Taiwan’s newly amended regulations mark a significant shift in how mergers and acquisitions can unfold, lowering some barriers to consolidation while imposing stricter safeguards on how financial groups pursue control and scale.
BY PAUL CHANG AND YVONNE LIU, TSAR & TSAI LAW FIRM
In recent years, Taiwan’s financial sector has entered a new phase of consolidation, as mergers among financial institutions reshape the market and raise questions about the industry’s future competitiveness.
Seeking to reduce uncertainty and disputes during the consolidation of financial holding companies and to speed up merger transactions, the Financial Supervisory Commission (FSC) moved to clarify the regulatory framework governing such deals. In July 2025, the FSC issued draft amendments to the Regulations Governing the Investing Activities of a Financial Holding Company, which were formally adopted in November.
Over the past several years, Taiwan has had 15 financial holding companies. That number fell to 14 this year following the merger of Taishin Financial Holding Co., Ltd. and Shin Kong Financial Holding Co., Ltd. In longstanding debates over financial supervision policy, the relatively large number of small-scale financial holding companies has often been cited as a structural challenge to building internationally competitive financial groups with sufficient scale.
Against this backdrop, consolidation has increasingly followed a familiar logic: larger institutions are seen as better positioned to compete globally. Mergers among financial holding companies have therefore continued in recent years, though not without controversy.
The latest regulatory amendments reflect this tension. On the one hand, the rules remove the previous requirement to obtain a “non-opposition resolution” from the target company’s board of directors, a change that could open the door to non-consensual mergers. The amendments also introduce greater flexibility in financing by allowing a one-year adjustment period for the double leverage ratio.
At the same time, the new framework imposes stricter conditions on acquisition attempts. A financial holding company making an initial investment must acquire a 25% controlling stake. If the target institution is publicly listed, the transaction must be completed entirely in cash rather than through a share swap. In addition, the investing company must submit a concrete financing plan and demonstrate how it will obtain a majority of shares or board seats, allowing regulators to assess the feasibility of the proposed transaction.
Together, the provisions raise the threshold for financial holding companies seeking to initiate mergers while also clarifying the regulatory framework governing such deals. The amendments suggest that regulators are attempting to encourage consolidation and strengthen the international competitiveness of Taiwan’s financial groups, while at the same time preserving financial stability and orderly market conditions.
How effectively regulators can balance these objectives, promoting industry development without unduly constraining necessary scale expansion or financial strategy, remains an open question.
Key provisions of the regulations
Initial investments must confer a controlling stake of at least 25%.
Under the amended regulations, when a financial holding company makes its first investment in another financial institution, including a financial holding company, bank, insurance company, or securities firm, it must acquire a controlling stake.
The ownership threshold has been raised from 10% to 25%, aligning the rule with the definition of “controlling interest” set out in Article 4, Paragraph 1, Subparagraph 1 of the Financial Holding Company Act.
The amendment also clarifies the purpose of such investments. If the target is another financial holding company, the investment must be made with the intention of pursuing a merger. If the target is another type of financial institution, the investment must aim to establish a subsidiary relationship.
Purely financial investments are no longer permitted. As a result, the previous practice of acquiring a small initial stake and later deciding whether to pursue a merger or treat the holding as a financial investment is no longer allowed under the revised regulations.
Initial investments must include a plan to secure majority ownership or board representation.
The amended regulations also require financial holding companies to demonstrate a clear path to control when making an initial investment in a financial institution. In addition to acquiring at least a 25% stake, as required above, the investing company must commit to obtaining either a majority of the shares or a majority of the seats on the board of directors.
To support this commitment, the investor must submit a financial and funding plan that is reasonable and feasible, demonstrating how the proposed transaction will be carried out. The requirement is intended to ensure that such investments are undertaken with the clear objective of completing a merger or establishing a subsidiary, rather than remaining a passive minority holding.
Investments in publicly listed companies must be paid in cash and completed in a single transaction.
Under the amended regulations, when a financial holding company invests in a publicly listed company, the consideration must be paid entirely in cash. Transactions structured using share swaps will no longer be permitted.
According to the FSC, the change is intended to protect shareholder interests by reducing the risks associated with differences in stock valuation and fluctuations in share prices. By requiring cash payments, the rule also removes the uncertainty that can arise when share swaps are used as a condition of an investment.
The requirement for a “non-opposition” resolution from the target company’s board has been removed.
Under previous regulations, when a financial holding company made its first investment in a financial institution, it was required to obtain a resolution from the target company’s board of directors indicating that the board did not oppose the investment. The amended regulations remove this requirement.
The change reflects practical considerations related to board procedures and corporate governance. In practice, it also provides greater flexibility for non-consensual mergers. At the same time, the amendment strengthens regulatory scrutiny in other areas. Financial holding companies must now submit a reasonable and feasible financial and funding plan, allowing the FSC to focus its review on the viability and financial soundness of the proposed transaction.
In doing so, the FSC places greater emphasis on whether the acquiring institution has adequate funding sources, a clear financing structure, and the ability to obtain a majority of shares or board seats to achieve effective consolidation, rather than relying on the position of the target company’s board as a prerequisite for initiating a merger.
One-year adjustment period for the double leverage ratio.
Under existing regulations, when a financial holding company conducts a merger, the ratio of long-term equity investments in subsidiaries, including the current investment, to shareholders’ equity may not exceed 125%. The limit is intended to prevent excessive leverage that could undermine financial stability.
The amendment introduces greater flexibility in cases where temporary borrowing is needed to finance an acquisition. If the transaction causes the ratio to exceed the 125% threshold, the financial holding company may submit a concrete capital-raising plan and bring the ratio back into compliance within one year. The change reflects the practical realities of merger financing while maintaining regulatory oversight of financial soundness.
New requirements for audit committee review and independent expert opinions.
The amendment introduces additional oversight requirements for a financial holding company’s first investment in another financial institution. Before proceeding with the transaction, the company must submit the investment plan to its audit committee for review of the fairness and reasonableness of the proposed deal.
The audit committee must also engage an external independent expert to provide an opinion on the transaction. Only after these steps are completed may the plan be submitted to the board of directors for approval. The requirement is intended to strengthen the board’s decision-making process by ensuring that directors have access to sufficient information and independent professional assessments before approving the investment.
Confidentiality requirement for public tender offer terms before regulatory approval.
Because investments by financial holding companies in financial or non-financial institutions require regulatory approval, uncertainty can arise when an acquisition is structured through a public tender offer.
To address this issue, the amendment requires the board of directors of the investing company to keep the approved terms of a proposed tender offer confidential until regulatory approval is obtained. This includes key conditions such as the purchase price, the number of shares to be acquired, and the duration of the offer. The measure is intended to prevent premature disclosure that could affect market prices, harm shareholder interests, or disrupt financial market stability.
One-year restriction on reapplying after a rejected investment application.
Under the amended regulations, if an application to invest in a particular target company is rejected, the investing financial holding company may not submit a new application for the same target within one year.
The measure is intended to encourage applicants to address the reasons for rejection and engage in more thorough preparation and stakeholder communication before seeking approval again, rather than repeatedly submitting applications without substantive changes.
Yvonne Liu is a senior partner and Paul Chang is an associate at Tsar & Tsai Law Firm, a Taipei-based firm with extensive experience in corporate, M&A, and capital markets matters.
