NEW DELHI, Aug 17: The government has decided to allow Indian companies to issue Global Depository Receipts (GDR)/ American Depository Receipts (ADR) in cases of bonus/rights issue and business reorganisations duly approved by the High Court.However, according to an official announcement, the companies would be required to apply to the department of economic affairs for obtaining approval of issue of GDRs/ADRs in all the cases. It has also been clarified that under the scheme, a GDR/ADR holder is entitled to hold or transfer GDRs/ADRs or redeem them into underlying shares with the option to continue to holding shares, and thus has a right to the ordinary shares underlying the GDRs an ordinary shareholder of a company acquiring a right or entitlement by virtue of ownership of ordinary shares, the GDR/ADR holders will also have the rights or entitlement owing to his rights over underlying shares. It was pointed out that the GDR/ADR holders would be entitled to same bonus and rights issue ofshares as an ordinary share holders of the company.Similarly, it was clarified that, "if ordinary shareholders of a company `A' become entitled to shares of another company `B' as a consequence of a genuine business reorganisation, duly approved by the High Court under section 391/394 of the Indian Companies Act, the GDR/ADR holders of company `A' also mature the same entitlement to shares of company `B'.Furthermore, when the GDR/ADR holders mature an entitlement to shares in a company, the company would need to issue and place ordinary shares with domestic custodian against which the overseas depository would issue corresponding ADRs/GDRs to the ADR/GDR holders.Approvals for such issues, however, would have to be sought from the department of economic affairs. According to the official announcement, the DEA would consider such requests on the basis of necessary supporting documents to assess that the proposed GDRs/ADRs issue was on account of the entitlement of GDR/ADR holders.
