Rules 5 explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
Rules 5 to 9 cover what happens once the corporate approvals in rule 4 are in place: how the receipts are issued, who votes, where the money goes, what applied to receipts issued before the rules and which parts of the Act do not apply to a depository receipt issue. This article states them as amended up to G.S.R. 111(E) dated 13 February 2020 per the MCA e-book; later amendments should be checked. Rules 5, 7 and 9 were changed by amendments effective from 14 February 2020, and the earlier wording is not the rule today. For legal advice on a cross-border issue, see our legal consultation service.
Receipts may be issued by public offering, private placement or any other manner prevalent in the concerned jurisdiction, against new shares or sponsored against existing shares. A receipt holder votes only after conversion into underlying shares; until then the overseas depository votes under the agreement. Proceeds are remitted to an Indian bank account or deposited in a permitted bank, or remitted to an IFSC Banking Unit. The Act's provisions on public issues and prospectuses do not apply to the depository receipt offer, and the overseas depository bank's name is entered in the Register of Members until redemption.
Rule 5: manner and form
| Sub-rule | Rule |
|---|---|
| (1) | Depository receipts can be issued by public offering or private placement or in any other manner prevalent in the concerned jurisdiction and may be listed or traded on the listing or trading platform in the concerned jurisdiction (substituted in 2020; the earlier wording said "prevalent abroad" and "overseas listing or trading platform"). |
| (2) | They may be issued against issue of new shares, or sponsored against shares held by shareholders of the company, in accordance with conditions the Central Government or the Reserve Bank of India prescribes or specifies from time to time. |
| (3) | The underlying shares are allotted in the name of the overseas depository bank, and against them the depository receipts are issued by that bank (the word "abroad" after "bank" was omitted in 2020). |
The overseas depository bank is, under rule 2, the "foreign depository" as defined in the Depository Receipts Scheme, 2014. See our article on rules 1 to 4.
Rule 6: voting rights
Sub-rule (1). A holder of depository receipts may become a member of the company and is entitled to vote as such only on conversion of the depository receipts into underlying shares, after following the procedure in the Scheme and the provisions of the Act.
Sub-rule (2). Until conversion, the overseas depository is entitled to vote on behalf of the holders of depository receipts in accordance with the agreement among the depository, the holders and the company.
So a holder of receipts is not a member until conversion. For the company, the practical question is who to send notices to and whose votes to count: until conversion, it is the overseas depository, acting under the agreement. The rule does not set out the terms of the agreement; the voting terms depend on it.
Rule 7: proceeds of the issue
The proceeds of issues of depository receipts are either:
- remitted to a bank account in India; or
- deposited in an Indian bank operating abroad, or any foreign bank (which is a Scheduled Bank under the Reserve Bank of India Act, 1934) having operations in India, with an agreement that the foreign bank having operations in India takes responsibility for furnishing all information that may be required.
In the case of a sponsored issue, the proceeds of the sale are credited to the bank accounts of the respective shareholders.
The proviso, inserted in 2020: proceeds may be remitted to an International Financial Services Centre Banking Unit (IBU) and used in accordance with the instructions the Reserve Bank of India issues from time to time. The 1934 Act is quoted as printed; check the current law.
Rule 8: receipts issued before commencement
Sub-rule (1). A company that issued depository receipts before the commencement of these rules was to comply with the requirements within six months of that commencement. Sub-rule (2). Any issue of depository receipts after six months from commencement is to be in accordance with the rules. Commencement was 1 April 2014, so the transition period has long passed; the rule is now of interest only to old records.
Rule 9: provisions of the Act that do not apply
| Sub-rule | Rule |
|---|---|
| (1) | The provisions of the Act and rules under it, insofar as they relate to public issue of shares or debentures, do not apply to issue of depository receipts (the word "abroad" at the end was omitted in 2020). |
| (2) | The offer document for depository receipts, by whatever name called, is not treated as a prospectus or an offer document under the Act, and all provisions applicable to a prospectus or offer document do not apply to it. |
| (3) | Despite section 88, until redemption of the depository receipts, the name of the overseas depository bank is entered in the Register of Members of the company. |
The practical result is that the prospectus provisions of the Act do not apply to the depository receipt offer document, and the company enters the overseas depository bank, not each receipt holder, in its register. For a company that also wants to list equity shares abroad directly, see our article on rules 1 to 5 of the Listing Rules and our post on section 23.
Example
Sunbeam Cables Limited issues depository receipts through an overseas depository bank. The underlying shares are allotted in the bank's name and the bank is entered in the Register of Members. An investor holding receipts cannot vote at the company's meeting; the overseas depository votes under the agreement. The money raised is remitted to a bank account in India. If the investor converts the receipts into underlying shares after following the Scheme and the Act, the investor becomes a member and votes as such.
Need help with a depository receipt issue?
The agreement with the depository, the register entry and the proceeds route all need to be settled before the issue. For advice on structuring and documenting it, see our legal consultation service.
Key takeaways
- Receipts may be issued by public offering, private placement or any manner prevalent in the concerned jurisdiction, against new or existing (sponsored) shares.
- Underlying shares are allotted in the overseas depository bank's name.
- A receipt holder votes only after conversion; until then the overseas depository votes under the agreement.
- Proceeds go to an Indian bank account or a permitted bank, or an IFSC Banking Unit under RBI instructions.
- The Act's provisions on public issues and prospectuses do not apply to the offer document.
Read next
- Rules 1 to 4: eligibility and conditions
- Rules 1 to 5 of the Listing Rules: international listing and LEAP-1
- Section 23: public offer and private placement
- Global Depository Receipts: how Indian companies raise foreign capital
Disclaimer: Based on the Companies Act, 2013 rules named above as consolidated in the MCA e-book (consulted on 3 October 2026), with the later notifications the article names. Later amendments, fees, forms and the Companies Act, 2013 provisions referred to should be checked. This article is general information, not legal advice; check the official text before acting.