A close company shall be formed by the agreement of all promoters and the promoters shall fully subscribe in the first issue of the total number of shares.

Equity capital to be contributed other than cash by the promoters may be in the form of assets required in the business of a close company , technical know-how, or service, provided, however, that equity capital to be contributed by service shall not exceed a certain percentage of the total shares issued by a close company .

The certain percentage set forth in the preceding Paragraph shall be prescribed by the central competent authority.

Equity capital to be contributed by technical know-how or service shall be agreed by all shareholders, and the kinds, amount of such capital contribution and the number of shares allotted to the subscriber by a close company shall be explicitly described in its Articles of Incorporation; the competent authority shall register such particulars in accordance with the Articles of Incorporation and shall make such particulars public on its information website.

The provisions of Article 198 shall apply mutatis mutandis to the election of directors and supervisors by the promoters in a close company , unless otherwise provided for in the Articles of Incorporation.

Articles of 132 through 149 and Articles 151 through 153 shall not apply to the formation of a close company .

The provision of Article 198 shall apply to the election of directors and supervisors in the shareholders' meeting of a close company, unless otherwise provided for in the Articles of Incorporation.

The provisions pertaining to ordinary liquidation shall apply mutatis mutandis to matters in special liquidation if not provided for in this sub-section.

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A close company is a non public offering company whose shares shall be held by not more than 50 persons, and whose Articles of Incorporation shall impose restrictions on transfer of shares of a company. "The central competent authority shall as necessary in view of the socio- economic situation and the actual needs increase the number of shareholders referred to in the preceding Paragraph; the method of calculation and scope of qualification of the shareholders shall be prescribed by the central competent authority.

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A private placement of corporate bonds by a close company shall be adopted by a majority of directors at a meeting attended by two-thirds or more of the total number of directors.

A private placement of convertible corporate bonds or corporate bonds with warrants by a close company shall be adopted by both the resolution of a meeting of board of directors set forth in the preceding Paragraph and the resolution of a shareholders’ meeting, provided, however, if the provisions of its Articles of Incorporation require no resolution of a shareholders’ meeting, such provisions shall govern.

The restrictions on number of shareholders and transfer of shares imposed by the Articles of Incorporation set forth in Article 356-1shall still apply after the holders of corporate bonds exercising their conversion rights or warrants.

The provisions of Article 246, Article 247, Paragraph 1 and Paragraphs 4 through 7 of Article 248, Article 248-1, Articles 251 through 255, Article 257-2, Article 259, and Paragraph 1 of Article 257 regarding certification of corporate bonds shall not apply to the issuance of corporate bonds provided in Paragraph 1 and Paragraph 2 of this Article.

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The issuance of new shares of a close company shall be adopted by a majority of directors at a meeting attended by two-thirds or more of the total number of directors, unless otherwise provided for in its Articles of Incorporation.

Paragraphs 2 through 4 of Article 356-3 shall apply mutatis mutandis to the contribution of equity capital for subscribing new shares. In addition, such contribution can also be made in the form of monetary credit extended to the close company.

Article 267 shall not apply to the issuance of new shares referred to in Paragraph 1 of this Article.

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A close company may voluntarily change its status into a non close company by a resolution adopted, at a shareholders’ meeting, by a majority of the shareholders present who represent two-thirds or more of the total number of its outstanding shares.

Where stricter criteria for the total number of attending shareholders and for the number of votes required to adopt a resolution at a shareholders’ meeting referred to in the preceding Paragraph are specified in the Articles of Incorporation of a close company, such stricter criteria shall govern.

In any event that a close company fails to meet the requirements set forth in Article 356-1, the company shall change its status into a non close company and shall apply for a necessary alteration registration in respect of such change accordingly.

If a close company fails to apply for an alteration registration in accordance with the preceding Paragraph, the competent authority may order it to rectify such violation within a given time limit and impose successively in each case a fine based on Paragraph Five of Article 387; where the violation is of a severe nature, the competent authority may, ex officio, order the dissolution of a company.

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A non public offering company may change its status into a close company by the unanimous consent of its shareholders.

