Taiwan’s joint venture (JV) market is increasingly shaped by geopolitical considerations, particularly the global emphasis on supply chain resilience, technology security, and the diversification of critical industries. As geopolitical tensions and concerns over supply chain concentration continue to influence investment strategies, companies are seeking partnerships that reduce reliance on a single jurisdiction while preserving access to advanced technologies, manufacturing capabilities, and key markets. Taiwan’s leading position in semiconductors and AI-related supply chains has consequently made it an attractive destination for strategic alliances and JVs. Recent examples include the Nanya and Etron joint venture focused on high-bandwidth memory solutions in 2025, the Winmate and U-Leam joint venture for low Earth orbit satellites in 2026, and the TSMC and Sony joint venture for the next generation of image sensors in 2026, all of which illustrate efforts to combine complementary technological capabilities while strengthening supply chains that support the growing demand for AI applications. Continued investment in AI-related infrastructure, including data centres and advanced computing facilities, further demonstrates how geopolitical and technological priorities are driving cross-border collaboration involving Taiwanese companies.

Many business sectors attracting investment in Taiwan, including offshore wind, semiconductors, AI infrastructure, and major infrastructure projects, require substantial capital commitments, long development timelines, and highly specialised expertise. Joint ventures enable market players to share development costs and mitigate risks while combining complementary strengths and creating synergies in technology, manufacturing capabilities, operational know-how, and market access. These advantages are relevant to both inbound investments into Taiwan and outbound investments by Taiwan companies. In the offshore wind sector, for example, JV activity has expanded beyond the development of generation assets to include the localisation of critical supply chain components, such as offshore service vessels and power cable manufacturing facilities.

Taiwan remains one of Asia’s active markets for joint ventures, supported by its strategic role in global supply chains, strong manufacturing base, and government support for key industries. While offshore wind has been one of the primary sources of cross-border JV activity in the past few years, JVs are increasingly being used across a broader range of sectors, including biotechnology, medical technology, artificial intelligence (AI), and infrastructure. Companies are leveraging JV structures not only to invest in projects, but also to localise supply chains, combine complementary technologies, facilitate technology transfer, expand into new markets, and share development risks.

Recent transactions illustrate this trend. In offshore wind, JVs have expanded beyond power generation to supporting infrastructure such as service vessels and offshore power cable manufacturing. In biotechnology and med-tech, Taiwanese companies are partnering with US, Japanese, and Hong Kong investors to strengthen manufacturing capacity, access overseas markets, commercialise innovative therapies, and diversify geopolitical risks. In the AI sector, growing demand for semiconductors, memory solutions, and data-centre infrastructure has led companies to form JVs that combine technological expertise, manufacturing capabilities, and market access, supporting the rapid expansion of AI-related industries.

At the same time, Taiwan continues to improve its investment environment through regulatory reforms. The Department of Investment Review (DIR) has digitalised and expanded its foreign investment filing platform, reducing administrative burdens and facilitating cross-border transactions. Amendments to regulations governing insurance company investments are expected to increase institutional capital available for infrastructure and policy-supported projects, creating additional opportunities for JV formation due to the special shareholding limitation imposed on the insurance companies.

JVs can be formed as traditional companies (either a company limited by shares or a limited company – JVC). JVCs in the form of a closed-end company allow for restrictions on the transfer of shares. The LLP structure is not available under Taiwan’s regulatory regime. The partnership structure is only available to individual partners – ie, not to entity/corporate partners. The LP structure is typically used for venture capital and is not a preferred option among institutional investors in the context of JV activities.

The traditional JVC has long been the most popular option for JVs in Taiwan. Nevertheless, establishing a closed-end JVC is also widely considered as it provides flexibility, allowing corporate governance arrangements in shareholders’ voting rights, in-kind contributions and simplified shareholder meeting procedures.

In Taiwan, JV parties typically consider corporate governance issues as the key factor, among other factors such as controllership, voting rights, restrictions on share transfers and repatriation, when determining the JV structure.

For tax-related considerations and incentives, the Statute for Industrial Innovation (SII) provides incentives, applicable from 1 January 2025 to 31 December 2029, including the following tax benefits, among others:

• Investment tax credits – up to 5% of expenditure in areas like smart machinery, 5G, cybersecurity, AI, energy conservation and carbon reduction can be credited against current-year corporate income tax (CIT). Alternatively, 3% of expenditure can be credited over a three-year period. The total credit is capped at 30% of the current year’s CIT plus profit retention tax.
• R&D tax credits – up to 15% of qualified R&D expenses, capped at 30% of tax payable. Small and medium-sized enterprises (SMEs) can choose between:
1. 15% credit for the current year only; and
2. 10% credit carried forward for two years pursuant to the Act for Development of Small and Medium Enterprises.

