placement of corporate bonds, purchasers are a limited number of knowledgeable and sophisticated investors who do not need the protection of a trust. Thus, the trust requirement is unnecessary in this context.

Most corporate bond offers are still done through the public market and only a few are done through private placement; therefore, the impact of this amendment to the market in general will be minor. However, this amendment is expected to increase flexibility and save costs for private placements of corporate bonds.