大同股份有限公司

Procedures for Lending Funds to Others

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. The Company shall follow the Regulations for lending funds to other parties.
Article 2.
Counterparts:
Unless in the event of the following circumstances, the Company shall not lend its fund to shareholders or any other persons pursuant to the Company Law:
1.
Companies or firms having business relationship with the Company;
2.
Companies or firms in need of funds for a short-term period. The total amount available for lending purposes shall not exceed forty percent (40%) of the net worth of the Company. For the purpose of the Regulations, "short-term period" shall mean the period of one (1) year. Provided that where the Company’s business cycle is more than one year, the business cycle shall apply. For the purpose of the Regulations, the amount of funds means the accumulated balance of the Company’s funds for a short-term period.
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.
Between any two foreign companies in which the Company directly or indirectly holds 100 percent of the voting shares or between the Company and any foreign companies in which the Company directly or indirectly holds 100 percent of the voting shares, the loan amount and the loan for a single company are subject to the restriction of 100 percent of the net worth of the company in its latest financial statement and to the restriction of one year but not subject to Subparagraph 2, Paragraph 1 and Article 5.
Article 3.
Evaluation standard for lending funds to other parties:
If a loan is made due to needs of business transactions between the Company and other companies or firms, the loan amount shall be limited to the lower one of the following: the total amount of transactions or 10 percent of the Company’s net worth in the latest financial statement. The 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) of the corporate borrower from the Company in the past twelve months. Fund lending to companies which need funds for a short-term period shall be limited to the following circumstances:
1.
Companies in which the Company holds more than 20% of the equity directly and indirectly and which need the funds for a short-term for the purpose of business;
2.
Companies or firms in need of the funds for a short-term period for the purpose of purchasing material or working capital;
3.
Any others approved to be lent the funds upon approval of the Company’s Board of Directors.
Article 4.
Approving authority:
1.
The Company’s lending funds shall be carefully assessed in accordance with Section 1, Article 7 hereof and reported to the board of directors and made upon resolution of the board of directors, and be prohibited from being authorized to any other persons.
2.
Loans between Tatung Company (hereinafter referred to as "the Company") and its subsidiaries or between different subsidiaries of the Company shall be subject to a resolution made by the board of directors. However, within a certain amount authorized by the board of directors and a duration less than one year, the Chairman of the board of directors could decide individually to loan to the same borrower in the forms of dividing the certain amount into several pieces and then allotting them separately or using of a loan on a revolving basis.
3.
Unless otherwise provided by Section 4, Article 2 hereof, the “certain amount” referred in the previous subparagraph for loans provided by the Company or its subsidiaries for any single enterprise shall not exceed ten percent of the net value of the Company based on its latest financial statements.
4.
Where the accounts receivable-related party beyond the normal credit period are restated as other accounts receivable, the fund lending shall be identified. Where the other accounts receivable as restated are related to the fund lending in nature, it shall be published in accordance with the “Guidelines for Lending of Capital, Endorsements and Guarantees by Public Companies” and Article 21 and Article 22 herein when the nature is identified, and reported to the latest directors’ meeting pursuant to Article 14 herein for resolution.
5.
When a proposal for loaning to others is submitted to the Board of Directors for discussion, opinions of independent directors shall be fully taken into consideration and their specific opinions for consent or objection to the proposal shall be recorded in the minutes of the board meeting.
Article 5.
Total amount available for lending purposes and limit of the amount for lending to a company:
1.
The total loan amount shall not exceed forty percent of the net value of the Company based on the latest financial statements.
2.
Loans shall be distinguished in the subsequent categorizations.
（1）
As a loan is made to companies or firms who have business transactions with the Company, the total amount of the loan shall be no more than forty percent of the Company’s net worth in the latest financial statement; a load made to an individual borrower shall be no more than the lower one of the following two: the total amount of business transactions between the individual borrower and the Company or ten percent of the Company’s net worth in the latest financial statement.
（2）
As a loan is made to a company or firm with short-term financing facility, the total amount of the loan shall be no more than forty percent of the Company’s net worth in the latest financial statement; a loan made to an individual borrower is subject to needs of business transactions and the amount shall be no more than ten percent of the Company’s net worth in the latest financial statement.
Article 6.
Term of funds lent by the Company and way to calculate the interest:
1.
The term of funds lent by the Company shall not exceed one year, provided that where the Company’s business cycle is more than one year, the business cycle shall apply.
2.
Interest calculation: The interests shall be calculated on a monthly basis with the last day of the month as the record day, and be calculated based on the amount the company has appropriated to the debtor. The rate of interest shall not be lower than the lowest short-term borrowing rate quoted by general financial institutions when the loan is disbursed.
Article 7.
Procedure for review:
1.
