Question

Which is the next step of GDR mechanism, after the overseas depository bank enter into a custodian agreement with the domestic custodian of such company?

• A. On the instruction of domestic custodian, the overseas depository bank issues shares to foreign investors.
• B. The domestic custodian holds the equity shares of the company.
• C. The domestic company enters into an agreement with the overseas depository bank for the purpose of issue of GDR.
• D. The whole process is carried out under strict guidelines.

Answer 1

The correct option is B The domestic custodian holds the equity shares of the company.

After the overseas depository bank enter into a custodian agreement with the domestic custodian of such company, the next step of GDR mechanism is: the domestic custodian holds the equity shares of the company. Hence the equity shares is held by the domestic custodian when the overseas depository bank signs the agreement.