Additionally, Taiwan has extended tax incentives for start-ups from two to five years and lowered capital thresholds for venture capital participation, and it now allows angel investor benefits for investments starting from TWD500,000. Companies operating in science parks, export processing zones and free-trade zones may qualify for additional tax benefits.

The Ministry of Culture (MOC) has also implemented tax benefits and incentive policies specifically to promote cultural and creative industries. These are designed to attract foreign investment and JV activities in Taiwan’s cultural sector.

The Ministry of Economic Affairs (MOEA) is the primary regulator, and the Company Act is the main statutory law, for JV companies in Taiwan. If there are foreign investments involved in JV activities, a foreign investor should obtain inbound foreign investment approval (FIA) from the Department of Investment Review of the MOEA (DIR) before making the investment.

The primary AML-related law is the Money Laundering Control Act, and the main regulator is the Department of Justice. If the JV activities occur in the financial sector or other sectors specified in the Money Laundering Control Act, the Regulations Governing the Anti-Money Laundering of Financial Institutions will also apply, and such enterprises will be supervised by the Financial Supervisory Commission. For cross-border investments where foreign exchange conversions are involved, the Central Bank will also be involved in AML control.

National Security Considerations and Sanction List

Under the Counter-Terrorism Financing Act in Taiwan, the Ministry of Justice has the discretion to put any person or entity considered to be engaging in activities relating to terrorism or intending to cause harm or threat to the public on the terrorist financial sanction list. Entities on the sanction list are prohibited from transferring their properties at will, so will not be able to engage in JV activities as a partner/investor.

In addition, to ensure the development and competitiveness of Taiwan’s hi-tech industries, the National Science and Technology Council (NSTC) released the Regulations on the Designation of National Core Critical Technologies on 26 April 2023 to specify the scope of national core critical technologies. The NSTC also set up the Review Committee of National Core Critical Technologies (the “Review Committee”), which is in charge of designation, alternation and other matters regarding critical national technologies, and the Office of National Core Critical Technologies to track the development and research of relevant technologies and put forward associated proposals. The Review Committee looks at the critical technologies under its jurisdiction annually, and assists the relevant industries in clarifying the scope and application thereof. The Legislative Yuan released 42 items as the national core critical technologies on 13 February 2026.

FDI Regime and PRC Investment

According to the Statute for Investment by Foreign Nationals, all direct investments by foreign entities/nationals require approval from the DIR (except for certain investments in listed securities). Furthermore, any investment in Taiwan by a Taiwan entity in which a foreign investor holds over one third of the shares or capital requires the approval of the DIR.

Without such approval, the investor may be prohibited from expatriating profits out of Taiwan or may be requested to divest. In practice, without the approval of the DIR, an investor will not be able to complete the incorporation registration nor convert its investment fund into New Taiwan dollars after the fund is wired to Taiwan. The DIR will review the proposed investment to assess whether it is against national security, public order, good customs and practices, and national health, and whether it contravenes any of the relevant laws and regulations.

Specifically, the Executive Yuan has issued a “negative list” of prohibited and restricted industries for foreign investors (other than PRC investors) to invest in, due to national security concerns.

Furthermore, as the geo-national tension between China and Taiwan rises, PRC investments in Taiwan are subject to greater scrutiny. “PRC investor” refers to a PRC entity/national and any non-PRC entity in which a PRC entity/national holds more than 30% of the shares or capital, directly or indirectly, or is controlled by a PRC entity/national. PRC investors are only allowed to invest in certain limited sectors listed on the “positive list” issued by the DIR.

To prevent and deter PRC investors from illegal investment in Taiwan via nominee or other similar arrangements, the Act Governing Relations between the People of the Taiwan Area and the Mainland Area prohibits Taiwanese individuals from offering their names to, or allowing the use thereof by, PRC investors to circumvent the relevant restriction on PRC investments. Both the PRC investor and the Taiwanese nominee would be subject to a fine of between TWD120,000 and TWD25 million for violation of this rule. In addition, the DIR may order the investor to cease or withdraw such investment, or to rectify it within a specified time limit, and it may suspend the investor’s shareholder rights if necessary.

