Face value requirement for Taiwan shares to be scrapped
January 1, 2014, 12:15 am TWN
Taipei--The Taiwan Stock Exchange (TWSE) said Tuesday that shares of companies listed on Taiwan's equity markets will no longer be required to have minimum face values of NT$10 (US$0.33) beginning on Jan. 1, 2014.
After the face value rule is removed, listed or would-be listed companies on the main board, the over-the-counter (OTC) market and the emerging market will be allowed the flexibility to determine face values based on their own needs, the TWSE said.
The Financial Supervisory Commission, Taiwan's top financial regulator, said the move to abolish the strict minimum face value rule will help internationalize the country's equity markets and bring them in line with regional markets that have no face value restrictions.
Many listed companies whose share prices have fallen below NT$10 have long urged financial authorities to get rid of the face value (also known as par value) requirement because it hurts them when they want to raise funds.
Financial authorities often urge investors to take the relatively low share prices of these companies into account when the companies try to raise funds, which can discourage further investment.
The GreTai Securities Market (GRSM), which operates the local OTC market and emerging market, said the added flexibility will help small and medium-sized enterprises (SMEs), the backbone of Taiwan's economy, gain access to funds.
According to the Ministry of Economic Affairs, Taiwan has about 1.28 million SMEs, representing more than 97 percent of the country's businesses.
As for the listed companies that plan to adjust the face value of their shares, trading of their shares will be suspended before the change is completed, both the TWSE and the GTSM said.
The Taiwan Stock Exchange cautioned that once the rule is relaxed, investors will have to pay closer attention to a listed company's return on equity and return on assets rather than simply its earnings per share or book value per share when evaluating a company.
The exchange said it will establish a special area on its website for the disclosure of financial information by listed companies whose shares have a face value other than NT$10 to give investors a clearer picture of the companies' finances.