'Depositary Shares' Cross Quotation of Securities in Foreign Markets (Las Depositary Shares. La Negociación cruzada de Valores En Mercados Extranjeros)

Abstract

Issuance and transfer of securities in the international stock markets raise puzzling legal issues. Several legal topics and various national legal orders may be called upon. This book unravels the legal characteristics of the main instrument that foreign corporations have used from 1927 to issue securities and to ease their marketability, transfer and quotation in foreign stock markets, making possible and accommodating the exercise of the corresponding economic and political rights: the Depositary Shares.

The first part of the book settles the conceptual foundations of this financial instrument and follows its historical evolution (chapter 1), describing its economic characteristics (chapter 2) and the types of Depositary Shares available in practice (chapter 3). Depositary Shares are derivative instruments built upon an underlying security previously issued by a foreign corporation according to the requirements and conditions of its legal order and normally apt to be negotiated in the corporation's domestic market.

The second part of the book studies the features of Depositary Shares from a legal perspective, deepening the analysis of the contracts through which these financial instruments are created; in which fiduciary elements are predominant (chapter 4). Depositary Shares' fiduciary nature has relevant consequences and conditions depositary bank's obligations and liabilities, as well as the rights of the Depositary Shares' holder. Depositary Receipts are also examined as the material representation of Depositary Shares, focusing on how they're issued and transferred. Special attention is given to how Depositary Shares fit in U.S. federal and States' securities regulation, as Depositary Shares have most widely been used in these markets (chapter 5). Finally, the rights of Depositary Shares' holders are analyzed, describing how the rights granted by underlying shares are transferred to Depositary Shares' holders, paying special attention to the most relevant shareholders' rights: right to information, right to vote, right to dividends and pre-emption rights. Problems arising from the use of Depositary Shares and the rules regarding acquisition of their own shares by foreign corporations and tender offers are also briefly considered (chapter 6).

Keywords: Depositary Shares, Cross-quotation, Foreign Securities, Securities Regulation, Corporate Law, Depositary Receipts

JEL Classification: K22, G30, N20