The Privatization of Government-Owned Enterprises Act

This Act is enacted to facilitate the privatization of government-owned enterprises, to exert the market mechanism, and to enhance the operational efficiency of enterprises.

The privatization of government-owned enterprises, either in whole or in part, shall comply with this Act. Matters not covered by this Act shall be governed by other laws and regulations.

The term "government-owned enterprise" as used in this Act shall refer to the following enterprises: 1. Any enterprise either solely owned by any government or jointly operated by governments at various levels; 2. Any enterprise jointly invested in and operated by the government and private individuals where the capital of the government exceeds 50%; 3. Any enterprise jointly invested in by the government and government-owned enterprises of the preceding two subparagraphs, or by government-owned enterprises of the preceding two subparagraphs, where the aggregate invested capital exceeds 50% of the capital of the invested enterprise.

The term "the competent authority in charge of the enterprises" as used in this Act shall refer to the competent authority in charge of the concerned enterprises.

Where the competent authority in charge of the enterprises, in view of the situation, consider that there is no more necessity to operate a government-owned enterprise by the government, such government-owned enterprise may be privatized after its privatization plan is submitted to the Executive Yuan for approval.

The privatization of a government-owned enterprise shall be effected by the competent authority in charge of the enterprises in the following manners: 1. Sale of shares; 2. Auction sale of assets; 3. Formation of a private-owned enterprise by joint venture with private individuals by way of contribution in kind; 4. Merger of companies with the surviving enterprise being a private-owned enterprise; 5. Cash capital increase. In privatizing a government-owned enterprise in the manners provided in the preceding paragraph, the competent authority in charge of the enterprises may, after submitting to the Executive Yuan for approval, effect the privatization by negotiation with a specific counter-party which is selected through public invitation. The contents of negotiation shall be submitted to the Legislative Yuan for recordation. In the event that a non-incorporated government-owned enterprise transfers its public use property, which is necessary for its business operation, according to paragraph 1, upon the privatization of that enterprise, it shall not be subject to the restrictions of Article 28 of the National Property Act.

In privatizing a government-owned enterprise under Article 6, a price appraisal committee shall be formed by the competent authority in charge of the enterprises in conjunction with relevant authorities to evaluate and decide the price.

Upon the date when a government-owned enterprise is privatized, the employees who are willing to be transferred shall be so transferred; provided, however, that if it is otherwise agreed upon by the new and former employers upon the time of restructuring or transferring the enterprise, such agreement shall prevail. Upon the date when a government-owned enterprise is privatized, the employees who are not willing to be transferred, or who are not transferred because of the proviso of the preceding paragraph, shall complete the severance procedures. Severance pay shall be paid to such employees and shall be calculated in accordance with the criteria for payment of pensions under the Labor Standards Act, without being subject to the restrictions of age and service seniority. An additional six-month salary at the salary rates applicable to them at the time of the privatization, and an additional one-month wage in lieu of the one month advance notice, shall be paid. To those employees to whom the provisions of the Labor Standards Act are not applicable, the foregoing may be applied mutatis mutandis. For the employees retained in employment after the privatization of a government-owned enterprise, the original enterprise may, on the date of their transfer, settle the account of their benefits with respect to their respective service seniority based on the payment criteria set forth in the preceding paragraph, but the six-month salary and the wage in lieu of the one month advance notice shall not be paid. Where any of such retained employees are laid off within five years from the date of the privatization of the government-owned enterprise, the severance pay shall be paid to employees according to the salary rate at the time of the transfer to the private owned enterprise or at the time of the employment termination, whichever is more beneficial to employees, plus a six month salary based on the employee's salary rate at the time of the transfer to the private owned e

Upon the date when a government-owned enterprise is privatized, the expenses and interest originally set aside and contributed to the public service pension fund according to the laws and regulations relating to the retirement of civil servants, shall be settled and cleared by the fund management agency. If there is any surplus, it shall be appropriated to the enterprise; if there is any deficit, it shall be returned to the fund by the enterprise.