The Fair Trade Act (FTA) is the primary regulation for antitrust and merger control in Taiwan. If the formation of a JV constitutes a “combination” with a certain market share (as a result of the combination, the parties will jointly acquire a market share of at least one third, or one of the parties will hold a market share of at least one quarter before the combination) or turnover thresholds in the preceding fiscal year under the FTA, clearance from the Fair Trade Commission (FTC) must be obtained before its formation. In this respect, “combination” refers to the following, among other things:

• the holding or acquisition of at least one third of the voting shares of or interest in another enterprise;
• having an arrangement with another enterprise for joint operation on a regular, ongoing basis, or the management of another enterprise’s business based on a contract of entrustment; or
• having direct or indirect control over the operation or personnel of another enterprise.

Prior to June 2023, the FTC would exercise jurisdiction over foreign-to-foreign combinations only if the transaction had a local effect on the Taiwanese market.

In June 2023, the FTC further relaxed the FTA to exclude notification requirements from those combinations where foreign enterprises establish or operate a JV outside Taiwan that does not engage in “economic activities” within Taiwan. Economic activities are defined as those involving the supply and demand of goods or services in Taiwan. Additionally, the FTC abolished the Guidelines on Handling Extraterritorial Combinations in June 2023 as a supplementary measure to the amendment of the FTA, to the effect that any extraterritorial combination meeting the filing thresholds must be notified with the exception of the newly defined non-notifiable type, as noted in the foregoing.

The FTC also amended the FTC Disposal Directions (Guidelines) on Handling Merger Filings, specifying that the simplified procedure now applies to combinations where:

• the transaction value is below TWD2.5 billion;
• in horizontal combinations, the combined Taiwan revenue of relevant products or services does not reach TWD200 million;
• in vertical combinations, none of the participating parties generate TWD200 million or more in Taiwan for the relevant products or services; or
• the enterprise being combined generates no Taiwan revenue.

If a JV participant is a listed company in Taiwan, it will be subject to the rules issued by the Taiwan Securities Exchange or the Taipei Exchange, as applicable, which mainly include the obligation to disclose the material information of the JV project, corporate decision procedural requirements and investing amount limitations to engage in such investments.

Disclosure Requirements Under the Company Act

Under the Company Act, companies are required to make an annual report containing the information of directors, supervisors, managerial officers and shareholders holding more than 10% of the total shares, including their names, nationalities, shareholding, date of birth (for individuals) or the date of incorporation (for entities), and other items required by the competent authority.

To promote full and timely disclosure of any significant changes in a public company’s shareholding structure, the threshold for a public company to report and disclose a substantial shareholding that any person acquires, either individually or jointly with others, was lowered from 10% to 5% in 2024.

Additional Disclosure Requirements Under the FDI Regime and AML Requirements

The DIR also generally requires the applicant to disclose information it holds on the major shareholders and ultimate beneficial owner (UBO) for the purpose of the DIR’s foreign direct investment review, and to ascertain any PRC involvement.

Moreover, financial institutions in Taiwan are obliged to identify the UBO of their clients when conducting the customer due diligence process, according to the Regulations Governing Anti-Money Laundering of Financial Institutions.

There have been several noteworthy court decisions in Taiwan over the past three years relating to JVs, particularly clarifying the interpretation of non-compete clauses in JV agreements.

Taiwan High Court 113-Shang-Zi No 141

In Taiwan High Court 113-Shang-Zi No 141, the court interpreted a non-compete clause in a JV agreement between two parties who co-founded a biotech company. The clause prohibited either party from engaging in competing business for two years post-termination. The court held that the restriction only applied to business activities that the JV company was legally permitted to conduct. Since the defendant’s post-termination activities did not fall within that scope, the defendant’s activities did not violate the non-compete obligation, and no damages were awarded. This judgment clarified the enforceability of post-termination non-compete clauses in the context of JVs by emphasising alignment with the JV’s lawful business scope.

Taiwan High Court 113-Shang-Zi No 239

In Taiwan High Court 113-Shang-Zi No 239, the court examined a non-compete clause in a JV agreement that allowed a JV partner to continue its existing business operations with prior disclosure and good-faith discussion among the JV partners. The plaintiff argued that the JV partner may only continue to accept orders from its existing clients and is prohibited from accepting orders from new clients. However, the court held that the non-complete provision clearly permits the partner to continue its existing business operations and should not be reinterpreted to impose stricter obligations in the absence of explicit language in the JV agreement. The court reaffirmed that contractual interpretation of JV agreements must respect the parties’ expressed intent and commercial context.

