Indian issuers typically access the international capital markets by the placement and listing of global depositary receipts (“GDRs”) on an overseas exchange. This article introduces the specifics of a GDR listing on the regulated markets of the Frankfurt Stock Exchange (“FSE”).

What are GDRs?
Depositary receipts represent a single share, several shares or fractions of a share in a foreign issuer, who is, in most cases, restricted for regulatory or other reasons from directly listing shares outside of its home country. The underlying shares are kept in custody in the home market of the issuer in an account of the depositary bank which issues the GDRs. The depositary bank conveys the economic ownership in the shares through the GDRs to their holders. On the international capital markets, American depositary receipts (ADRs) and GDRs are well-established financial instruments. GDRs may be included for trading or listed on all market segments of the FSE.

Market Segments offered by the FSE to Issuers
For the listing of their GDRs on the FSE, issuers may choose between the regulated market (General Standard/Prime Standard) and the merely stock exchange regulated Open Market (First/Second Quotation Board and Entry Standard). The General and the Prime Standard, which are both regulated market segments, are subject to the post-listing obligations of the EU Transparency Directive. The Prime Standard, however, imposes even stricter post-listing obligations on issuers than the EU Transparency Directive. Admission to the regulated markets generally requires a securities prospectus. For inclusion for trading in the Open Market a securities prospectus is only needed if the issuer plans to offer securities to the public or if the envisaged marketing measures appear to make the publication of a securities prospectus advisable. Only issuers in the Entry Standard segment of the Open Market undertake to comply with certain post-listing obligations. In the regulated markets, issuers can generally tap into a wider investor pool and the liquidity tends to be considerably higher than in the segments regulated merely by the exchange. For these reasons this article focuses on the specifics of a GDR listing in the regulated markets.

Specifics of the Securities Prospectus
The Regulation (EC) No. 809/2004 of 29 April 2004 (Prospectus Regulation) provides for a special annex regulating the minimum content of a securities prospectus for GDRs. Pursuant to this annex, information has to be included in the securities prospectus, inter alia, with respect to the issuer of the underlying shares and the GDRs, as well as information relating to the depositary, which has issued the GDRs. In accordance with the interpretation by the German regulator, BaFin, of the word “issuer” in the German Securities Prospectus Act, the depositary bank has to take responsibility for the prospectus. The responsibility statement of the depositary may, however (in contrast to the responsibility statement of the issuer of the underlying shares and the applicant for the admission of the securities), be limited to the prospectus information relating to the issuer of the GDRs and the GDRs.

Specifics of Post-listing Obligations
Only the issuer of the underlying shares and not the issuer of the GDRs is required to fulfill the post-listing obligations according to the German Securities Trading Act. Regarding the applicable post-listing obligations it has to be added that there are considerable differences between post-listing obligations for shares and GDRs, especially in the General Standard. An issuer of GDRs in the General Standard, for example, is not obliged to publish its half-yearly financial reports or any interim management statements. In case the underlying shares are not admitted to trading on an organized market pursuant to sec. 2 para. 5 of the German Securities Trading Act (BSE and NSE do not fall under this definition), the provisions on disclosure of directors’ dealings and the provisions on voting rights notifications do not apply.


Contact:
Salans LLP
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Dr. Alexandra Zech
60327 Frankfurt, Germany
Phone: +49 69 / 45 00 12 390
Email: azech@salans.com