American Depositary Receipt

As an American Depositary Receipt (ADR, often American Depository Receipt or American Depositary Share ) are denominated in dollars, of U.S. depositary bank ( depositary banks ) in the U.S. issued share certificates or depositary receipts referred to a certain number of deposited shares of a foreign company embody and traded in her place on the U.S. capital market like stocks.


Strictly speaking, an ADR is a certificate that is issued by a U.S. financial institution that has taken the underlying shares in custody. One ADR represents usually a fraction of a share, but can also correspond to a full share. A transfer of ADR is done by endorsement and delivery. The respective owner of an ADR may at any time with the retransfer of the certificate to the Custodian the surrender of at a foreign depository bank ( custodian banks ), usually the branch office of the Custodian under custody in the country where the foreign company's shares and their sale on the foreign market.

ADRs created to facilitate transactions in foreign securities in the United States. The ADR can be traded on a U.S. exchange, without the corporation must undergo the full authorization procedure, the United States Securities and Exchange Commission (SEC), which would be necessary for a stock market listing otherwise.

Motives for the issuance of ADRs are applied include the requirements for listing in the U.S., where, for example, only registered shares are admitted to trading, but not the dominant one in Germany genus of bearer shares. Another reason for the construction of ADR programs is that certain American institutional investors, such as state pension funds, life insurance companies or banks, restrictions on their investment in foreign securities are subject. Since ADR as U.S. equities are treated, so can this be used by foreign companies without the issuance of shares on the U.S. capital market.

An issue of ADR can basically be in the form of unsponsored or sponsored ADR programs. In unsponsored ADR programs, the initiative is taken solely by a U.S. custodian or a dealer. The cost of the ADR program must be regularly paid by the investors. In addition, the Custodian shall not be required due to the lack Custodian Agreement with the foreign entity to disclose information of the company to investors. Unsponsored ADR programs are not admitted to trading on many exchanges, so that is of little practical importance.

In sponsored ADR programs, the initiative of the issuer goes out and is realized by the latter in conjunction with the custodian bank. Here, a deposit contract ( depositary agreement) is closed, which requires the Custodian to take the issue and redemption of certificates, the exercise of voting rights by the U.S. investor, the transfer of dividends and company information and program maintenance. The majority of the costs incurred in sponsored ADR programs is borne by the issuing entity. In addition to a private placement, there are three different forms for sponsored ADR programs:

Level I

Through a Level I program a trade in the United States on the Over the Counter (OTC ) market can be initiated for already existent shares of a company. This, however, any further capital received nor the ADR can be listed on a U.S. stock exchange. A Level I program must be registered using the form on Form F- 6 filed with the SEC pursuant to the provisions of the Securities Act (SA). Form F- 6 requires only information about the ADR program itself, but not on the underlying foreign issuers. A registration of the shares deposited under the Securities Exchange Act (SEA ) is not due to the exemption of Rule 12g3 -2 ( b ) normally required since the ADR of a Level I program neither traded on a U.S. stock exchange or on the NASDAQ system should be. In the SEC, the information published in its home market of the company must be submitted in an English translation. The major advantage of a Level I program against higher-grade programs is the lack of commitment to accounting under U.S. GAAP.

In addition to the Level I to Level III programs to the general public, there is the possibility of a private placement under Rule 144A, which addresses specific institutional buyers ( Qualified Institutional Buyers ). A private placement has the advantage that no complex registration procedures required and no financial statements under U.S. GAAP is required.

Level II

For a listing on a U.S. stock exchange or on the NASDAQ at least a Level II ADR program is hang up. Here, in addition to the Form F- 6 and the underlying shares must be registered in accordance with the provisions of the SEA with the SEC and the reporting and disclosure requirements of the stock exchange are observed. A registration of the shares with the SEC with Form 20 -F, requires the extensive information about the issuer. It must be presented financial statements under U.S. GAAP, to name a substantial Shareholder and to provide information on the Executive Board and Supervisory Board members. However, the registration takes a minimum annual reporting obligation to a comparable extent by itself.

Level III

For raising capital through the issuance of new shares in the country where the issuer and the trading of the corresponding ADR on a U.S. stock exchange, a Level III program is required. In addition to the forms on Form F- 6 and Form 20- F, the Form F -1 must be submitted; the required therein obligations to disclosure and preparation of financial statements in accordance with U.S. GAAP are similar to those on Form 20 -F.