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American Depository Receipt

American Depository Receipt

American Depository Receipt (ADR): An American Depository Receipt (ADR) is a negotiable receipt which represents one or more depository shares held by a US custodian bank, which in turn represent underlying shares of non-US issuer held by a custodian in the home country. American Depository Receipt is an attractive investment to US investors willing to invest in securities of non US issuers for following reasons:

• American Depository Receipt s provide a means to US investors to trade the non-US company’s shares in US dollars. ADR is a negotiable receipt (which represents the non US share) issued in US capital market and is traded in dollars. The trading in  American Depository Receipt effectively means trading in underlying shares.

• ADRs facilitates share transfers. ADRs are negotiable and can be easily transferred among the investors like any other negotiable instrument. The transfer of ADR automatically transfers the underlying share.

• The transfer of ADRs does not involve any stamp duty and hence the transfer of underlying share does not require any stamp duty.

• The dividends are paid to the holders of ADRs in U.S. dollars.

A non U.S. issuer has to work with its US investment bankers, US depository bank, US and non US legal counsel and independent accountant to prepare the registration documents and offering materials.

The listing of such an issue is done on the NYSE or AMEX to enable trading. Quotations on NASDAQ can also be used for trading purposes. Any requirement with respect to Blue Sky Law, if not exempted, has to be fulfilled.

Specified document and information must be provided to NASDAQ to enable it to review the terms of the offering and determine whether the underwriting arrangements are fair and reasonable. The filing documents with NASDAQ are the responsibility of managing underwriter.The dividends are paid to the holders of ADRs in U.S. dollars.

American Depository Receipt


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