Contracts and company law essentials in Taiwan

Governing law, language and enforcement

Parties may choose the governing law of a contract under Article 20 of the Act Governing the Choice of Law in Civil Matters Involving Foreign Elements. Taiwanese counterparties expect Taiwan law and the Taipei District Court or arbitration at the Chinese Arbitration Association, and foreign law is common in licensing and supply deals. Court proceedings are in Mandarin Chinese, so bilingual contracts with a prevailing-language clause are standard and registry filings are in Chinese. Taiwan is not a party to the New York Convention but recognises foreign arbitral awards under its Arbitration Act on a reciprocity basis, and foreign public documents are authenticated through Taiwan's overseas offices rather than by apostille.

Chops and the 2024 Electronic Signatures Act

Taiwanese companies execute documents with the company chop and the responsible person's chop, and counterparties, banks and registries expect them; LegalMatrix documents provide chop blocks beside the signature blocks. The Electronic Signatures Act was substantially amended in 2024 (third reading 30 April 2024). Electronic documents and electronic signatures are now functionally equivalent to paper and handwritten signatures, the earlier requirement for the counterparty's prior consent was replaced by a right to object in advance, and digital signatures backed by a certificate from a certification authority approved by the Ministry of Digital Affairs are presumed to have been made by the signatory. Exclusions now require express statutory authority or an announcement by the Judicial Yuan or Ministry of Justice for judicial matters, and existing administrative exclusions lapse after a transition period. Stamp tax applies to certain paper instruments; check the Ministry of Finance for the treatment of electronic contracts.

The Personal Data Protection Act applies to any contract under which personal data is collected or processed, requires notice to individuals of the purpose and categories of use, and allows the competent authority to restrict international transfers in specified circumstances. Supervision is moving from sector regulators to a dedicated Personal Data Protection Commission; check the authority for current guidance before relying on sector practice.

Company Act: vehicles, approvals and investment review

The company limited by shares (gufen youxian gongsi) has shares, a board of at least three directors (or one or two for a non-public company that so elects) and supervisors or an audit committee; it is the vehicle for employee equity. The limited company (youxian gongsi) has capital contributions and one to three directors, and a member needs the consent of a majority of the other members to transfer. Responsible persons owe a duty of loyalty and the care of a good administrator under Article 23 and are personally liable for breach. There is no residency requirement, but foreign investment requires approval from the Department of Investment Review of the Ministry of Economic Affairs before capital is injected or shares acquired, and later transfers are reported.

Ordinary resolutions pass by a majority of votes at a meeting attended by holders of a majority of shares; special resolutions need two-thirds of votes at such a meeting or the Act's alternative majorities. Shares in a company limited by shares are freely transferable in principle (Article 163), so restrictions live in a shareholders' agreement binding among the parties, or in the articles of a closely-held company. Securities transaction tax or income tax may apply depending on whether share certificates have been issued; check the authority. Annual shareholders' meetings are held within six months of year end, minutes are in Chinese, and responsible persons and major shareholders are reported annually to the Ministry of Economic Affairs platform.

Labor Standards Act: notice, severance and non-competes

Taiwan is not an at-will jurisdiction. An employer may terminate only on statutory grounds, with advance notice under Article 16 of ten days (over three months' service), twenty days (one to three years) or thirty days (three years or more), pay in lieu permitted, and severance under the Labor Pension Act. Probation is not regulated but up to three months is accepted practice, and a dismissal during probation still needs a ground.

Article 9-1 (2015) sets four conditions for a valid post-employment non-compete: a legitimate business interest; the employee's access to trade secrets; a reasonable scope of period, area, activities and counterparties; and reasonable compensation paid for the restricted period, separate from salary. The maximum period is two years and a clause that fails any condition is void. Employee equity comes from the Company Act: employee stock options (Article 167-2), restricted shares for employees (Article 267) and treasury shares transferred to employees (Article 167-1), extendable to employees of parent and subsidiary companies. Gains are taxed as other income; check the Ministry of Finance.

Trade marks at TIPO

Taiwan is first to file. Registration takes approximately six to eight months without office actions and an accelerated route exists. Opposition is post-grant: three months from the publication date of the registration. Registration lasts ten years from the publication date, renewable within six months before expiry with a six-month grace period after, and a mark unused for three years may be cancelled. Foreign applicants without a Taiwan domicile or office must appoint a trade mark agent registered with TIPO, with no notarised power of attorney. Taiwan is outside the Madrid system, so a national filing is always required, and Chinese-character versions of foreign marks are commonly filed alongside the Latin-script mark to block pre-emptive transliterations.

Checklist

• Obtain investment review approval before injecting capital or acquiring shares.
• Choose a company limited by shares if employee equity is planned.
• Use bilingual documents with chop blocks.
• Pay compensation for any non-compete and keep it within two years.
• File the mark and its Chinese-character form at TIPO through a registered agent.

LegalMatrix products for Taiwan are signed off by an attorney admitted in Taiwan with aligned Chinese and English texts.