A Nasdaq or NYSE ticker is still the most visible badge of international ambition for a Vietnamese company. Yet very few onshore-listed Vietnamese firms have tried to reach US investors through ADR programs, even though the structure is routine for issuers from India, Brazil and Korea. The reason is not a lack of investor appetite.
It is a stack of Vietnamese ownership, accounting, foreign-exchange and tax constraints that must be solved before a depositary bank will launch ADR programs. This article explains how ADR programs work, which level fits which objective, and where Vietnamese law makes the route difficult.
Contents
- What ADR programs are and who runs them
- Level I, Level II and Level III ADR programs
- Rule 144A and Reg S ADR programs
- Sponsored versus unsponsored ADR programs and the depositary bank
- Form F-6 and foreign private issuer reporting
- Vietnam’s foreign ownership limit and share conversion
- SSC and SBV rules on offshore depositary programs
- Withholding and tax treatment of ADR dividends
- ADRs versus direct listing, and why the route is rare
- Frequently Asked Questions
What ADR programs are and who runs them
An American Depositary Receipt (ADR) is a negotiable certificate, issued in the United States, that represents ordinary shares of a non-US company held by a custodian in the home market. Each certificate evidences American Depositary Shares (ADSs), and each ADS represents a fixed ratio of underlying shares, for example one ADS for ten shares. US investors trade and settle in US dollars through DTC, and never touch the Vietnamese settlement system.
These instruments are commonly called depositary receipts, and the umbrella term for a company’s arrangement with a depositary is known as ADR programs.
The three parties behind every program
Three parties make ADR programs work. The issuer owns the shares and, in a sponsored program, signs a deposit agreement. The depositary bank, typically BNY Mellon, Citibank or JPMorgan, issues and cancels the receipts, maintains the register, distributes dividends and relays voting materials. The custodian, a licensed bank in the issuer’s home country, safekeeps the deposited shares and instructs the depositary. For Vietnamese shares, the custodian would have to be a Vietnamese custodian bank licensed to hold securities for foreign investors.
How ADR programs work in conversion
Conversion runs in two directions. In issuance, an investor or broker buys shares in Vietnam, deposits them with the custodian and instructs the depositary to issue ADSs against them. In cancellation, the holder surrenders ADSs, the depositary instructs the custodian to release the shares, and the shares are either sold locally or delivered to the holder. For Vietnamese shares, every conversion step is also a securities and foreign-exchange event that must clear local rules.
Level I, Level II and Level III ADR programs
The “levels” describe how much US regulation the issuer accepts in exchange for how much US market access it receives.
Level I: over-the-counter access
Level I ADR programs are the lightest. The ADSs trade over the counter, not on an exchange. The issuer registers the ADRs on Form F-6 but does not register the underlying shares and does not file annual reports with the US Securities and Exchange Commission (SEC), provided it qualifies for the Rule 12g3-2(b) exemption. That exemption requires the issuer to publish in English, on its website, the information it must disclose in its home market.
Issuers cannot raise capital in the United States through Level I ADR programs.
Level II: exchange listing without a raise
Level II ADR programs list existing shares as ADSs on NYSE or Nasdaq. The issuer registers the shares under the Exchange Act through Form 20-F and the ADRs through Form F-6, and must meet exchange listing standards and Sarbanes-Oxley governance rules. Financial statements must be prepared under IFRS as issued by the International Accounting Standards Board, or reconciled to US GAAP. This is where Vietnamese issuers stumble, because Vietnamese Accounting Standards (VAS) are not IFRS.
Level III: public offering in the United States
Level III ADR programs are a full US public offering of new shares through ADSs, with a registration statement on Form F-1 plus Form F-6, and an exchange listing. It carries the heaviest cost and liability, including Section 11 exposure for misstatements in the prospectus, but it is the only level that lets an issuer raise primary capital from the US retail and institutional market.
| Feature | Level I | Level II | Level III | Rule 144A / Reg S |
|---|---|---|---|---|
| US venue | OTC | NYSE / Nasdaq | NYSE / Nasdaq | Private (QIBs) and offshore |
| Raises capital | No | No | Yes, public offering | Yes, private placement |
| SEC registration | Form F-6 only | F-6 and Form 20-F | F-6, F-1 and Form 20-F | None for the offer; Rule 12g3-2(b) exemption |
| Accounting standard | Home GAAP | IFRS or US GAAP reconciliation | IFRS or US GAAP reconciliation | Per offering memorandum |
| Relative cost and liability | Low | Medium to high | Highest | Medium |
Rule 144A and Reg S ADR programs
Many emerging-market issuers choose unregistered ADR programs. They raise capital privately and accept resale restrictions in exchange for lower cost and fewer ongoing obligations.
Rule 144A ADR programs for qualified institutional buyers
Under Rule 144A, restricted ADSs can be resold to qualified institutional buyers (QIBs), generally institutions managing at least USD 100 million of securities. The issuer sells to the initial purchasers under Section 4(a)(2) of the Securities Act, and the initial purchasers resell under Rule 144A. Issuers must agree to furnish information to holders on request if they are not otherwise reporting. Rule 144A is popular because the offering memorandum, rather than a registration statement, governs disclosure, and it is typically faster to execute.
