Taiwan's FSC allows listed companies to issue foreign currency dividends, earliest implementation next year

Taipei, April 21 (CNA) The Financial Supervisory Commission (FSC) announced today that, considering that foreign ownership in Taiwanese stocks has reached 46.93% and the Taiwan stock market's market value has jumped to the 7th largest globally, it hopes to align its systems with international practices. It will explicitly allow custodians to receive foreign currency cash dividends on behalf of foreign investors, meaning listed and emerging companies can issue foreign currency cash dividends if needed, applicable only to foreign shareholders. This marks the first time that common stocks in Taiwan can issue foreign currency dividends, and if system adjustments proceed smoothly, it could be implemented as early as next year.

Outsiders expect companies with high foreign shareholder ratios, such as TSMC, to benefit.

Huang Chung-hao, Deputy Director-General of the FSC's Securities and Futures Bureau, announced today at a regular press conference that according to the latest statistics, foreign ownership in Taiwanese stocks has reached 46.93%, and the Taiwan stock market's market value has grown annually, currently ranking 7th globally. The FSC hopes to align its system with international standards.

Huang Chung-hao explained that the FSC, referring to international practices, will issue an official letter based on the relevant regulations of the "Regulations Governing Investment in Securities by Overseas Chinese and Foreign Nationals." This letter will explicitly state that custodians designated by overseas Chinese and foreign nationals, in accordance with the aforementioned regulations, can receive foreign currency cash dividends issued by listed and emerging companies on their behalf. The funds can also be paid into the overseas foreign exchange deposit accounts designated by overseas Chinese and foreign nationals, or their foreign exchange deposit accounts opened in domestic financial institutions, as instructed by the investors.

Huang Chung-hao further explained that companies have successively raised such demands because some companies may collect a lot of US dollar payments, but when issuing cash dividends, they need to convert US dollars to New Taiwan dollars. However, after foreign investors receive dividends, they have to convert the New Taiwan dollar dividends back into foreign currency for remittance, causing exchange burdens for both foreign shareholders and companies. Therefore, the FSC hopes to create a more friendly investment environment through this official letter.

Regarding the process after the official letter is issued, Huang Chung-hao stated that after reviewing, there is no need to adjust the regulations of the Ministry of Economic Affairs and the Central Bank. The FSC has already asked Taiwan Depository & Clearing Corporation to study and establish a mechanism for issuing companies to manage reconciliation and control for foreign currency cash dividends issued to overseas Chinese and foreign nationals, which is expected to go online in the third quarter of this year. Subsequently, systems for company share registrars and custodians will also need to be adjusted, with the new measure estimated to be implemented as early as next year.

Huang Chung-hao further explained that according to the Company Act, companies do not need to apply separately to issue foreign currency dividends, but are encouraged to communicate properly with shareholders. After the company's board of directors makes a resolution, if they announce the ex-dividend record date, they should also explain whether they plan to issue foreign currency dividends. Foreign currencies are not limited to US dollars; if a company deems it necessary to issue euro or other foreign currency dividends, it can do so. Foreign shareholders must also choose whether to receive foreign currency dividends.

Regarding the specific conversion time, Huang Chung-hao pointed out that it is expected to be a few days before the cash dividend payment date, and the details are still to be discussed with relevant units.

The new system primarily applies to foreign shareholders. The media asked if domestic investors could also choose to receive foreign currency dividends if they had such a need. Huang Chung-hao stated that the current Company Act does not restrict the eligibility of recipients. The actual decision depends on whether the enterprise has a need and feasibility. Currently, the new system mainly provides foreign currency dividends to foreign shareholders. If domestic investors also have a need, they can submit suggestions to listed companies in the future, but if it involves domestic investors, it would require more system adjustments.

According to FSC data, current exchanges including New York, Hong Kong, the UK, Australia, and Canada do not restrict listed companies to issuing dividends in a single currency. In practice, the UK, Australia, and Canada all issue multi-currency dividends. (Editor: Lin Shu-yuan) 1150421

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