When the borrower intends to apply for a loan, it shall file the application documents specifying the cause of loan, purpose of fund, claimed amount, date of repayment and the latest financial statement. The application is submitted to the Company’s Finance, Accounting and Investment Department for the risk evaluation upon approval of the borrower’s board of directors. The contents of evaluation shall include:
(1)
The necessity of and reasonableness of extending loans to others.
(2)
Borrower credit status and risk assessment.
(3)
Impact on the company's business operations, financial condition, and shareholders' equity.
(4)
Whether collateral must be obtained and appraisal of the value thereof.
2.
The company shall collect and report the borrower’s application documents and review report to the board of directors.
3.
After the resolution of the board of directors, then, when handling for loans for funding procedures, crediting the bank account to the borrower, a payment receiving list of bank deposit shall be retrieved and account at the date of occurrence, and the total lists shall be collected for the borrower’s reviewing.
4.
Financial Department shall prepare a memorandum book for its fund-loaning activities and record each the following information: borrower, amount, date of approval by the board of directors, lending/ borrowing date, and matters to be carefully evaluated under provision.
Article 8.
Control actions and procedure for disposing of NPL: Upon lending the funds, the Company shall ask the borrower to provide the information about its production and financial statements, and submit the information to the relevant unit for review and appraise the borrower’s business performance.
1.
The Company shall ask the borrower to establish the strict internal control system and to submit its annual business plan and the business plans for the following one to three years to the Company for review.
2.
The borrower shall provide the monthly, quarterly and annual income and expenditure budget of the fund to the company’s Finance, Accounting and Investment Department for review as scheduled.
3.
The borrower shall submit the financial statements for the current month, as well as the same month of the previous year to the company’s Finance, Accounting and Investment Department for review.
4.
The borrower's officers shall submit the business performance reviewing report and prospective reports to the company on a quarterly basis. If it is impossible for the borrower to achieve the objective under the original plan, the borrower shall present the report specifying the cause for failure to achieve the objective, and also propose the new plan for correction and achievement of the objective at the company’s directors' meeting.
5.
The company may appoint a manager to the borrower to review and examine the evaluation.
6.
Where the borrower fails to repay the loan or pay interest on time, the proposed repayment schedule plan shall be required.
7.
The company may require any company borrower to repay loan in advance when it becomes aware of any factor that will affect the payment ability by the evaluation procedures.
8.
The NPL shall be provided as the allowance for bad debt, and shall adequately disclose relevant information in its financial reports and provide certified public accountants with relevant information for implementation of necessary auditing procedures.
Article 9.
Internal audit:
Internal audit： The company's internal auditors shall audit the Operational Procedures for Loaning Funds to Others and the implementation thereof no less frequently than quarterly, and prepare written records accordingly. They shall promptly notify the audit committee in 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 10.
The operational procedures of the loan balance exceeds the limit：
If, as a result of a change in circumstances, an entity for which an endorsement/ guarantee is made does not meet the requirements of the regulations, or the loan balance exceeds the limit, a ratification plans shall be adopted and submitted to the audit committee as well as completing the rectification according to the timeframe set out in the plan.
Article 11.
Disclosure of financial statements, and announcement and report:
1.
The Company shall announce the amount of funds lent to other parties by the Company and its subsidiaries in the preceding month, as well as the monthly turnover, before the 10th day of the month.
2.
If the balance of the fund lent by the Company meets any of the following circumstances, it shall be announced and reported within two days commencing immediately from the date of occurrence of the fact:
(1)
The balance of funds lent to other parties by the Company and its subsidiaries exceed more than 20% of the net worth of the Company specified in its latest financial statement.
(2)
The balance of funds lent to any single enterprise by the Company and its subsidiaries exceed more than 10% of the net worth of the Company specified in its latest financial statement.
(3)
The increase of funds lent by the Company or its subsidiaries reaches NT$10 million or more, and is more than 2% 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 (3).
The “date of occurrence of fact” noted in the preceding paragraph 2 refers to the date of signing, the date of payment, the resolution date of the board of directors, or other date on which the object and amount of the lending of capital are determined.
Article 12.
The Company’s subsidiaries shall comply with the following requirements:
1.
Where a subsidiary of the Company intends to make loans to others, the Company shall instruct it to formulate its own Operational Procedures for Loaning Funds to Others in compliance with “Regulations Governing Loaning of Funds and Making of Endorsements/Guarantees by Public Companies”.
2.
Subsidiaries shall follow the regulations defined by them when lending the funds.
3.
The subsidiaries that are not public companies of the Republic of China, when the fund lent 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 lent funds 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 Regulations shall be enforced upon agreement of more than half of all members of the Audit Committee and resolution of the Board of Directors and be approved at the shareholders’ meeting. The same shall apply to any amendments to the Procedures.
Provided that the preceding paragraph is not approved by more than half of all members of the Audit Committee, it shall 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.
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