• Procedures for Endorsement & Guarantee

    Updated and resolved by the general meeting of
    shareholders held on June 30, 2020
    Article 1.
    The Company defines the Regulations in accordance with the “Regulations Governing Loaning of Funds and Making of Endorsements/Guarantees by Public Companies” promulgated by Financial Supervisory Commission to help the control over endorsements/guarantees. The Company shall follow the Regulations for making endorsements/guarantees.
    Article 2.
    The counterpart to whom the Company may make endorsements/ guarantees:
    (1)
    Any company which has a business relationship with the Company;
    (2)
    Any company in which the Company holds more than 50% of the shares with voting right directly or indirectly;
    (3)
    Any company which holds more than 50% of the Company’s shares with voting right directly or indirectly; Subsidiaries in which Tatung Company (hereinafter referred to as “the Company”) holds, directly and indirectly, 90% or more of the voting shares could provide endorsements or guarantees for each other and the total amount of endorsements or guarantees which one subsidiary provides for another shall not exceed ten percent of the net value of the Company. However, such limitation of the amount shall not be applicable to subsidiaries in which the Company holds, directly and indirectly, 100% of the voting shares. Endorsement and guarantee may be made among the intercompanies in which the Company holds 100% of the shares with voting right.
    The mutual guarantees in the same trade required by construction cocontractors’ contracts or the endorsements/guarantees made by the whole shareholders of the joint venture subject to their shareholding for investees shall be free from the restrictions referred to in the preceding two paragraphs.
    The capital contribution means that the Company makes the investment directly, or via any company in which the Company holds 100% of the shares with voting right.
    The term "net worth" as used in the Regulations refers to the balance sheet equity attributable to the owners of the parent company under the Regulations Governing the Preparation of Financial Reports by Securities Issuers.
    Article 3.
    The scope of endorsements/guarantees made by the Company:
    (1)
    Financing endorsement and/or guarantee: The endorsement/guarantee made by the Company or investees of the Company for financing needs.
    (2)
    Endorsement/guarantee of customs duties due from the Company: The endorsement/guarantee made by the Company or investees of the Company for custom duties.
    (3)
    Other endorsements/guarantees: The endorsements/guarantees other those referred to in the preceding two subparagraphs.
    Article 4.
    Ceilings on the amount of endorsements or guarantees:
    (1)
    The total amount of endorsements or guarantees which the Company provides shall not exceed fifty percent of the net value of the Company based on its latest financial statements. The amount of endorsements or guarantees which the Company provides for any single enterprise shall not exceed twenty five percent of the net value of the Company based on its latest financial statements.
    (2)
    The total amount of endorsements or guarantees which the Company and its subsidiaries provide jointly shall not exceed one hundred and eighty percent of the net value of the Company based on its latest financial statements. The amount of endorsements or guarantees which the Company and its subsidiaries provide jointly for any single enterprise shall not exceed one hundred percent of the net value of the Company based on its latest financial statements.
    (3)
    If the total amount of endorsements or guarantees which the Company and its subsidiaries provide jointly exceeds fifty percent of the net value of the Company based on its latest financial statements, the Company shall explain necessity and reasonableness of endorsements or guarantees in the shareholders’ meeting.
    (4)
    In the case of an endorsement guarantor with the Company due to business dealings, the amount of individual endorsement guarantees shall not exceed the amount of business transactions between the parties, except for the above-mentioned limits.
    The amount of business transactions referred to the higher one of the following: the total amount of purchases (including services), or the total amount of sales (including services),between the guarantor and the company ,within the last 12 months.
    Article 5.
    Hierarchy of decision-making and authority on endorsements or guarantees:
    (1)
    Any endorsement and/or guarantee to be made by the Company shall be reported to and subject to the resolution of the board of directors’ Meeting, or each time a predetermined amount which is limited by thirty percent of specified amount in each item of the preceding article may be delegated to the Chairman by the board of directors to facilitate execution and such endorsement/guarantee shall be reported to the most upcoming board of directors' Meeting for ratification. Meanwhile, the development at the endorsement/ guarantee shall be reported at the shareholders' meeting for record.
    (2)
    Before subsidiaries in which the Company holds, directly and indirectly, 90% or more of the voting shares provide endorsements or guarantees for each other in accordance with Section 2, Article 2, a resolution must be passed by the Board of Directors of the Company firstly. However, such limitation is not applicable to subsidiaries in which the Company holds, directly and indirectly, 100% of the voting shares.
    (3)
    The company intending to make endorsements or guarantees for its investment company shall submit items regarding Endorsements/Guarantees to handling units, and, after submit the same to the Chairman for approval.
    Article 6.
    Procedures for making endorsements or guarantees and review:
    (1)
    Before making endorsements or guarantees for others, the company shall implement detailed review procedures, including:
    (A)
    The necessity of and reasonableness of endorsements/ guarantees.
    (B)
    Credit status and risk assessment of the entity for which the endorsement/guarantee is made.
    (C)
    The impact on the company's business operations, financial condition, and shareholders' equity.
    (D)
    Whether collateral must be obtained and appraisal of the value thereof.
    (2)
    If the Company provides or its subsidiaries provide endorsements or guarantees for another subsidiary of which the net value is lower than one-half of its paid-in capital, the Company shall demand the borrower to submit a specific improvement plan and to report its operational results for the Board of Director’s review on quarterly basis. In the case of a subsidiary with shares having no par value or a par value other than NT$10, for the paid-in capital in the calculation under this subparagraph, the sum of the share capital plus paid-in capital in excess of par shall be substituted.
