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Taiwan’s vibrant capital markets offer a wide range of fundraising avenues for both domestic and international participants. Local issuers can raise funds domestically through rights offerings or access global investors via instruments of global depositary receipts (GDRs) and European convertible bonds (ECBs).

Meanwhile, foreign issuers may tap into Taiwan’s market through Taiwan depositary receipts (TDRs), international bonds, RMB-denominated Formosa bonds, or by applying for primary listing of securities on the Taiwan Stock Exchange (TWSE).

These fundraising activities are governed primarily by: the Regulations Governing the Offering and Issuance of Securities by Securities Issuers; the Regulations Governing the Offering and Issuance of Securities by Foreign Issuers; the Regulations Governing the Offering and Issuance of Overseas Securities by Issuers; and the Taiwan Stock Exchange Corporation Rules Governing Review of Securities Listings.

These regulations are further supplemented by rules promulgated by the Financial Supervisory Commission (FSC) and TWSE.

A landmark development in Taiwan’s capital market was the launch of the Taiwan Innovation Board (TIB) in 2021. Historically, stringent listing requirements and high entry thresholds deterred many innovative companies from accessing traditional fundraising channels. To address these challenges, the TWSE introduced the TIB, creating a dedicated platform to support innovative enterprises.

Under the Taiwan Stock Exchange Corporation Rules Governing Review of Securities Listings, startups with critical core technologies, strong innovation capabilities or disruptive business models are eligible for listing on the TIB. These span sectors such as IoT, AI, big data, cybersecurity, biotechnology, green energy, renewable resources and national defence.

Notably, as of late 2023, the TIB’s market capitalisation has exceeded TWD150 billion (USD4.6 billion).

Listing requirements

The TIB offers a more accessible pathway for emerging industries to enter Taiwan’s securities market by easing regulatory hurdles compared to traditional listings on the main board.

Specifically, the TIB eliminates the paid-in capital requirement – a key barrier for many startups – and instead focuses on market capitalisation rather than profitability.

These shifts align with the unique needs of the startup ecosystem, allowing innovative startups that have yet to achieve profitability to access public funding and fuel their growth.

TIB trading mechanism

In light of the lower listing thresholds on the TIB, its trading mechanisms were initially designed to mitigate the higher investment risks associated with emerging companies.

When the TIB was launched in 2021, trading was restricted to qualified investors. These were defined as:

1. 1. professional institutional investors or legal entities with at least two years of securities trading experience;
   2. venture capital firms; and
   3. individual investors with at least two years of securities trading experience and either:

• • 1. financial assets of TWD10 million or more; or
    2. an average annual income of TWD1.5 million over the past two years.

While these measures were implemented to protect investors, they had the unintended consequence of limiting liquidity for TIB-listed securities. Recognising this, the FSC and TWSE relaxed the TIB’s trading restrictions in September 2023, introducing the following key changes:

1. 1. Removal of minimum capital requirement. The minimum capital threshold of TWD100 million has been eliminated. Market capitalisation now serves as the core listing criterion, better reflecting the needs of the startup economy.
   2. Adjusted underwriting mechanism. The underwriting process for TIB listings has been adjusted to align more closely with the general IPO system. The reference price for underwriting has been reduced from 90% to 70% of the over-the-counter (OTC) benchmark price. Additionally, the minimum proportion of shares for public sale has increased from 3% to 5%. To facilitate price discovery, there are no price limits for the first five trading days.
   3. Transition to general market. When TIB-listed companies transition to the general stock market, they must offer at least 3% of their shares for public sale. Share allocation during the transition will be divided as 80% through bidding and 20% through subscription.
   4. Relaxed criteria for qualified investors. For institutional investors, the required trading experience has been reduced from two years to one year. For individual investors, financial proof has been lowered from TWD500,000 to TWD200,000, and the average annual income requirement has been reduced from TWD150,000 to TWD100,000.

Furthermore, a major regulatory reform was approved by the board of the TWSE on 26 November 2024.

The reform focuses on four key aspects:

1. 1. removing restrictions on qualified investors and diversifying trading instruments;
   2. enhancing the rigour of innovation evaluations;
   3. creating a flexible and friendly fundraising environment; and
   4. strengthening investor protection.

These amendments to the above-mentioned rules have been submitted to the FSC for approval, with implementation expected in early January 2025. The main amendments are:

Removing restrictions on qualified investors and diversifying trading instruments. To attract more domestic and international innovative enterprises and capital into the market, and to increase trading volume, the amendments remove restrictions on qualified investors, adopting general board trading mechanisms. This change is expected to increase the investor base for TIB-listed stocks from the current 300,000 to more than 13 million.

In addition, TIB-listed stocks will now be accessible through various instruments including margin trading, securities lending and intraday (or after-hours) odd-lot trading, providing investors with diverse and dynamic trading environments.

Introducing external experts to enhance the rigour of innovation evaluations. To ensure that the TIB remains a premium platform recognised for innovative enterprises, the TWSE will involve external experts to evaluate the innovation aspects of applicant companies. Only those meeting the innovation criteria will proceed to the Listing Review Committee for further consideration.

Creating a flexible and friendly fundraising environment. Companies applying for TIB listings that have already publicly sold at least 10% of the total proposed shares and meet the equity dispersion requirements at the time of application may be exempted from conducting additional public offerings. This adjustment provides greater flexibility and efficiency for TIB-listed companies seeking to raise funds.

Strengthening investor protection. Several measures have been introduced to enhance oversight and safeguard investors.

These include: raising the approval threshold for TIB Listing Review Committee decisions to at least two-thirds of attending committee members; limiting sales to group-affiliated or related entities to no more than 70% of total sales; requiring disclosure of plans to enhance corporate value for businesses experiencing severe declines or losses; mandating biannual investor conferences for all TIB-listed companies; and increasing the inspection rate of underwriting firms’ compliance assistance activities.

Key takeaway

Currently, 20 companies are listed on the TIB, including J&V Energy Technology and HD Renewable Energy, both of which have successfully transitioned to the main board. Tigerair Taiwan also migrated to the main board on 29 November 2024.

With the upcoming regulatory relaxations set to take effect in January 2025, the TIB is poised to attract a broader range of emerging industries, further broadening its scope and appeal.

These reforms are expected to foster a dynamic and vibrant ecosystem that supports the growth and development of innovative companies while reinforcing the global competitiveness of Taiwan’s capital markets.

Over time, this momentum could create a positive cycle of economic growth, improved corporate performance, and increased innovation. By attracting investment and empowering groundbreaking enterprises, Taiwan is well-positioned to solidify its role as a global hub for innovation-driven industries.

DENTONS
3F, No. 77, Section 2,
Dunhua South Road, Taipei, Taiwan
Tel: + 886 2 27020208
Email: james.hsiao@dentons.com.tw