Taipei District Court 114-Zhong-Su-Zi No 889

In Taipei District Court 114-Zhong-Su-Zi No 889, the court examined a joint-venture arrangement documented in a “Shareholders’ Joint Investment and Business Operation Agreement” under which the parties agreed to contribute capital to, establish, and jointly operate a restaurant business, by looking beyond the text of a JV agreement. One party sought to rescind the agreement and recover its investment contribution, arguing that the agreed ownership structure and management arrangements had not been fully implemented because it had not been registered as a shareholder and legal representative of the JV company. However, the court held that the agreement was an innominate contract analogous to a partnership, under which the parties’ obligations should be assessed in light of their overall commercial collaboration rather than solely through the lens of corporate formalities.

Since the JV company had been established, the business had commenced operations, and the parties had substantially performed their agreed commercial objectives, the court declined to permit rescission of the agreement or repayment of the investment contribution. At the same time, the court found that the failure to register the claimant as a shareholder and director constituted a breach of specific contractual obligations expressly set out in the JV agreement and therefore enforced the agreed liquidated damages provision. The court reaffirmed that, while the performance of a JV arrangement may be assessed on a substance-over-form basis, clearly drafted governance and ownership commitments remain independently enforceable according to their contractual terms.

The JV parties typically enter into non-disclosure agreements, accompanied by a memorandum of undertaking (MoU) and/or a letter of intent (LoI). In Taiwan, investors generally include exclusivity provisions in the MoU or LoI.

At the pre-JV agreement stage, the MoU or LoI is typically expected to cover elements relevant to high-level commercial consensus, such as investment structure, expected paid-in capital, shareholder rights (including the right of first refusal) and management rights and governance (but not the details thereof); sometimes, the MoU or LoI also covers additional arrangements such as earn-outs, exit rights, the distribution waterfall, the deadlock resolution mechanism and other issues of major concern to the investors in the project.

In Taiwan, listed companies are obliged to disclose significant JV projects when they have a degree of certainty and materiality, according to the Securities and Exchange Act. Under the Regulations Governing the Scope of Material Information and the Means of its Public Disclosure, such timing could, depending on the specific nature of a given project, be the closing day, negotiation day, execution day or resolution day of the board of directors (whichever is earliest).

In Taiwan, JV agreements typically include conditions precedent such as regulatory approvals, corporate authorisations, completion of due diligence and confirmation of capital contributions. These conditions must be satisfied or waived before closing and are often tied to the legal and operational readiness of the JV.

Material adverse change (MAC) and force majeure clauses are commonly negotiated, especially in cross-border or high-value deals for JV activities. MAC clauses allocate pre-closing risk and are often narrowly defined to reflect specific commercial concerns, while force majeure provisions, grounded in both the spirits of contracts and Article 227-2 of Taiwan’s Civil Code, address unforeseeable events that hinder performance, often with tailored notice and mitigation requirements.

There are two common approaches to setting up a JV vehicle in Taiwan:

• one of the JV participants first establishes a local entity, which will issue new shares for other JV participants to subscribe for; or
• the JV participants convene a promoters’ meeting and establish the JV entity together.

In practice, the first option is preferred by investors because the procedure is more straightforward.

Participation by foreign entities requires FIA from the DIR. The DIR reviews the proposed shareholding structure and business scope to ensure compliance with the Statute for Investment by Foreign Nationals of Taiwan. Investments are generally permitted unless they fall within industries listed on the government’s negative list, which includes sectors such as military-related chemicals, firearms, energy supply, telecommunications and mass media, or may cause concern with respect to national security.

While Taiwan does not impose a general minimum capital requirement for JV formation, certain regulated industries do require special licences or minimum capital injections under applicable laws. Examples include, among others:

• financial institutions (eg, banks, insurance companies) – subject to strict licensing and capital adequacy requirements under financial supervisory regulations;
• freight forwarding and logistics – require registration with the Ministry of Transportation and Communications, often with minimum capital thresholds;
• telecommunications and broadcasting – require licensing and compliance with ownership restrictions and capital requirements; and
• medical and biotech sectors – may require approval from the Ministry of Health and Welfare, with minimum capital tied to the scope of operations.

