I. Introduction

In the United States, the shares of many foreign corporations are traded in the form of American Depositary Shares (“ADSs”) that represent the underlying foreign shares on a share-for-share, partial-share or multiple-share basis. ADSs are usually issued by a U.S. commercial bank (the “Depositary”), which holds the underlying foreign shares directly or through a foreign correspondent (the “Custodian”). ADSs historically have been referred to by the negotiable certificates evidencing the ADSs, known as American Depositary Receipts (“ADRs”). [1]

The issuance of ADRs may be either “sponsored” or “unsponsored.” “Unsponsored” ADRs are issued by a Depositary for already outstanding foreign shares, without an agreement with the issuer of the shares. An ADR facility for an issuer’s shares, however, cannot be established unless the issuer either (i) is subject to the periodic reporting requirements under the Securities Exchange Act of 1934 (the “1934 Act”), or (ii) is exempt from these reporting requirements pursuant to Rule 12g3-2(b) under the 1934 Act. [2] Consequently, in the case of an issuer that does not meet either of these two conditions, a Depositary cannot create an unsponsored ADR facility without the issuer’s cooperation. [3]

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