    (3)
    The Financial Department shall establish the memorandum book for its endorsement/ guarantee activities and record each piece of the following information for the record: the entity for which the endorsement/guarantee is made, the amount, the date of passage by the Board of Directors or by authorization of the Chairman of the Board, the date of the endorsement/ guarantee, and matters to be carefully evaluated under provision.
    (4)
    The Financial Department shall regularly track the guarantee notes, which is due and has not retrieved, and report the reason. Furthermore, the Financial Department shall assess or list the possibility of loss of endorsements/ guarantees, and disclose the information which refers to endorsements/ guarantees appropriately in the financial statements. The notes requiring extension shall be collected and wrote-off, and reissued.
    (5)
    The Company shall guarantee the handling fee for the endorsement guarantee object not less than the guaranteed commission rate of the financial institution to the Company.
    Article 7.
    Custody of corporate chops:
    The company shall use the corporate chop registered with the Ministry of Economic Affairs as the dedicated chop for endorsements/guarantees. The chop shall be kept in the custody of a designated person in the Administrative Management Office of the company. Furthermore, a designated person shall be approved by the board of directors and the same procedure shall be followed for any future changes to the person. The Black bill shall be kept in the Financial Department of the company.
    Article 8.
    Internal audit:
    The company's internal auditors shall audit the Operational Procedures for Endorsements/ Guarantees for Others and the implementation thereof no less frequently than quarterly and prepare written records accordingly. They shall promptly notify the audit committee in the writing of any material violation found. In addition, where the circumstances are considered serious, they shall report to the board of the directors and adopt necessary measures.
    Article 9.
    The governing of the amount of endorsement/ guarantee exceeds the limit:
    Where as a result of changes of condition, the entity for which an endorsement/ guarantee is made no longer meets the requirements of these Regulations, or the amount of endorsement/guarantee exceeds the limit, a public company shall adopt rectification plans and submit the rectification plans to the audit committee, as well as completing the rectification according to the timeframe set out in the plan.
    The Company shall evaluate or record the contingent loss for endorsements/guarantees, and shall adequately disclose information on endorsements/guarantees in its financial reports and provide certified public accountants with relevant information for implementation of necessary audit procedures.
    Article10.
    Where it is necessary for the Company to exceed the limit of endorsement/guarantee defined herein to meet the need in accordance with the Regulations, it shall be subject to approval of the Board of Directors and joint guarantees made by a majority of the directors towards the potential loss of the excess, and the Regulations shall be amended subject to ratification of the shareholders’ meeting. If the shareholders’ meeting disapproves it, the excess shall be discharged within a given time limit. The directors’ meeting referred to in the preceding paragraph shall take into full consideration each independent director's opinion and include independent directors' opinions specifically expressing assent or dissent and their reasons for dissent into the minutes of the directors' meeting.
    Article11.
    Procedure for announcement and report:
    (1)
    The Company shall announce and report the previous month's balance of endorsements/guarantees of itself and its subsidiaries, as well as its turnover by the 10th day of each month.
    (2)
    In addition to disclosing the balance of endorsement and guarantee on a monthly basis, the Company whose balance of endorsements/guarantees reaches one of the following levels shall announce and report such event within two days commencing immediately from the date of occurrence.
    (A)
    The balance of endorsements/guarantees made by the Company and its subsidiaries exceed more than 50% of the net worth of the Company specified in its latest financial statement.
    (B)
    The balance of endorsements/guarantees to any single enterprise by the Company and its subsidiaries exceed more than 20% of the net worth of the Company specified in its latest financial statement.
    (C)
    The balance of endorsements/guarantees to any single enterprise by the Company and its subsidiaries reaches NT$10 million or more and the balance of endorsements/guarantees, the carrying amount of the investment using the equity method and funds lent to the enterprise exceed more than 30% of the net worth of the Company specified in its latest financial statement.
    (D)
    The increase of endorsements/guarantees made by the Company or its subsidiaries reaches NT$30 million or more, and is more than 5% of the net worth of the Company specified in its latest financial statement.
    (3)
    The Company shall announce and report on behalf of any subsidiary thereof that is not a public company of the Republic of China any matters that such subsidiary is required to announce and report pursuant to the item (4).
    The aforementioned “Date of occurrence” refers to the date of contract signing, date of payment, dates of boards of directors resolution, or other date that can confirm the counterpart and monetary amount of the endorsements/guarantees, whichever date is earlier.
    Article12.
    The Company’s subsidiaries shall comply with the following requirements:
    (1)
    Where a subsidiary of the Company intends to make endorsements/ guarantees for others, the Company shall instruct it to formulate its own Operational Procedures for Endorsements/Guarantees in compliance with “Regulations Governing Loaning of Funds and Making of Endorsements/ Guarantees by Public Companies”.
    (2)
    The subsidiaries shall comply with the regulations when making endorsements/guarantees.
    (3)
    The subsidiaries that are not public companies of the Republic of China, when the endorsements/guarantees made by them meet the requirements for announcement and report defined in the “Guidelines for Lending of Capital, Endorsements and Guarantees by Public Companies”, shall report the amount, counterpart and time limit of the endorsements/guarantees to the parent company on a monthly basis, and the parent company shall announce and report such matters on behalf of the subsidiaries.
    Article 13.
    The Operational Procedures shall be enforced with the consent of one-half or more of all audit committee and upon resolution of the board of directors and be approved at the shareholders’ meeting. The same shall apply to any amendments to the Procedures.
    If the preceding paragraph is not approved by more than one-half of all members of the Audit Committee, it may be agreed by more than two-thirds of all directors, and the resolutions of the Audit Committee shall be stated in the proceedings of the Board of Directors.
    Article 14.
    Bylaw:
    In accordance with the Company’s Personnel Management Regulations, managers and persons-in-charge who violate the Operational Procedures shall be punished based on the suffering condition.