These requirements must be carefully assessed during the structuring phase, as they directly impact the feasibility and timeline of the consummation of the JV transaction.

In Taiwan, a JV is typically established as a company. The terms are documented in a JV agreement, although some of the terms are also stipulated in the articles of incorporation of the JV entity.

A corporate JV agreement typically covers the parties, investment structure, capital call schedule, corporate governance, management and board composition, reporting and information rights, audit procedure, dispute resolution mechanism, confidentiality, non-compete/non-solicitation, breaches and indemnity, transfer restrictions (such as right of first refusal put/call options, drag-along and tag-along provisions), termination rights, distribution waterfall, and costs and expenses.

The JV entity’s directors or board of directors constitute the managing body. The board may also delegate different committees to aid the decision-making process and/or form a steering committee. It is also worth noting that Taiwan adopts a system of “supervisors” for companies having two or more shareholders. If there are two JV participants, each will normally nominate one supervisor for the JVC.

In practice, JV entities can be funded by equity or a mix of debt and equity. Depending on the provisions agreed by the parties, the JV participants may be required to increase investment by equity or loan when receiving a drawdown notice. Alternatively, there can be a right to purchase more shares and increase the investments in the JV entity. To avoid future equity funding diluting the original controlling power of certain JV participants, the parties may also include a right of first refusal provision in the JV agreement; the Taiwan Company Act also gives shareholders a statutory pre-emptive right when the JV entity issues new shares.

Taiwan JVCs typically have an odd number of directors on the board to avoid a deadlock. In some cases, such as a 50–50 JV where each party appoints the same number of directors, or where the minority JV participant has certain veto rights at either board or shareholder level, an escalation process can be included in the JV agreement to resolve potential deadlocks.

In addition to the aforementioned documents, services agreements, IP transfer agreements, licensing agreements and co-operative development agreements may be required, depending on the case.

In Taiwan, the rights and obligations of JV parties are primarily governed by contracts, as there is no specific statute regulating JVs. JV parties typically agree on the following key rights and obligations:

• profit sharing and loss allocation, usually in proportion to their capital contributions unless otherwise stipulated;
• governance and management rights, including board representation, veto rights on reserved matters and participation in key decisions;
• access to information including financial reports, operational updates and board materials, often reinforced through shareholder agreements or information rights clauses; and
• non-compete and non-solicitation obligations, which preclude parties from engaging in competing businesses during, and sometimes after, the JV term, subject to reasonableness and enforceability under Taiwan law.

Profits and losses are generally distributed in accordance with the parties’ equity stakes, unless the JV agreement provides otherwise. There are no general statutory restrictions on how profits and losses must be allocated, but the arrangement must be clearly documented to avoid disputes. Courts may uphold alternative arrangements if they reflect the parties’ true intent and are not contrary to laws and public policy.

Regarding liabilities arising from JV activities in Taiwan, if the JV company is structured as a company limited by shares or a limited company, each party’s liability is limited to its capital contribution. If the JV is structured as a limited partnership, the general partner is jointly and severally liable for the JV’s debts and obligations, while the limited partners’ liabilities remain limited to their respective capital contributions. However, if the JV is structured as a contractual or unincorporated JV and the arrangement resembles a partnership, the parties may be held jointly and severally liable for the JV’s debts and obligations under the principle of partnership liability.

In Taiwan, minority members of a JV typically protect their interests through a combination of contractual rights and structural safeguards in the JV agreement and constitutional documents. These protections are especially critical in international JVs, where asymmetries in control and barriers to information access may arise. Common key mechanisms under JV agreements include the following:

• Board representation and voting rights – minority parties often negotiate for board seats and veto rights over reserved matters, such as changes to the business scope or capital structure, or the transfer of key assets, to ensure participation in major decisions and prevent unilateral actions by majority shareholders.
• Information and audit rights – minority investors typically secure access to financial statements, operational reports and inspection rights. These provisions are essential for monitoring performance and fostering transparency.
• Non-compete and exclusivity provisions – to safeguard the JV’s commercial value, minority parties may require non-compete obligations from other shareholders and exclusivity in certain markets or technologies.
• Exit and transfer rights – tag-along rights, put options and pre-emptive rights are commonly used to protect minority interests in exit scenarios or changes in ownership. These rights help ensure that minority parties are not left behind or diluted without recourse.

