Conversion of ADRs- and GDRs

ADRs and GDRs of Russian companies must be converted into shares as quickly as possible. But this is not easy. We support you during this process.
Your Contact
Dr. Magali Kolleck-Feser
ADR- and GDR-conversion

Secure your investment

Because of the present sanctions against Russian companies there is a high degree of uncertainty concerning private and institutional investments in so-called ADRs and GDRs. Anyone who does not exchange their depositary receipts for Russian companies into shares soon will be faced, in the worst-case scenario, with the total loss of their whole investment. But such an exchange currently presents enormous challenges. We of the international business law firm Goldenstein have therefore developed solutions for the existing problems and successfully support investors with the conversion of their DRs for Russian companies.

Rapid Action is called for

The conversion of Russian ADRs and GDRs is currently only possible for a restricted period

Total Loss threatens

Anyone who does not exchange their depositary receipts for shares soon must fear the total loss of their entire investment

Free Examination and Counselling Service

The business law firm Goldenstein examine whether you can and should exchange your ADRs and GDRs. Our initial counselling session is free of charge.

Consultation request

1.

Fill out form

Would you like to check whether your depository receipts can also be converted into shares? Simply fill out our form. It only takes a few minutes.
2.

We review your case

As soon as we receive your information, we will examine your case at no cost to yourself and advise you with the best options for the conversion of your ADRs.
3.

Conversion of your ADRs

We will support you, together with our partners, in the conversion of your depositary receipts. We shall thereby minimise your expenditure as far as possible.
4.

Done

Your ADRs have been converted into shares and your investment is secure.

This is how investing in Russian ADRs and GDRs works

Russian shares may only be traded on the Moscow Stock Exchange. For this, however, investors require a depositary account in Russia. In order that investors from all over the world may nonetheless be able to invest in the Russian stock market via their domestic banks and brokers, many Russian companies launched so-called Depositary Receipt Programs in the past few years. Depositary receipts are receipts for shares that may be traded on international stock exchanges without any significant regulatory effort or expense.

Anyone who, in the past few years, has invested money in Russian companies from a base in Germany or any other country, has thus, in the normal case, purchased not Russian shares but such depositary receipts. In Europe it is essentially American Depositary Receipts (ADRs), Global Depositary Receipts (GDRs) and, in part, also European Depositary Receipts (EDRs) that have been issued.

Until recently, such investments posed no challenges to investors. However, since the Russian war against the Ukraine and the western sanctions connected therewith, uncertainty prevails. This is because many Depositary Receipt Programs of major Russian companies such as Gazprom or Lukoil had to be stopped due to a new Russian law. DRs that have been issued must therefore be exchanged for shares within just a few months. This is currently not so simple, however.

Normally, the conversion of ADRs or GDRs to shares works as follows: the investor informs their broker or their bank that they wish to exchange their depositary receipts. This bank then approaches the European custodian of depositary receipts. This, in turn, passes this information on to the Russian custodian – the National Settlement Depositary (NSD). There, the deposited shares are then transferred to the Russian depositary account of the investor, which must be opened beforehand.

Until recently, the conversion of their depositary receipts was not attractive for international investors as the opening of a Russian depositary account involves a lot of bureaucratic effort for Europeans. The ending of many Depositary Receipt Programs now renders such an exchange indispensable, however. Due to the sanctions against Russian companies, this process is now also much more complicated than before.

These Russian Companies are ending their ADR and GDR Programs

In April 2022 Russia passed a law that is forcing many Russian companies to cease trading in depositary receipts within the coming months. The Russian legislator thus wishes to achieve that shares of Russian companies, in the future, are tradable only in Russia.

It is indeed the case that Russian companies still had the option of applying for the continuation of their Depositary Receipt Programs. But many companies did not exercise this option. So far it is only known that shares in the following companies will also be globally tradable in the future: Polyus, Tatneft, Severstal, Surgutneftegas, PhosAgrom, Sistema and Novatek.

Conversely, this also means that shares of major companies such as Gazprom, Magnit, Lukoil, Mobile TeleSystems, RusHydro, the LSR Group and the Federal Grid Company of Unified Energy System (FGC UES) will, soon already, only be tradable on the Moscow Stock Exchange. Partly this is already the case. Investors affected must therefore convert their depositary receipts to shares as quickly as possible. Otherwise, they risk the total loss of their own investment.

In fact, all conversion periods for Russian depositary receipt programs have already expired. Accordingly, the responsible banks will probably try to sell the deposited securities that have not been converted by their owners in a timely manner.

