Research On Investor Protection Under The Absence Of Depositary Obligations Of Chinese Depository Receipts

In order to meet the demands of domestic investors to invest in overseas companies and provide a financing channel for overseas companies to obtain capital from domestic investors,China has established Chinese Depository Receipt System,and the Chinese Depository Receipts applied by No.9 Co.,Ltd.has been issued.However,Chinese Depository Receipt System has not yet matured,and the tolerance of market and investors for risks is not yet known.Therefore,analyzing the obligation of the depositary,a channel role in the operating structure of depository receipts,is of great significance to promote the protection of depositary receipts investors.The first chapter introduces the infringements on investors’ rights and interests caused by the absence of depositary obligations in Chinese Depository Receipt System,which is mainly reflected in the fact that investors are excluded from participating the formulation and revision of depository agreements,and the lack of depositary information disclosure obligations at the regulatory level and regulatory rules for self-benefit behavior of the depositary which affect the exercise of investors’ right to know,vote and distribute.Under this circumstance,the absence of depositary obligations will result in the inability to effectively protect the legitimate rights and interests of depositary receipts holders.Therefore,it is necessary to improve the current norms of depositary obligations.The second chapter first explains the main reasons for the absence of depositary obligations are blind transplant of the "depository non-responsibility theory" from American law when the Chinese Depository Receipt System was established,and the role of depositary in different legal relationships is not accurately positioned.Secondly,it elaborates on the legal basis for perfecting the absence of depository obligations,and clarifies that the legal relationship between the three parties under the depository agreement is a kind of trust legal relationship,and the depository agreement characterizes a special stock holding relationship.Under this premise,the position of the depositary during the issuance and transaction of the depository receipts shall be clarified,and the depositary shall be the trustee and the stock holder of the investor,and the joint issuer of the depositary receipt.The third chapter mainly proposes solutions to the problems raised in the first chapter.The first is to address the issue of excluding investors from participating in the formulation and revision of depository agreements,this paper proposes risk assessment and substantive review of the arbitrary clauses of depository agreements before the issuance of depository receipts.Meanwhile,solicitation of opinions for investors could be added in the specific formulation procedures of depository agreements.What’s more,amending the clauses closely related to the interests of investors shall get investors’ consent in advance.Secondly,in view of the obstacles to the exercise of investors’ right to know,this paper proposes to increase the content of information disclosure,improve the principles of information disclosure,and establish a corresponding accountability mechanism.Finally,in accordance with the identity of the depositary as the trustee under the trust legal relationship,this paper explains the specific duty of loyalty and diligence that the depositary shall be responsible to the investors.Specifically,the duty of loyalty includes the duty of isolating basic property,prohibiting buying or selling depository receipts,and prohibiting sponsorship.The depositary’s duty of diligence is to actively exercise the rights of the overseas underlying securities for the benefit of investors.In other words,depositary shall actively participate in the shareholders’ meeting of the overseas underlying securities issuer and exercise the voting rights,exercise the right of proposal and the right of shareholders to know according to the company law of the registration place of the overseas underlying securities issuer and the company’s articles of association,etc.