In international JVs involving Taiwan, the selection of substantive and procedural law is a foundational aspect of legal structuring. Where the JV’s core activities are mostly conducted in Taiwan, it is generally advisable to adopt Taiwan law as the governing substantive and procedure law. This ensures consistency with local regulatory frameworks and facilitates enforcement by Taiwan courts.

While Taiwan courts are competent and accessible, JV parties – particularly in cross-border arrangements – often prefer alternative dispute resolution (ADR) mechanisms outside Taiwan. Arbitration is commonly selected for its neutrality and efficiency. For example, the Singapore International Arbitration Centre (SIAC) is frequently chosen for JVs involving Asian entities, while the International Centre for Dispute Resolution of the American Arbitration Association may be preferred in JVs involving US parties. The choice of venue typically reflects the nationality and commercial interests of the JV participants.

Failure to agree on forum and arbitral rules can result in jurisdictional uncertainty, increased litigation risk and potential delays in enforcement. In such cases, the rules of the arbitration association, which may not align with the parties’ commercial expectations or the nature of the JV, may apply. It is therefore essential to clearly specify both substantive and procedural law in the JV agreement to avoid ambiguity and ensure predictability.

Taiwan does not mandate ADR procedures for commercial disputes. However, arbitration and mediation are widely accepted and often encouraged, particularly in JV and contractual disputes. Parties are free to designate arbitration institutions and rules in their agreements, and Taiwan courts generally uphold such clauses.

Taiwan is not a signatory to the New York Convention or other major international treaties on dispute resolution due to its unique international status. Nonetheless, Taiwan has developed a robust domestic legal framework for recognising and enforcing foreign arbitral awards under the Arbitration Act of Taiwan, provided the award satisfies reciprocity and procedural fairness standards.

Foreign court judgments may be enforced in Taiwan under the Code of Civil Procedure of Taiwan, subject to conditions including reciprocity, finality, and consistency with public policy. Foreign arbitral awards may also be enforceable through Taiwan’s courts, provided they meet the statutory requirements and do not conflict with public order or good morals.

The board of directors is usually elected by the participants through cumulative voting. In some cases, the participants will add a voting agreement to ensure execution of the pre-arrangement with respect to the number of seats on the board.

Depending on the corporate structure and its purpose, the parties can include a provision regarding weighted voting rights in different classes of shares in their agreements. For closed-end companies, Article 356-9 of the Company Act stipulates that shareholders can freely reach a voting or voting trust agreement. In addition, according to Article 10 of the Business Mergers and Acquisitions Act (BMAA), the shareholders can reach a voting agreement for the purpose of M&A as well. However, beyond these two scenarios, the courts hold diverse views on whether shareholders or stakeholders can reach a valid voting agreement, as a voting agreement may affect the implementation of corporate governance. For example, in 2022, the Supreme Court ruled that the voting agreement under which shareholders are obliged to vote for the director and supervisor candidates proposed by the outgoing (selling) shareholder for the target company, to guarantee payment of the share purchase price in instalments, was unenforceable because the agreement violated the principle of corporate governance and public customs (Supreme Court Civil Judgment 109-Tai-Shang-Zi No 2482 (2022)).

Article 23 of the Company Act generally requires a director to maintain loyalty to the company and exercise the due care of a good administrator in conducting the business operations of the company. It is therefore generally understood that the director holds a duty of loyalty and a duty of care to the company, as recognised in a recent court judgment in Taiwan (Supreme Court Civil Judgment 110-Tai-Shang-Zi No 117 (2021)). Separately, when the JV participant is a legal person, it can appoint an individual to serve as a director of the JV company under the “mandate relationship” according to the Company Act and the Civil Code. Consequently, the appointee bears a duty of care and a duty of loyalty to both the JV company and the JV participant.

Under the Company Act, directors are subject to certain restrictions on voting on matters with conflicts of interest (see 7.3 Conflicts of Interest). Furthermore, directors are prohibited from engaging in self-dealing with the JV entity without disclosing the nature of such transactions to, and receiving approval from, the meeting of shareholders (Articles 206 and 209 of the Company Act). In Taiwan, the board of directors is allowed to delegate its functions to committees such as audit, compensation, nomination and independent committees.

In the event of a shareholder having conflicts of interest in a specific matter that may harm the interest of the company, the Company Act requires that the shareholder cannot participate in voting nor act as proxy for another shareholder. Similarly, a director who has a conflict of interest has to explain the material content thereof and cannot participate in voting if such conflict could harm the interest of the company.