Regulation S ADR programs for offshore investors
Regulation S provides a safe harbor for offers and sales outside the United States. Regulation S ADR programs serve non-US investors, with Category 1 to 3 conditions that restrict flowback into the US market depending on the issuer’s US market interest and reporting status. Vietnamese issuers often combine both in ADR programs: a Rule 144A tranche for US institutions and a Reg S tranche for Asian and European funds, documented in a single offering memorandum.
Sponsored versus unsponsored ADR programs and the depositary bank
Unsponsored ADR programs are created by a depositary bank without the issuer’s agreement, usually in response to market demand and relying on Rule 12g3-2(b). Several unsponsored depositaries can exist for one company, each with its own terms. Unsponsored ADR programs are rarely suitable for a company that wants a controlled shareholder base.
Why sponsored programs dominate
In sponsored ADR programs the issuer and one depositary sign a deposit agreement that fixes fees, voting mechanics, record dates and the issuer’s information duties. Sponsored status gives the issuer a single channel to US holders, the ability to cooperate on investor relations and, at Levels II and III, an exchange listing.
What the depositary bank actually does
The depositary bank issues and cancels ADSs, collects dividends in Vietnamese dong, converts them to US dollars, deducts taxes and fees and pays holders. It circulates notices of shareholder meetings, collects voting instructions and forwards rights offerings.
Form F-6 and foreign private issuer reporting
Form F-6 is the registration statement under the Securities Act for ADRs themselves. It is a short form that includes the deposit agreement and the form of receipt, and it does not substitute for registering the underlying shares. It becomes effective rapidly when the underlying shares are already registered or exempt. The related SEC guide to the form is a useful primer.
Who qualifies as a foreign private issuer
Most Vietnamese companies would qualify as a foreign private issuer (FPI) under Rule 3b-4, provided that US holders own no more than 50% of voting securities, or if they do, that the majority of executive officers and directors are not US citizens or residents, a majority of assets are outside the US, and the business is not administered principally in the US. The test is applied annually at the end of the second fiscal quarter.
What FPI status relieves and what it does not
An FPI files a Form 20-F annual report within four months after fiscal year-end and furnishes material home-market information on Form 6-K. It does not file quarterly Form 10-Q reports or proxy statements, and its insiders are exempt from Section 16 short-swing profit rules. It remains subject to Sarbanes-Oxley certifications and internal-control requirements and to the listing standards of the exchange, subject to home-country practice exemptions that must be disclosed.
Vietnam’s foreign ownership limit and share conversion
For most Vietnamese issuers, the foreign ownership limit (FOL) is the first hard question. When a custodian holds shares for ADS holders who are foreign investors, those shares are in substance foreign-owned. Depositaries cannot lawfully issue ADSs beyond the available foreign room.
How the limit is set
Under the Law on Securities 2019 and Decree 155/2020/ND-CP, foreign ownership in a public company is generally unrestricted unless a sector-specific law or an international treaty imposes a cap. Where a cap applies, such as the 30% aggregate cap for commercial banks, the percentage is tracked by the Vietnam Securities Depository and Clearing Corporation (VSDC, now integrated into Vietnam Exchange; verify) and the issuer’s board may adopt a lower charter limit, to the extent permitted.
Recent amendments to the securities legislation should be checked for the current position (verify).
Converting shares into depositary receipts
The practical sequence for ADR programs is demanding. Foreign investors must hold a securities trading code and an indirect investment capital account in Vietnam to buy shares. The shares must be registered and deposited at VSDC and credited to a custodian account that identifies the depositary as nominee.
Each deposit increases foreign ownership in the issuer’s books, so the custodian must confirm available room before the depositary issues ADSs, and a cancellation must free that room again. If room is exhausted, ADS prices may trade at a premium to the home-market price, which is a signal that FOL, not demand, is the constraint.
SSC and SBV rules on offshore depositary programs
This is the area where precision matters most, and where no widely used implementing procedure exists for ADR programs over Vietnamese shares. Every point below should be verified with current texts and, ideally, confirmed in advance with the regulators (verify).
State Securities Commission (SSC) touchpoints
The Law on Securities 2019 and Decree 155/2020/ND-CP regulate offshore offerings by Vietnamese issuers and treat certain depositary certificates as securities. A Vietnamese issuer that wants shares offered or listed abroad should expect to seek SSC acknowledgement or approval, to demonstrate shareholder resolutions and to remain compliant with Vietnamese disclosure duties during the program (verify the exact procedure and form). VSDC and the custodian bank also have operational roles in blocking, transferring and registering deposited shares.
State Bank of Vietnam (SBV) touchpoints
The Ordinance on Foreign Exchange and implementing SBV circulars govern the foreign investor’s indirect investment account, remittance of dividends and share sale proceeds, and the repatriation of any capital raised abroad by a Vietnamese issuer. Proceeds from a Level III or Rule 144A offering must be brought into Vietnam through compliant channels and used for the purposes stated (verify the current circular and registration requirements).
Withholding and tax treatment of ADR dividends
Tax shapes who buys the ADSs and at what net return, so it should be modeled early.