Fortunately, no case of such a forced sale has been reported so far. Therefore sometimes it is still possible to exchange depositary receipts for common shares again, although the respective ADR programs have already expired. However, it is completely unclear how long this will be the case. Therefore, affected investors should act quickly to protect their securities from forced sale.

In any case, if there were a forced sale of the deposited shares, many securities would come onto the market at the same time. This will most likely lead to enormous price slumps. While German investors must reckon with uncontrollable losses because of such a forced sale, investors from countries such as Russia or China could buy securities of German investors cheaply and benefit from the forced sale.

Company Expire date of the DR-program
Magnit 26/08/2022
RusHydro 29/11/2022
Federal Grid Company of Unified Energy System (FGC UES) 09/12/2022
LSR Group 27/12/2022
Lukoil 30/12/2022
Mobile TeleSystems 13/01/2023
Gazprom 03/08/2023

Chart 1: The deadlines for the conversion of depositary receipts of selected Russian companies

Check ADR/GDR exchange
Do you currently own Russian depository receipts? Then check now in a few minutes whether you can currently convert them into shares.

This is how the conversion of Russian Depositary Receipts works despite sanctions

In general, quick action is required when it comes to converting depositary receipts from Russian companies into shares. The conversion of Russian DRs is always only possible for a limited time and is also extremely complicated.

One of the reasons for this is that the European depository company for depositary receipts – Clearstream – has been refusing to initiate the conversion of Russian depositary receipts since summer 2022, citing alleged sanctions.

In this regard, on June 23, 2023, the European Commission provided legal certainty by amending EU Regulation 269/2014 to allow brokers, financial institutions and custodians to apply for authorization to exchange Russian ADRs. In the future, these institutes will enjoy legal certainty during the conversion process. Only applications relating to securities of sanctioned companies may be rejected. This does not include Gazprom, for example.

Therefore, the biggest challenge for affected investors is that some US issuers of Russian depositary receipts have closed their books. In this regard, there is currently good news, because J.P. Morgan, Chase Bank and BNY Mellon have recently reopened their books for the ADR programs of Magnet, Federal Grid Company (FGC UES), Cherkisovo, Inter RAO UES, Rosseti, PIK Group and Mobile Telesystems. In addition, Citibank recently announced that it would reopen the books for the Lukoil ADR program and a few smaller ADR programs.

The depositary receipts of Inter RAO, Rosseti and the Federal Grid Company cannot currently be converted into common stock due to sanctions imposed on these companies. For the other listed companies, however, the conversion is currently possible in principle and is also partially successful. In addition, it is very likely that the conversion of depositary receipts from companies such as Gazprom will also be possible again in the coming weeks.

However, since it is currently unclear when this will be the case, investors should at least collect all the documents needed to convert their securities in the traditional way because so far, the exchange has only been possible within a short time window. The commercial law firm Goldenstein advises affected investors in this regard free of charge and without obligation. We would be happy to help you to carry out the preparatory actions that are already possible in Russia in order to be able to use any exchange option that arises at short notice.

This is how it works:

1.
Check, with the aid of our form, whether you can convert your ADRs or contact us directly by telephone on +49 331 200 57 20 or by e-mail to adr@goldenstein-kanzlei.de
2.
We will examine your case at no cost to yourself and advise you with the best options for the conversion of your ADRs
3.
We will support you, together with our partners, in the conversion of your depositary receipts. We shall thereby minimise your expenditure as far as possible.
4.
Your ADRs have been converted to shares and your investment is no longer threatened with a total loss

Questions and Answers

What are Depositary Receipts anyway?
Must I convert my Russian DRs in every case?
Can I simply just keep my DRs?
What will happen if I do not convert my Russian DRs?
How much time I have to convert my Russian Depositary Receipts?
Can I simply open a depositary account with a Russian bank and transfer my shares to that?
Am I free to choose the bank that will hold my Russian shares in future?
I own DRs from various Russian companies. Can I transfer the deposited shares to one account?
When can I expect the exchanged shares to be deposited into my account?
Can I sell the converted shares immediately via my new custody account?
Will I receive dividends again after the conversion?
What does the exchange do for me if I have to hold the converted shares afterwards?
Does the commercial law firm Goldenstein also offer an exchange of DRs from companies whose DR programs have been extended?
I possess ETF with Russian shares. Do I have to convert these investments also?
Must I transfer the ownership of my shares for conversion to third parties?
Has the commercial law firm Goldenstein already successfully converted their clients' depositary receipts into shares?
Does the commercial law firm Goldenstein work together with Deeland Investments?
Check ADR/GDR exchange
Do you currently own Russian depository receipts? Then check now in a few minutes whether you can currently convert them into shares.