On The Legal Status Quo Of Cross-strait Merger

As both sides of the Taiwan Strait have joined World Trade Organization (WTO) , enterprises of both sides are bound to further merge into the world's economic system and they face even fiercer competition. Faced with such a challenge, transformation of enterprises can not totally depend on internal organic growth and should resort to the method of merging to speed up re-composition, integration, spin-offs, or expansion of scope and business from their original territory in order to scope with rapidly changing global business environment. Under this big environment, mechanisms such as law, accounting, taxation, and capital market should all follow the trends of industrial restructuring and corporate transformation. Only by doing so can the competitiveness of a country or a region be maintained. Of it, from a legal approach, the most important task is to revise corporate law, securities trading law, and other laws relevant to corporate merges in order to lower risks and costs of merging activities, which will encourage enterprises to implement structural reform or corporate merges.From 1990's to now, securities market on mainland China has rapidly developed. It has made big progress in aspects such as market capacity, means of trading, supervisory regulations, and the number of listed companies. With the deepening of the reform aimed at opening to the outside world, quality enterprise on mainland China, namely listed companies, have played an increasingly important role in the economic development of our country. Currently listed companies have begun to march into the territory of regulated development, with far better profit and performance than non-listed companies. At the same time, listed companies have resorted to the platform of securities market to conduct industrial restructuring through a re-arrangement of capital in order to improve allocation of resources. Of such allocation, merging and acquisition account for a big share in the re-arrangement of capital of listed companies. Many listed companies use this method to expand business scale, implement diversification in business management, and deepen product structuring.On the other hand, after Taiwan has become a member of WTO, foreign enterprises, under the open policy of free trade and globalization, are easier to enter Taiwan market compared with the past. As a result, foreign merges have gradually increased in addition to merges of a rather big scale completed consecutively by domestic listed companies and companies listed on the over-the-counter market such as Taiwan Semiconductor Manufacturing Co., Ltd., United Microelectronics Corporation, Yageo Corporation, and Yuanta Securities.With rapid high-tech advancement in the world and enhanced globalizing trend, decision makers at big international conglomerates have reached a consensus, which is that the only make-or-break choice they face is to become the top leader in their respective business or to be washed out of the game. "Natural Selection, and Survival of the Fittest." Darwin's theory of evolution of living creatures is also applicable to the history of economic development of human society. Acquisitions and Merges among enterprises have become an effective way for contemporary enterprises to realize low-cost expansion and rapid development and growth. Nobel Economic Prize Winner George J. Stigler once said, "Not one of big U.S. conglomerates are developed without merges of a certain degree and in some way. There is practically no big U.S. conglomerate which is developed mainly through internal expansion." It is a prominent sign in the history of modern economy for a company to become a conglomerate through merges with its competitors.Economic theories and practices of both East and West have proved that the higher the level one stays in economic running, the more chance it will have in winning extraordinary profit. So the high-level strategy commonly used by U.S. and European enterprises is acquisitions and merges, which are also main means of capital management. The so-called capital management is to turn all material and immaterial existing assets owned by enterprises into live and value-accruing capital. They realize accruement of value of the biggest possible scale through various means such as merges and re-arrangement to implement effective management. Enterprises on the mainland, after completing the "two leaps" from production of products to production of commodities and from the model of singular production to the model of production management, are now faced with a third leap from the model of production management to the model of capital management. So now it seems to be realistic and significant for us to study relevant legal questions regarding merges with listed companies on both sides of the Taiwan Strait.The Paper is arranged into 5 parts. The first part describes the historical background of merge between companies, where the meaning and significance of merge and the motives of merge are presented to allow readers to understand what is merge and the difference from acquisition. In the second part, description is given on the practices of merge and shareholder protection system of communist China. In this part, legal procedures of merge and shareholders protection systems of various countries are brought out to compare, so as to mirror what is enough and what is insufficient in the protection of shareholders interests and the relationship between directors and company of communist China, so that the obligations of directors may be clarified. The third part describes the realities of legal system for merge of companies. In this part, we addressed in the reality of merge between companies, features of merge and the protection over shareholders offered by company merge system in Taiwan. Through elaboration in this part, it is clear that the companies in Taiwan are aware that only through merge of companies can the scale of business be expanded and the competitiveness can be promoted and there may be chance to play a role in a global perspective. The fourth part discussed the reformation / transformation of state owned enterprises of communist China, where we addressed the advantage and strength in reforming state owned enterprises of communist China through merge, and we also described the effectiveness brought to state owned companies of communist China. The 5^th part reviewed the adjustments and changes of organization change and entire political system of state owned enterprises of communist China, which is intended for the reference of communist China in reforming their state owned enterprises.