Vietnamese taxes on dividends
As a general rule, dividends paid by a Vietnamese joint-stock company to a foreign corporate shareholder with no permanent establishment are not subject to Vietnamese corporate income tax withholding, while dividends paid to non-resident individuals are subject to personal income tax at 5% under the Law on Personal Income Tax and its guidance (verify current rates and treaty positions). The depositary, as legal holder, must be correctly characterized, and the look-through treatment of ADS holders under Vietnamese practice should be confirmed with the tax authority.
Transfer of shares and ADS cancellation
Foreign investors pay a 0.1% tax on gross proceeds from transfers of securities in Vietnam. Whether an ADS issuance or cancellation, which moves legal title at the custodian, is a taxable transfer must be confirmed.
US-side considerations for holders
US holders are generally taxed on dividends as ordinary income, or at qualified-dividend rates where the ADSs are readily tradable on an established US market and the issuer is not a passive foreign investment company (PFIC). Because the United States and Vietnam signed a tax treaty in 2015 that, to our knowledge, is not in force, treaty-based reductions should not be assumed (verify).
Depositary banks typically charge pass-through fees per ADS, which also reduce net yield. A PFIC analysis is essential for asset-heavy issuers such as real estate or financial holding groups.
ADRs versus direct listing, and why the route is rare
The alternative to an ADR is a direct listing of ordinary shares of a company incorporated abroad, which is how most Vietnamese-founded companies have approached US markets. VinFast Auto, a Singapore-incorporated entity, listed on Nasdaq in August 2023 through a business combination with a special purpose acquisition company, not an ADR.
| Criterion | ADR over Vietnamese shares | Offshore holding company listing |
|---|---|---|
| Issuer | Vietnamese company | Singapore, Cayman or BVI holding company |
| Vietnamese foreign ownership limit | Applies directly | Applies only at operating-subsidiary level |
| Accounting | VAS must be converted to IFRS or US GAAP | Built into group reporting from the start |
| Home market link | Fungible with onshore shares | No onshore fungibility |
| Regulatory approvals | SSC, SBV, VSDC (verify) | Restructuring approvals and tax on reorganization |
| Typical use | Already-listed company seeking US investors | Growth company raising US capital |
Reasons ADR programs are rare for onshore-listed firms
Five reasons recur. First, ADR programs convert onshore shares that often have little or no free foreign room. Second, VAS financial statements require IFRS conversion, and Vietnam’s IFRS roadmap under Decision 345/QD-BTC is voluntary in its early phases (verify current status). Third, Vietnam’s offshore-offering and foreign-exchange procedures for depositary programs are not well trodden. Fourth, onshore liquidity on HOSE and HNX already serves many issuers’ funding needs.
Fifth, US reporting for ADR programs, Sarbanes-Oxley compliance and class-action exposure impose costs that few mid-cap issuers can justify for a thin trading float.
Frequently Asked Questions
Can a Vietnamese company list ADRs on NYSE or Nasdaq?
Legally yes, through Level II or III ADR programs, but it must satisfy exchange standards, Form 20-F reporting and IFRS or US GAAP financials, plus Vietnamese approvals and foreign-room availability. Few have done so.
What is the difference between Level I and Rule 144A ADRs?
Level I ADRs trade over the counter and are registered on Form F-6, with no capital raise. Rule 144A ADRs are privately placed to qualified institutional buyers, can raise capital, and are not SEC-registered.
Do ADR programs count toward the foreign ownership limit?
Yes, in substance. ADR programs use room because shares held by the custodian for foreign ADS holders generally use foreign room, so the depositary needs confirmation of available room before issuing ADSs (verify with the issuer and VSDC).
Are ADR dividends taxed in Vietnam?
Foreign corporate holders are generally not subject to Vietnamese withholding on dividends, while non-resident individuals face 5% personal income tax. Treaty relief and depositary treatment must be confirmed (verify).
Is Form F-6 enough to start ADR programs?
No. Form F-6 registers the ADRs only. ADR programs also need a deposit agreement, custodian arrangements, Vietnamese approvals and, depending on the level, Form 20-F, Form F-1 or an exemption.
The sensible next step is a short feasibility review before any US counsel or depositary is engaged: map your current foreign room, accounting standard, shareholder approvals and tax position against a Level I, Level II or Rule 144A and Reg S structure, then decide whether an ADR route, or an offshore holding company, better serve your capital-raising goals.
Considering a US capital markets route? IVLF Advisors LLC supports Vietnamese issuers on capital markets strategy through our capital markets practice and on financing structure through investment and finance advisory. Contact our Ho Chi Minh City or Hanoi team to arrange a confidential preliminary consultation. Further reading: SEC Form F-6 and the State Securities Commission of Vietnam.
Disclaimer: This article provides general information only and is not legal, tax or financial advice. Laws and regulatory practice change, and items marked “verify” must be confirmed against current texts and regulator guidance before any decision is taken.
This article is provided for general information only and does not constitute legal advice for any specific case. Regulations may change – please consult a qualified professional before acting. Should further analysis be required, please contact one of our lawyers below.
