Preventing Loopholes in 'Xia Ge Zhao Ji' Case! Ministry of Economic Affairs Clarifies: Total Number of Subscribers for Outstanding Private Placement Corporate Bonds Must Not Exceed 35

In response to recent controversies involving Zhaoji Investment and Hermit Crab Management Consulting for indiscriminate issuance of corporate bonds, the Ministry of Economic Affairs (MOEA) announced on the 28th an interpretation of the Company Act to prevent non-publicly traded companies from circumventing the 35-investor limit through multiple private placements. Effective immediately, the number of subscribers across all outstanding private placement corporate bonds must be cumulatively counted, with the total not exceeding 35. If a company has already exceeded 35 subscribers in past private placements, it is prohibited from conducting further private placements until all related bonds mature.

Zhaoji Investment and Hermit Crab Management Consulting, affiliated with Zhaoji Housing Management—the leading rental management company—have been exposed for a corporate bond repayment crisis. On the 28th, the MOEA issued a press release stating it will release an interpretation of Article 248, Paragraph 3 of the Company Act, clearly stipulating that for non-publicly traded companies, the number of subscribers across all outstanding private placements of corporate bonds must be cumulatively calculated and must not exceed 35. If the same investor participates in multiple private placements, they are counted as one person.

According to the MOEA, the Company Act stipulates that for non-publicly traded companies conducting private placements of corporate bonds, the number of subscribers—excluding financial institutions—must not exceed 35. Since private placements target specific investors, unlike public offerings to the general public, the law imposes a cap on the number of subscribers.

However, some companies have been circumventing the 35-investor limit per placement by conducting multiple private placements, effectively creating a public offering to unspecified investors. To prevent such practices, the MOEA has issued this interpretation effective from the 28th, requiring the cumulative calculation of subscribers across all outstanding private placements, with the total capped at 35.

Additionally, companies that have already conducted private placements with a total subscriber count exceeding 35 are prohibited from conducting any new private placements until all outstanding bonds mature. The MOEA emphasized that the original intent of allowing non-publicly traded companies to issue private placement bonds is to provide diversified financing channels. However, if bonds are effectively offered to the general public, issuers must comply with the Securities and Exchange Act and file for approval with the securities regulatory authority.

The MOEA warned that offering corporate bonds to the general public without prior approval under the Securities and Exchange Act may result in criminal liability under Article 174, Paragraph 2, Item 3. This interpretation aims to establish a clearer calculation standard for subscriber counts in multiple private placements, urging companies to comply with regulations and avoid legal violations.

Moving forward, the MOEA will strengthen cross-agency supervision in collaboration with the Financial Supervisory Commission (FSC), and enhance information disclosure for private placements by non-publicly traded companies. This includes greater transparency on issuers’ financial conditions and fund usage, enabling investors to better assess investment risks, reduce financing-related risks, and protect public interests.

Additional exclusive reports from Feng Media: · Exposé: Hua Jingqun promised Zhaoji victims, “I’ll handle it,” then threatened to retract—Chen Zhaozi: “Be a man, take responsibility” · Li Jiancheng’s ex-wife from Zhaoji Housing Management returns to Taiwan—Taipei Prosecutors find strong evidence of embezzlement and money laundering, court rules 1 million bail · Is Zhaoji’s situation escalating? Acer takes over, and just two days later, Chairman Li Wenxiang resigns abruptly after “discovering internal deficiencies”