After the unanimous consent of its shareholders provided in the preceding Paragraph, the company shall immediately notify each of its creditors and make a public announcement.

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A close company shall explicitly describe its nature of 'closeness' in its Articles of Incorporation and the central competent authority shall make such a nature public on its information website.

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A close company shall make no public offering of any of its securities, provided, however, that this provision shall not apply to the crowd-funding portal operated by securities businesses approved by the competent authority in charge of securities affairs.

The proviso to the preceding Paragraph shall still be subject to the restrictions on the number of shareholders and transfer of shares imposed by the Articles of Incorporation set forth in Article 356-1.

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The restrictions on transfer of shares shall be explicitly described in the Articles of Incorporation of a close company. "The restrictions on transfer of shares set forth in the preceding Paragraph shall be conspicuously annotated on a close company ’s printed share certificates; if a company does not issue shares, an assignor shall state such restrictions on the relevant written documentation delivered to the assignee. "The assignee referred to in the preceding Paragraph may request the company to deliver a copy of its Articles of Incorporation.

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Where a close company is to issue special shares, it shall include in its Articles of Incorporation provisions concerning:

1. Order, fixed amount or fixed ratio of allocation of dividends and bonus on special shares;
2. Order, fixed amount or fixed ratio of allocation of surplus assets of the company;
3. Order of or restriction on, no voting right, multiple voting right, or veto power over specific matters on the exercise of voting power by special shareholders;
4. Any prohibition or restriction regarding special shareholders’ rights of being elected as directors and/or supervisors or rights of electing a certain amount of seats of directors and supervisors;
5. Number, method or formula for special shares to be converted into common shares;
6. Restrictions on transfer of special shares; and
7. Other matters concerning rights and obligations incidental to special shares.

Paragraph Two of Article 157 shall not apply to multiple voting rights of special shareholders as set forth in Item Three of the preceding paragraph.

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A close company may explicitly provide in its Articles of Incorporation that its shareholders' meeting can be held by means of visual communication network or other methods promulgated by the central competent authority. "In case a shareholders' meeting is proceeded via visual communication network, then the shareholders taking part in such a visual communication meeting shall be deemed to have attended the meeting in person. "A close company may explicitly provide in its Articles of Incorporation that if it is agreed by all its shareholders, any action to be taken at a shareholders' meeting may be taken, without a meeting, by written consents to exercise their voting power. "A shareholders' meeting held in accordance with the preceding Paragraph shall be deemed to have been convened; the shareholders who exercise their voting power by written consents shall be deemed to have attend the meeting in person.

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Shareholders of a close company may reach a voting agreement in writing to jointly exercise their voting rights or may form a voting trust where the voting trustee will exercise the voting power based upon the terms and conditions stated in such a written voting trust agreement. "The trustee referred to in the preceding Paragraph shall be a shareholder unless otherwise provided for in its Articles of Incorporation. "A voting trust cannot be set up as a defense against the close company unless the written voting trust agreement referred to in the first Paragraph, the name or title, office, residence or domicile of each shareholder, and the total number, kind and amount of shares transferred to the voting trust have been delivered to the company for registration 30 days prior to a regular shareholders’ meeting or 15 days prior to a special shareholders' meeting.

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In case the promoters have not subscribed to the total number of shares in the first issue, the remainder shares shall be subscribed to by solicitation.

When the aforesaid subscription to shares is to be solicited, special shares may be issued in accordance with the provisions of Article 157.

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The promoters, when publicly soliciting subscriptions to shares, shall first have the following documents and information prepared, and then file the same along with an application to the authority in charge of securities exchange for examination and approval: "1.Business plan; "2.Full names and resumes of the promoters, and the number of shares subscribed, and the kind of contribution; "3.Prospectus; "4.Names and locations of banks or post offices authorized to collect payment for shares subscribed; "5.Names of underwriters or agents, if any, and the covenants between the promoters and such underwriters or agents; and "6.Other matters as may be prescribed by the authority in charge of securities exchange. "The total number of shares subscribed by the aforesaid promoters shall not be less than one-fourth of the total number of shares in the first issue. "Within thirty days after receiving a notice from the authority in charge of securities exchange, all documents and information specified in various items of Paragraph 1 of this Article shall be annotated with the reference number and date of the approval letter and publicly announced provided, however, that the covenants referred to in Item 5 of the Paragraph 1 may be exempt from public announcement.