In the event the employees who have received compensation payment under the civil servant insurance program or the labor insurance program and then participate in such insurance programs again and claim for old age pension or old age benefits, the insuring agencies shall withhold the original compensation payment and shall not be subject to the restrictions of Article 29 of the Labor Insurance Act which entail that the compensation payment shall not be transferred, offset, seized or used as a security; provided, however, that if the old age pension or old age benefits that is claimed is less than the original compensation payment, only the amount that is claimed shall be withheld. The amount withheld by the insuring agencies pursuant to the preceding paragraph shall be returned to the original competent authority in charge of the enterprises.

A government-owned enterprise shall conduct employees' job-transfer training, second career training or employment counseling before it is privatized. Where necessary, the competent authority in charge of the enterprises or the labor competent authority shall assist therein. For the employees who are laid off within five years after a government-owned enterprise is privatized, the labor competent authority shall conduct job- transfer training or employment counseling.

When a government-owned enterprise is privatized through selling its shares, a specific amount of shares shall be set aside for the employees to subscribe on a favorable term and preemptive basis. Regulations governing such matters shall be drawn up by the competent authority in charge of the enterprises and submitted to the Executive Yuan for approval.

In privatizing a government-owned enterprise according to Article 6, the competent authority in charge of the enterprises may, as it deems necessary to coordinate the economic policies and market situation, submit to the Executive Yuan for approval, and shall not be subject to the restrictions of paragraph 1 of Article 25, Article 26, Article 52, and paragraph 1 of Article 86 of the Budget Act, and Article 7 and Article 66 of the National Property Act. The net balance of income and expenses may be included in the auditing of that current fiscal year or a supplementary budget shall be made.

Where the shareholdings of an enterprise held by the government does not exceed 50%, Article 6, Article 7, Article 13, and Article 15 shall apply mutatis mutandis to the transfer of such government-held shares.

The funds obtained by the government from privatizing a government-owned enterprise shall be handed over to the national treasury as a financial resource for capital expenditures, except that part of the funds may first be appropriated for a special fund. The regulations governing appropriation and use of special fund in the preceding paragraph shall be prescribed by the Executive Yuan. The uses of the special fund shall be as follows: 1. To pay the additional six-month salary and the compensation for various losses provided in paragraph 6 of Article 8 and the fees and expenses borne by the government for privatization. 2. To finance the shortage caused by the payments made by such government-owned enterprises for privatization. 3. To finance the shortage caused by the payments to a government-owned enterprise's employees laid off as a result of any special project prior to privatization and/or in connection with the winding-up of the government-owned enterprise. 4. To finance the government's capital plan expenditure. The funds paid and appropriated for the special fund under paragraph 1 of this Article shall not be subject to the restrictions of paragraph 1 of Article 25, paragraph 1 of Article 86, and Article 89 of the Budget Act.

In the event that a non-incorporated government-owned enterprise restructures itself, in part or in whole, into a government-owned company for the purpose of privatization, the budget of the original enterprise may continue to be used. The government-owned shares in the government-owned company under the preceding paragraph may be transferred after the registration of incorporation of that company, shall not be subject to the restrictions of paragraph 2 of Article 163 of the Company Act.

Where a government-owned enterprise, which is of public utility or national defense nature, is privatized, the competent authority in charge of the enterprises may order the enterprise to issue preferred shares for subscription at par value by the competent authority in charge of the enterprises, entitling it to exercise the rights set forth in paragraph 2 within a specific period of time. An enterprise which issues preferred shares shall obtain consent from the shareholder of the preferred shares prior to conducting the following acts: 1. Changing the name of the enterprise; 2. Changing its business scope; 3. Transferring its business or assets in whole or in substantial part. Any resolution adopted by the enterprise in violation of the preceding paragraph shall be null and void. The preferred shares issued according to this Article shall not be transferred; provided, however, that after the expiration of the specific period of time provided in paragraph 1, such preferred shares shall be redeemed at par value and cancelled by the enterprise.

The enforcement rule of this Act shall be prescribed by the Executive Yuan.

This Act shall come into force from the date of promulgation.