IIEffective Insolvency and Creditor Rights Systems
Taiwan's insolvency regime has been called "archaic," but Lawrence Liu, writing for the Forum on Asian Insolvency Reform has reported that the need to remain globally competitive has inspired the authorities to revamp the system. The law is fragmented, with reorganization covered under the Company Act and liquidation and composition covered under the Bankruptcy Act. Insolvency of failed banks and insurance companies are regulated by the Banking Act and Insurance Act, respectively. Amendments to the laws in 2000 and 2001 have not yet addressed all the weaknesses in the regime. The Bankruptcy Act does not adequately address cross-border issues, but there were draft amendments, proposed in 2004, that deal with some cross-border rules. A 2009 report by KPMG notes that a new law consolidating reorganization and bankruptcy proceedings was, at the time of the publication, under review. In 2009, the U.S. Department of Commerce stated that Taiwan’s insolvency regime guaranteed creditors the right to proportional share in a debtor's assets. The DoC report, along with several others, also makes note of the slow legal proceedings in Taiwan Nonetheless, there is no publicly available information regarding Taiwan's compliance with the Principles and Guidelines for Effective Insolvency and Creditor Rights Systems developed by the World Bank.
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IDInternational Financial Reporting Standards
Accounting standards in Taiwan are set by the Financial Accounting Standards Committee (FASC) of the Accounting Research and Development Foundation (ARDF). In 1999, in its ongoing efforts to achieve convergence with International Financial Reporting Standards (IFRSs), the FASC initiated a three-year "comparability project" to review differences between IFRSs and the Taiwanese Statements of Financial Accounting Standards, according to a 2008 presentation by Dr. Rong-Ruey Duh, the chairman of the ARDF. Dr. Duh noted that the results of this comparison served as the basis for revising then-current national standards and issuing new standards more aligned with IFRSs. As stated in the ARDF's "Project Plan Concerning the Convergence with IFRSs," as of October 2007 many IFRSs had been incorporated in the national requirements. Nevertheless, differences between Taiwanese and international requirements still existed. Finally, on June 5, 2009, the ARDF released its “Roadmap toward IFRS Adoption in Taiwan,” announcing its plan to fully adopt IFRSs in Taiwan using a phased-in approach. In Phase I, listed companies and financial institutions supervised by the Financial Supervisory Commission (FSC) (except for credit cooperatives, credit card companies, and insurance intermediaries) will be required to adopt Taiwan-IFRSs starting 2013, with early adoption permitted in 2012 for certain types of companies. In Phase II, other companies, including unlisted public companies, credit cooperatives, and credit card companies will me mandated to apply Taiwan-IFRSs starting from January 1, 2015, with earlier application permitted from January 1, 2013.
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IIPrinciples of Corporate Governance
Following the Asian financial crisis of 1997, Taiwan initiated an overall reform of its financial sector. According to the 2006 Wisconsin International Corporate Governance report, these initial reforms were later accompanied by improvements in corporate governance starting in 2002, which focused on greater independence of the board of directors, audit committees, and supervisory commissions. The report identified weaknesses in three areas relating to financial reporting, share-based compensations, and - more generally - the mechanisms for corporate control. Some of these issues have since been resolved, particularly with the 2005 and 2006 amendments to the Company Law and the Securities and Exchange Act. A 2007 Securities and Futures Institute (SFI) report "Corporate Governance" noted that to enhance corporate governance for listed companies, the Taiwan Stock Exchange (TSE) and the SFI have issued Corporate Governance Best-Practice Principles for TSE/GTSM Listed Companies. Moreover, the SFI report claims that Taiwan is fulfilling the requirements of the Organization for Economic Cooperation and Development (OECD) principles of corporate governance through various regulations stipulated in the Company Law and the Securities and Exchange Act. However, apart from this information, there is insufficient publicly available information that directly address Taiwan's compliance with the OECD principles.
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IIInternational Standards on Auditing
Listed and non-listed companies in Taiwan are required to comply with the Taiwanese Statements of Auditing Standards developed by the Auditing Standards Committee (ASC) of the ARDF. A 2007 National Federation of Certified Public Accountants Associations (NFCPAA) self-assessment explained that the law requires the use of national standards with no reference to the International Auditing and Assurance Board (IAASB) pronouncements. The self-assessment, however, noted that the NFCPAA works together with the ASC to help incorporate IAASB pronouncements into Taiwanese requirements and holds seminars on IAASB pronouncements to disseminate information on the significance of international standards. Nevertheless, there is insufficient further information publicly available that directly addresses Taiwan's compliance with the International Standards on Auditing promulgated by the IAASB.
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IDAnti-Money Laundering/Combating Terrorist Financing Standard
According to a 2009 report by the U.S. Department of State (DoS), Chinese Taipei’s (Taiwan) position as a center for international trade coupled with its developed financial sector, make it vulnerable to money laundering and other transnational crimes. Taiwan is not a member of many of the major international organizations, such as the United Nations, the International Monetary Fund, and the World Bank. The country is therefore at a disadvantage as it cannot be a party to international conventions relating to anti-money laundering (AML) and combating the financing of terrorism (CFT). Taiwan, however, is a founding member of the Asia/Pacific Group on Money Laundering (APG), which released its second mutual evaluation of Taiwan compliance with the Financial Action Task Force's (FATF) 40+9 recommendations and special recommendations on AML/CFT in 2007. Per the findings of the 2007 mutual evaluation, although Taiwan has some elements of a functioning AML/CFT regime, it still lacks significant laws and procedures that will allow it to fully comply with the FATF's requirements on AML/CFT. The evaluation found that Taiwan was fully or largely compliant with 25 of the FATF's 40 recommendations (R) and 9 special recommendations (SR). Nevertheless, none of these included any of the FATF’s core recommendations. However, as noted by Taiwan’s Ministry of Justice Investigation Bureau’s Annual AML Report, several amendments were made to the Money Laundering Control Act in response to the findings of the APG evaluation. In addition to this, a Counter-Terrorism Action Law has been in the works since 2003, as reported in 2009 U.S. DoS report. If passed, it would explicitly designate the financing of terrorism as a major crime. This proposed law, per the 2009 U.S. DoS report, is expected to allow relevant law enforcement authorities to seize terrorist assets even without a criminal case in Taiwan. However, updated compliance levels are still yet to be assigned based on the developments that have taken place since the 2007 APG mutual evaluation. The FATF, in its 2008-2009 Annual Report, named Taiwan as one of the jurisdictions that have endorsed the FATF's 40+9 recommendations.
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IICore Principles for Systemically Important Payment Systems
Taiwan has four payments systems: the Check Clearing House System, the Interbank Remittance System, the Central Bank of China (CBC) Interbank Fund-transfers Settlement System (CIFS), and the Central Government Securities Settlement System. According to the CBC website, the first three qualify as systemically important payment systems. Of these three, CIFS operates on a real-time gross settlement basis. Annual Reports from the CBC and two 2008 World Bank reports on payment systems provide some information regarding Taiwan's payment system infrastructure. According to a report by Massimo Cirasino and Jose Antonio Garcia based on a World Bank Survey of payment systems worldwide, Taiwan exhibits a “medium-low level of development” in the assessment's legal and regulatory component, a “high level of development” in its system design as it relates to safety, soundness, and efficiency, and a “medium-high level of development” in its oversight component. Although the World Bank assessment is loosely based on the Committee on Payment and Settlement Systems Core Principles for Systemically Important Payment Systems (CPSIPS), it does not directly address each individual principle or their requirements. Apart from the World Bank report there is no source publicly available that comprehensively addresses Taiwan’s compliance with the CPSIPS.
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