Legal Protection Of Chinese Depositary Receipts

Depositary Receipts are negotiable certificates issued by depositaries. Thesecertificates represent the ownership interest in a foreign private issuer’s securitiesdeposited. DRs are created to circumvent laws and regulations formulated by somecountries to limit direct overseas financing or overseas investment. Many countrieshave lifted restrictions. DRs become a widely popular investment tool because theyare conducive to overseas financing by foreign issuing companies and facilitateoverseas investment by domestic investors. However, our country have not yetintroduced Depositary Receipt System because of the immature development of thecapital market, lack of relevant legal system, foreign exchange control and otherreasons. This article aims to analyze several issues regarding the legal protection ofChinese Depositary Receipts. The main idea of each chapter is as follows:Chapter I is the overview of Depositary Receipts. The first part is about theconcept and characteristics of DRs. The transformation between the underlyingsecurities and DRs is the basis of effective function. The second part is about theorigin and development of DRs. The third part is about the analysis of legalrelationship of DRs. The commercial trust structure is the legal structure of DRs.Chapter II is the legal protection of operating mechanism of DRs. The first partis about the TDR issuing mode. As the current situation of Chinese capital markets,TDR issuing mode should be convertible DRs limited by a total. The second part isabout the choice of the subject of DRs. The third part is about the design of theoperation process of DRs, involving the issuing, trading, issuance and cancellation of DRs.Chapter III is the legal protection of the interests of investors of DRs. The firstpart is about the legal protection of review and supervision of DRs. The second part isabout the legal protection information disclosure. The third part is about buildinglegal protection framework for investors of DRs referred by trust law legal system.Chapter IV is the legal protection of foreign exchange management of DRs. Thefirst part is about the current laws and regulations of foreign exchange control. Thesecond part is about the obstacles of the operation of DRs resulted from the currentforeign exchange control. The third part is the corresponding solution, which is toopen a special domestic RMB account and a special overseas foreign exchangeaccount.