Gdr, Adr Norms Amended

The finance ministry has permitted the issue of global depository receipts or American depository receipts against bonus or rights issues by companies.

These bonus or rights entitlements would be considered only against the entitlement of GDR/ADR holders. This would be subject to approval by the High Court concerned.

According to a government press release yesterday, corporates wanting to make such issues would have to apply to the department of economic affairs with supporting documentation. This was necessary to support that the issues were on account of the entitlement of the GDR/ADR holders.

The statement said that under the current scheme GDR/ADR holders are entitled to hold or transfer or redeem them into underlying ordinary shares.

 

Consequently if an ordinary shareholder of a company acquires a right or entitlement by virtue of ownership of ordinary shares, the GDR/ADR holders will be entitled to have similar rights, it added.

The release said that the several representations had been received from issuer companies seeking clarification on the eligibility or entitlement of bonus or rights and their entitlements in the event of corporate reorganisation, mergers or demergers.

Similarly, the statement said that in the event of business reorganisation by a company, approved by the high court under section 391/394 of the Companies Act then the GDR/ADR holders will also be to entitled to treated on par with other shareholders of the company.

Further the statement said that against the entitlement, the company would have to issue and place ordinary shares with the domestic custodian against which the overseas depository would issue ADRs/GDRs to the holders.