Lending Spare Cash to Another Taiwan Group Company: When Article 15 of the Company Act Allows It

A Taiwan company cannot justify a loan of its funds to a shareholder by pointing to a shared parent. Article 15, paragraph 1, of the Company Act bars loans of company funds to shareholders or anyone else except in two cases: business dealings between companies or between a company and a firm, and necessary short-term financing between them. Only the second case states a cap of 40% of the lending enterprise's net worth.

Two companies in Taiwan belong to a US-based group. A, the sales company, holds cash it does not need. B, a holding company in the same group, owns shares in A. Both are Taiwan companies limited by shares (股份有限公司) whose shares are not publicly issued, and the group's founder serves as a director (董事) of both (an invented example). B has asked A for a loan. The founder sees no difficulty, since it is all one group. No money has moved yet.

B's shares do not authorize the loan

Article 15, paragraph 1 opens with 「公司之資金，除有左列各款情形外，不得貸與股東或任何他人」. Unless one of the listed cases applies, A may not lend its funds to a shareholder or anyone else. That includes B. Its shares in A explain their relationship, but they do not establish an exception.

Group membership is absent from the same list. A sister company that owns no A shares would still fall under "any other person" (任何他人). For the US parent, moving surplus cash within a group may be routine. A still needs facts that place this particular loan within item 1 or item 2.

So what can A rely on? B is a Taiwan company, so a loan from A to B has to fit one of the two items in the same paragraph. Item 1 covers companies, or a company and a firm (行號), that have business dealings (業務往來). For item 2, companies, or a company and a firm, must need short-term financing (短期融通資金). Which item applies decides both the facts A has to establish and whether any amount cap is written into the text.

Item 1: business dealings between the companies

Item 1 of Article 15, paragraph 1 applies where companies, or a company and a firm, have business dealings. It specifies no minimum transaction value or length of trading history. Nor does it prescribe a document list or a percentage cap. The 40% figure appears in item 2. Item 1's silence on percentages does not say that any loan amount is allowed.

For item 1, A needs to identify its actual business dealings with B. If B buys A's products, their purchase contracts and accounting records provide a place to start. Where B only holds A shares, A must first find out whether the two companies have any dealings beyond that investment. An ownership chart cannot answer that question.

Item 2: a short-term financing need, capped at 40%

As of October 2026, item 2 of Article 15, paragraph 1 permits a loan between companies, or between a company and a firm, where short-term financing is necessary. The financing amount may not exceed 40% of the net worth (淨值) of the lending enterprise. That benchmark is A's net worth, the lender's. B's balance sheet does not set the cap. A would confirm its own net-worth figure from its financial records before deciding on any loan.

Here is the arithmetic, using invented figures. Say A's net worth is NT$50 million. Under the 40% cap in item 2, a loan made on that basis may not exceed NT$20 million. B has asked for NT$30 million. That is NT$10 million over the cap. At that amount, item 2 is not available.

Would cutting the loan to NT$20 million solve the problem? Not by itself. Item 2 contains two conditions that must both be met: a need for short-term financing, and the 40% ceiling on the amount. A loan within the cap still falls outside item 2 if there is no such need. The smaller figure satisfies only the second condition.

How short is "short-term"? Item 2 gives no number of days or months. A should ask when B needs the funds and what B expects to use for repayment. Recording those facts in the loan terms may help explain the financing need; item 2 itself does not prescribe a particular document.

Who answers for a loan outside both items

Under Article 15, paragraph 2, a company's responsible person (公司負責人) who violates paragraph 1 is jointly and severally liable with the borrower for returning the money. The liability is personal. In the example, if A lent to B outside both items, B and A's responsible person who violated paragraph 1 would be jointly and severally liable for returning the money A lent. Where the company has suffered damage, that person is also liable for the damage. The two duties have different triggers. The duty to return follows from the violation itself; the damage liability arises only when the company has actually suffered damage.

Article 8 defines who the responsible persons are. In a limited company (有限公司) or a company limited by shares (股份有限公司), they are the directors (paragraph 1). Managers (經理人) and the other persons listed in paragraph 2 are also responsible persons within the scope of their duties. The founder in the example, as a director of A, is one of A's responsible persons. Giving instructions from the United States without personally operating A's bank account does not change that status.

The tax treatment of interest on a parent loan into a Taiwan subsidiary concerns a separate transaction, discussed in Funding a Taiwan Subsidiary with Parent Loans.

Before the money moves: the facts A has to establish

Set side by side in the words of Article 15, paragraph 1, the two exceptions call for different facts.

"One group" fits in none of these cells. Before answering B, A has to work out whether it has real business dealings with B and, if not, whether B has a genuine short-term financing need. If A relies on item 2, the NT$30 million B wants is above the NT$20 million 40% cap calculated from A's assumed net worth. The money is still in A's account.

What a Taiwan lawyer can be retained for

A Taiwan lawyer can examine A's and B's registration records, shareholders, directors and transaction records. With those facts, the lawyer can advise whether the proposed loan fits item 1 or item 2 of Article 15, paragraph 1, or neither. Common ownership alone cannot settle that opinion, and no particular outcome can be promised.

The review can also cover money A has already lent to B or other companies. If A relies on item 2, the lawyer can examine B's funding plan for the amount and timing of its short-term need, then compare A's net-worth calculation with the requested loan. A draft loan agreement and board minutes can record the proposed terms, the financing need and B's repayment plan.

To discuss the proposed loan with an English-speaking lawyer in Taipei before funds move, write to Hovering International Law Firm at wei@hoveringlaw.com.tw. The office is at 7F-2, No. 35, Sec. 1, Chengde Rd., Datong Dist., Taipei City 103, Taiwan. Include both companies' registration records, A's financial statements and B's loan request so the lawyer can examine the dealings and A's net worth.

Official sources

• Company Act (公司法), Art. 8, Art. 15
• Company Act, full text (current text, reflecting amendments through December 26, 2025)
• Official English translation of the Company Act, used to check terms (the Chinese text governs)

Checked: October 16, 2026