Depository receipt is a negotiable certificate issued by a bank representing shares in a foreign company traded on a local stock exchange. Stock exchange is a marketplace where financial instruments like shares, commodities and bonds are traded. The main purpose of stock exchange is to accept listed securities as collateral and extend credit facilities against them. A specific process has to be followed in order to facilitate the listing of a foreign company’s share in the Indian stock exchange known as the Indian Depository Receipt (IDR) which has to be submitted. Stocks can also be invested in the Foreign Stock Exchange (FOREX) which promotes foreign trade and investment. In order to invest in a Foreign Stock Exchange, a depository receipt known as the Global Depository Receipt has to be issued by the bank representing shares of a foreign company which can later be traded in the local stock exchange.


Global Depository Receipt is defined in Section 2(44) of the Companies Act, 2013 as “any instrument in the form of a depository receipt, by whatever name called, created by a foreign depository outside India and authorized by a company making an issue of such depository receipts.”[1]


There are two main types of depository receipts:

  1. American Depository Receipt (ADR)
  2. Global Depository Receipt (GDR)[2]

American Depository Receipt is a negotiable instrument which is issued by the US depository bank against a certain number of shares. For eg: NYSE, NASDAQ. This receipt is issued when an investment is made in the NYSE. Global Depository Receipt is issued in an international depository bank representing foreign company. For eg: London Stock Exchange, Shanghai Stock Exchange.

The main difference between American Depository Receipt and Global Depository Receipt is that, ADR can be issued only by the US depository banks and only the citizens of US can invest in other foreign companies while GDR can be issued by any respective international depository bank in which the stocks are invested and is not country specific like US.


According to Section 41 of the Companies Act, 2013 “a company may pass a special resolution in its general meetings authorizing it to issue depository receipts in any foreign country in such manner and subject to such conditions as may pe prescribed.”[3] Global Depository Receipts are issued to those companies which are eligible under the terms of the provisions and scheme of the Foreign Exchange Management Rules & Regulations.

The procedure by which the company can issue global depository receipts are as follows:

  1. The Board of Directors of the company intending to issue depository receipts shall pass a resolution authorizing the company to do so.
  2. The company shall take prior approval of its shareholders by a special resolution to be passed at a general meeting.
  3. The depository receipts shall be issued by the overseas depository bank appointed by the company and the underlying shares shall be kept in custody of a domestic custodian bank.
  4. The company shall ensure that all the applicable provisions of the scheme and the rules and regulations issued by the Reserve Bank of India are complied with before and after the issue of depository receipts.
  5. The company shall appoint a merchant banker or a practicing-chartered accountant or a practicing cost accountant or a practicing company secretary to oversee all the compliances relating to issue of depository receipts and the compliance report shall be placed at the meeting of the Board of Directors of the company.
  6. The depository receipts can be issued by way of public offering or private placement or in any other manner prevalent abroad and may be listed or traded in an overseas listing or trading platform.
  7. The depository receipts may be issued against issue of new shares or may be sponsored against shares held by shareholders of the company in accordance with such conditions as the Central Government or Reserve Bank of India may prescribe or specify from time to time.
  8. These shares shall be allotted in the name of the overseas depository bank and against such shares, the depository receipts shall be issued by the overseas depository bank and against such shares, the depository receipts shall be issued by the overseas depository bank.

The above-mentioned conditions must be complied with by the company in order to issue a global depository receipt and in case any one of the conditions is not followed the Board of Directors is under no obligation to pass the resolution in the general of the company.


In 2019, the Securities and Exchange Board of India (SEBI) issued detailed procedure that needs to be followed for the issuance of depository receipts besides the eligibility criteria for listed companies and obligations of India as well as the foreign depositories and domestic custodians.[4]

The following suggestions were put forward for the issuance of global depository receipts:

  1. Listed firms are allowed to issue such securities provided that the promoters, directors and shareholders are not barred from the capital markets.
  2. Existing shareholders will be allowed transfer permissible securities for the purpose of issuance of depository receipts.
  3. Issue and listing of depository receipts may take place subject to the limits approved pursuant to a special resolution in terms of GDR Rules.
  4. Listed firms will be allowed to issue permissible securities for the purpose of issue of depository receipts only in permissible jurisdictions and such DRs will be listed on specified international bonuses including NASDAQ, NYSE, Hong Kong Stock Exchange and London Stock Exchange.
  5. Listed companies shall ensure that the aggregate of permissible securities which may be issued or transferred for the purpose of issue of depository receipts along with permissible securities already held by persons resident outside India, shall not exceed the limit on foreign holding of such permissible securities under the regulations of FEMA.
  6. SEBI also stated that the listed companies should ensure that in case of public disclosures made by the listed company on international exchanges are in compliance with the requirements of the permissible jurisdiction where the DRs are listed or of the international exchanges are also filed with the recognized stock exchange as soon as reasonably possible but not later than 24 hours from the date of filing.[5]

It basically provides guidelines for Indian companies as well as the foreign companies which are listed in the respective stock exchanges and the circumstances under which the depository receipts should be issued.


Global Depository Receipts are financial instruments which is issued by the foreign stock exchange and can be traded in the local stock exchange. The Companies Act, 2013 defines GDR as well as provides the basis for the issue of depository receipts. Like global depository receipts which are issued by foreign companies, in India the receipts issued is Indian Depository Receipt (IDR) which are not that prevalent but after the SEBI guidelines they have been used. With proper guidelines and rules, it is possible to issue the Indian Depository Receipts as it contributes a lot to the economy of the country and promotes fair trade between the investors.


Foreign Exchange Management Act, 1999

[1] Companies Act, 2013, § 2(44). No. 18, Acts of Parliament, 2013 (India).

[2] BUSINESS STANDARD,,market%20other%20than%20the%20US. (last visited Oct. 13, 2022).

[3] The Companies Act, 2013, § 41, No. 18, Acts of Parliament (India).

[4] ECONOMIC TIMES, (last visited Oct. 15, 2022).

[5] Id.

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