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Banks or post offices authorized to collect payments for shares subscribed to shall have the obligation to certify the amount of money received, and the amount so certified shall be deemed as the capital money already received.

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Upon finding either of the following discrepancies in an application for public offering of shares, the authority in charge of securities may disapprove the application or may revoke its approval previously granted to the applicant: "1 Where any statement made in the application is found to be contrary to the applicable laws and/or regulations or to be false; or "2.Where there is any change in the matters described in the application; and no correction thereto has been made within a given time limit after having been required to do so. "Under the circumstance set forth in Item 2 of the preceding Paragraph, the authority in charge of securities may impose on each of the promoters a fine in an amount not less than NT$ 20,000 but not more than NT$ 100,000.

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In case of annulment of approval in accordance with the preceding article, the solicitation shall be cancelled if not yet in progress; if solicitation is already in progress, persons so drafted may demand a refund of the original issuing value of shares plus interests thereon to be calculated at the legal rate.

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The prospectus shall state the following particulars:

1. Particulars set forth in Article 129 and Article 130;
2. Number of shares subscribed to by each of the promoters;
3. If share certificates are issued above par value, the issuing value;
4. The time-limit for full subscription by solicitation and the statement that if the shares are not subscribed in full within such time-limit, the subscribers may rescind their subscription; and
5. In case special shares are issued, the total amount of such shares and the matters specified in various items of Paragraph One of Article 157.

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The promoters shall prepare a share subscription form indicating therein the matters required in Paragraph One, Article 133 and the reference number and the date of the approval letter given by the authority in charge of securities, and shall make such form available to the subscribers for them to fill in the number and amount of the shares to be subscribed and their respective domiciles or residences, and to affix thereon their respective signatures or personal seals.

In case the share certificates are issued at a premium, the subscribers shall indicate in the share subscription form the amount of share price they agree to pay.

In the event the promoters violate the provisions of Paragraph One of this Article by failing to prepare and make available the share subscription forms, the authority in charge of securities shall impose on them a fine in an amount not less than NT$ 10,000 but not more than NT$ 50,000.

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Subscribers shall have the obligation to pay for the shares they have subscribed to in the subscription form.

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For a company issuing par value shares, its issue price of share certificates shall not be less than the par value thereof, unless otherwise provided for by the competent authority in charge of securities affairs for public companies. "For a company issuing no par value shares, its issue price of share certificate shall have no restrictions.

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When the total number of shares in the first issue has been subscribed to in full, the promoters shall immediately press each of the subscribers for payment. Where share certificates are issued above the par value thereof, the amount in excess of such value shall be collected at the same time with the payment for shares.

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Where subscriber delays payment for shares as provided in the preceding article, the promoters shall fix a period of not less than one month and call upon each subscriber to pay up, declaring that in case of default of payment within the stipulated period their right shall be forfeited.

After the promoters have made the aforesaid call, the subscribers who fail to pay accordingly shall forfeit their rights and the shares subscribed to by them shall be otherwise sold.

Under the aforesaid circumstances, compensation for loss or damage, if any, may still be claimed against such defaulting subscribers.

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After the share price payable by all subscribers under the preceding Article has been fully paid up, the inaugural meeting of the company shall be convened by the promoters within two months.

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The provisions of Paragraphs One, Four, Five of Article 172, Article 174, Article 175, Article 177, Article 178, Article 179, Article 181, Paragraphs One, Two, Four, Five of Article 183 and Articles 189 to 191 shall apply mutatis mutandis to the procedure and resolutions of the inaugural meeting; however, in the election of directors and supervisors, the provisions of Article 198 shall apply mutatis mutandis. "The promoter who fails to comply with Paragraphs One, Five of Article 172 or Paragraphs One, Four, Five of Article 183 as applied mutatis mutandis in the preceding paragraph shall be imposed with a fine in an amount of not less than NT$ 10,000 but not more than NT$ 50,000.