JV participants are advised to consider the necessity of licensing agreements or IP/technology transfer agreements as early as possible before launching a JV project. The ownership of new IP developed in and out of the JV entity’s business scope is one of the key areas of consideration.

It is essential to clarify the contract purpose and scope to determine IP ownership under contractual collaborations. Depending on the industry, JV participants often have to deal with the use, development and transfer of IP, such as patents, trade marks, copyrights, trade secrets or know-how, in JV agreements. IP can be a valuable asset and may be considered as a capital contribution.

IP clauses are sometimes included in JV agreements, but they are more often separately addressed in an IP assignment and/or licensing agreement between the JV entity and one or more JV participants.

In many cases, licensing IP rights to facilitate the JV entity’s operation is preferred, because assigning IP rights tends to be more complex and time-consuming than reaching a licensing agreement.

Investors are increasingly interested in ESG projects as customers have more awareness of ESG issues now. In addition, a JV project that follows ESG principles or addresses ESG issues will likely achieve better long-term performance, as shown by recent studies in Asia.

The Financial Supervisory Commission in Taiwan is promoting new policies requiring public companies to disclose their ESG efforts by submitting ESG reports. As one of the Taiwan government’s initiatives to respond to climate change, the National Development Council published the key strategies for “Taiwan’s Pathways to Net-Zero Emissions in 2050” in 2022, which aims to reach the target of net-zero greenhouse gas emissions by 2050.

In general, JV entities are not subject to mandatory obligations to take action on aspects of ESG if they are not public companies or financial institutions. However, enterprises in Taiwan are encouraged to incorporate ESG guidelines into their business strategies and management systems.

Currently, the “Action Plan for Sustainable Development of Listed Companies” and the “Climate Change Response Act” are the primary ESG-related regulations in Taiwan. Whether the recent announcement/enactment of this legislation will affect JV arrangements in Taiwan will be closely monitored over the coming years.

From a contractual perspective, the parties to a JV arrangement usually include a put option and/or a call option provision to buy out each other’s shares in the JV agreement as part of the exit arrangements. If the JV party decides to exercise the put/call option, the participants might need to negotiate the value of each share of the JV entity if the calculation is not pre-agreed in the JV agreement.

The JV participants can also proceed, under the Company Act, with liquidation and dissolution procedures to wind up the company. The key actions for the liquidation process include issuing a public announcement for the creditors to report any debts, settling the outstanding debts and taxes, making up for any losses and repaying the debts of the JV entity before distributing the profits, if the JV entity decides to wind up. Moreover, when there is a foreign participant, the DIR’s approval regarding the dismissal of a foreign investment is required before a foreign JV participant can remit the residual overseas upon the conclusion of liquidation proceedings.

Tax incentives may be one consideration when transferring JV assets. Under the BMAA, if the company acquires assets amounting to more than 65% of the compensation of the share purchase, it will be exempted from stamp tax, deed tax and securities exchange tax.

Depending on the value and percentage of the JV’s total assets, the transfer of assets will be subject to certain statutory procedural requirements. For example, the transfer of assets requires the majority vote of the shareholder’s meeting for the transfer to have a material impact on the JV company’s operation.

For foreign JV participants, it is pivotal to also take the withholding tax issue into consideration. When the JV entity declares dividends and repatriates dividends offshore to foreign JV participants, it will be subject to a withholding tax of 21%. If the foreign JV participant is incorporated in a country that has signed a tax treaty with Taiwan, a lower withholding tax rate may apply.

Freedom to Determine the Exit Strategy

Generally, JV parties may freely negotiate and incorporate mechanisms such as put and call options, tag-along and drag-along rights, deadlock-triggered buyouts and pre-emptive rights. These provisions are generally enforceable under Taiwan law, as long as they are clearly drafted and do not contravene mandatory legal norms or public policy.

Common Exit Mechanisms in Taiwan

Frequently used JV exit strategies in Taiwan JVs include:

• sale of shares – subject to any agreed restrictions, this is the most straightforward and flexible method;
• dissolution and liquidation – used when the JV has fulfilled its purpose or when the parties cannot resolve a deadlock;
• M&A – a strategic exit route, particularly where one party seeks to consolidate control or monetise its investment; and
• initial public offering (IPO) – less common but viable for JVs with scalable operations and long-term growth potential.

Each exit route should be aligned with the JV’s commercial objectives, governance structure and regulatory obligations.