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At the inaugural meeting of the company, the following matters shall be reported by the promoters: "1. The Articles of Incorporation; "2. The roster of shareholders; "3. The total number of shares issued; "4. The name of subscribers and the kinds, quantities, values or appraisal standards of the property, technical know-how other than cash provided by subscribers as their capital contributions, if any; "5. The incorporation costs to be borne by the company, and the remuneration payable to promoters; "6. The total number of special shares, if any, to be issued; and "7. The roster of directors and supervisors of the company, which roster shall indicate the domiciles or residences, the serial number of ID Cards or the reference number of the status certificates issued by the government of them. "Upon finding of any false statements in the report made under the preceding Paragraph, the promoters shall each be imposed with a fine in an amount not more than NT$ 60,000.

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At the inaugural meeting of a company, election of the directors and supervisors shall be effected. The directors and supervisors elect shall, upon election, immediately investigate the accuracy of the matters reported by promoters under the preceding Article, and shall report to the inaugural meeting of the investigation results.

Where any promoter is elected a director or a supervisor who has a personal interests in the matters subject to investigation, then the inaugural meeting shall elect another person as the substitute of said promoter to perform the investigation.

If anything contained in the promoters report is found excessive or false in the course of investigation conducted under the preceding two Paragraphs, appropriate cut-off or reduction shall be made by the inaugural meeting;

If any promoter impedes the investigation, or if any director, supervisor or investigator makes false report, he/she shall be imposed with a fine in an amount not more than NT$ 60,000;

Upon request of the directors, supervisors or investigators for extension of the deadline date for submission of the investigation report under either of the provisions of the preceding two Paragraphs, the inaugural meeting may decide, by applying the provisions of Article 182 of this Act mutatis mutandis, to postpone or to reconvene the inaugural meeting.

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The inaugural meeting may curtail the remuneration given or special privileges accorded to the promoters and expense incurred in the incorporation of the company, if any is found excessive. If the payment on shares other than in cash is overestimated in value, the inaugural meeting may reduce the number of shares to be given or order the subscriber to make up for the deficiency.

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All shares in the first issue, which have not been subscribed to and those which, though subscribed, have not been paid for, shall be subscribed and paid for the promoters jointly and severally. The same shall apply to those shares which have been subscribed but eventually rescinded.

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In the circumstances specified in Article 147 and Article 148, the company may claim against the promoters for compensation for loss or damage, if any.

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The inauguration meeting may amend the Articles of Incorporation or resolve not to incorporate the company.

The provisions of Article 277, Paragraphs 2 through 4 shall apply, mutatis mutandis, to the aforesaid amendment of Articles of Incorporation; and the provisions of Article 316 shall apply, mutatis mutandis, to the aforesaid resolution not to incorporate the company.

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Where three months have elapsed after the total number of shares in the first issue has been contributed but the payment for which has not been fully met, or, where the payment has been fully met but the promoters have not called the inaugural meeting within two months, the subscribers may rescind their subscription.

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After the conclusion of the inaugural meeting, no subscriber may rescind his subscription.

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In case a company has issued special shares, any modification or alteration in the Articles of Incorporation prejudicial to the privileges of special shareholders shall be adopted in a resolution by a majority of the shareholders present who represent two-thirds or more of the total number of its outstanding shares and shall also be adopted by a meeting of special shareholders. "For a company whose share certificates have been publicly issued, if the total number of shares represented by shareholders attending a shareholders' meeting is not sufficient to meet the criteria as specified in the preceding paragraph, the said resolution may be adopted by a large majority representing two thirds of the votes at a shareholders' meeting attended by shareholders representing a majority of the total number of issued shares, and a favorable resolution to be adopted by a meeting of special shareholders shall be also be required. "In case stricter criteria for the total number of shares represented by the attending shareholders and the number of votes at the shareholders' meetings referred to in the preceding two paragraph are specified in the Articles of Incorporation of a company, such stricter criteria shall govern. "The provisions governing shareholders' meetings shall apply.

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