The deposit agreement behind an American Depositary Shares (ADS) program is often treated as boilerplate, signed by the issuer on the depositary’s form shortly before the IPO. That is a mistake. The agreement allocates fees, amendment power, termination risk, liability, transfer mechanics and dispute resolution between three groups (the issuer, the depositary and every ADS holder) for as long as the program exists. For Vietnam-linked issuers, several of those clauses interact directly with onshore events: a licensing problem at the operating company, a delisting, a restructuring that triggers indirect transfer tax, or a take-private.
ADS deposit agreement risk allocation at a glance
The ADS deposit agreement is the contract that allocates risk between the issuer, the depositary and ADS holders. The points below summarise where the ADS deposit agreement most often shifts risk, and where an issuer should focus its review.
- Fees: the ADS deposit agreement sets which fees the depositary may charge and who bears them.
- Amendment: the ADS deposit agreement usually lets the depositary amend its terms without holder consent, subject to notice.
- Termination: the ADS deposit agreement sets the triggers, the notice period and what holders receive on termination.
- Liability: the ADS deposit agreement limits the depositary’s liability and allocates indemnities between the issuer and the depositary.
- Transfers: the ADS deposit agreement governs DRS and Profile mechanics and the withdrawal right.
- Disputes: the ADS deposit agreement typically includes a jury trial waiver, so holders should read that clause closely.
Reading the ADS deposit agreement against the due-diligence checklist below helps an issuer see which risks it carries and which sit with the depositary. In short, the ADS deposit agreement is best reviewed before the issuer signs.
This article is a due-diligence guide to the risk-allocation provisions of a typical deposit agreement, written for founders, CFOs, boards and investors in Vietnam-operating groups.
1. Fees and charges in the ADS deposit agreement: who pays, and how they are collected
Deposit agreements put most fees on investors, not the issuer, and collect them mechanically. A typical recent schedule looks like this:
| Fee or charge | Typical level | Trigger | Collection method |
|---|---|---|---|
| Issuance and cancellation fee | Up to US$5.00–US$10.00 per 100 ADSs (or part) | Deposit of shares, surrender of ADSs, share distributions, ratio changes, termination | Charged to the depositing or surrendering party or its broker |
| Cash distribution fee | Up to US$0.05–US$0.10 per ADS | Each cash dividend or distribution | Deducted from the distribution |
| Depositary services fee | Capped, e.g. US$0.10 per ADS per calendar year | Annual or periodic | Deducted from distributions or billed via DTC participants |
| Securities distribution fee | As if the securities were shares deposited for ADS issuance | Distribution of securities or rights | Sale of part of the property or deduction |
| Pass-through costs | At cost | Registration fees, SWIFT, currency conversion, taxes and servicing charges | Deduction or direct charge |
Two features deserve attention. First, the annual services fee is capped per calendar year, but a holder may be charged more than one such fee in a consecutive 12-month period. Second, the depositary may refuse to provide any fee-attracting service until its fees are paid, so unpaid fees can block a withdrawal.
Revenue sharing and FX income
Deposit agreements typically disclose that the depositary may reimburse the issuer for certain program expenses, or share fee revenue with it, on agreed terms. They also disclose that the depositary and its affiliates may act as principal in currency conversions and retain the spread. For a Vietnam-linked issuer, these arrangements should be reviewed by the audit committee for related-disclosure and governance purposes, and the reimbursement letter should be read alongside the deposit agreement itself.
2. Amendment without consent under the ADS deposit agreement
The issuer and depositary can amend the deposit agreement and the form of ADR without the consent of ADS holders, for any reason. The only procedural protection is timing: an amendment that adds or increases fees (other than taxes, governmental charges and certain pass-through expenses) or that prejudices a substantial existing right of holders becomes effective for outstanding ADSs only 30 days after the depositary notifies holders. A holder who keeps its ADSs after that date is deemed to accept the amendment. The holder’s remedy is exit: sell, or cancel and withdraw the shares.
Diligence point for investors: review the current deposit agreement as amended, not the version filed at IPO. Amendments are filed as post-effective amendments to the Form F-6 registration statement.
Reviewing a deposit agreement, a delisting plan or a pre-IPO restructuring for a Vietnam-operating group? IVLF Advisors offers a confidential preliminary risk review covering the deposit agreement, the offshore holdco and the onshore licences (NDA available).
3.
Termination: triggers, timeline and what holders receive
Termination triggers
The depositary must initiate termination if the issuer instructs it to. It may initiate termination if, among other things:
- 60 days have passed since it gave notice of resignation and no successor depositary has been appointed;
- the issuer delists the ADSs from the US exchange and does not list them on another US exchange or arrange over-the-counter trading;
- the issuer delists its shares from a non-US exchange without relisting elsewhere outside the US;
- the ADSs have become, or will become, ineligible for registration on Form F-6;
- the issuer appears insolvent or enters insolvency proceedings;
- all or substantially all the value of the deposited securities has been distributed;
- there are no deposited securities, or they have become apparently worthless; or
- the deposited securities have been replaced.
Timeline after notice of termination of the ADS deposit agreement
The depositary must notify holders at least 90 days before the termination date. After that date it may sell the deposited securities, normally as soon as practicable, and holds the net proceeds and any other cash unsegregated and without liability for interest for holders that have not surrendered their ADSs. Between termination and sale, holders may still surrender ADSs and take delivery of the shares, but the depositary may refuse or reverse withdrawals that would interfere with the sale process. After termination it is not required to register transfers, pay distributions or give notices.
The Vietnam angle: ADS deposit agreement termination is rarely only a US event
- Take-private transactions. When a Vietnam-operating group delists through a merger or scheme at the Cayman level, ADS holders are typically cashed out and the program terminated. The transfer of control of the offshore holdco can be a taxable indirect transfer of the Vietnamese company’s capital under the 2025 Corporate Income Tax Law and its implementing decree, and may require updates to the Vietnamese company’s investment and enterprise registrations. Sequence the onshore filings and tax declarations into the deal timetable.
- Insolvency or “apparently worthless” triggers. These are often downstream of onshore problems: revocation or non-renewal of a sub-licence, a foreign ownership breach in a conditional sector, or a land-use dispute. Diligence of onshore licensing is therefore part of assessing termination risk for an ADS investment.
- Holders who withdraw shares. Investors who take delivery of Cayman shares on termination hold an illiquid unlisted security. Any later transfer by them may itself be an indirect transfer for Vietnamese tax purposes, with the Vietnamese company exposed to filing obligations.
4. Limitation of liability and indemnities in the ADS deposit agreement
Both the issuer and the depositary limit their exposure to ADS holders. In substance, they:
- are obliged only to perform the actions specifically set out in the deposit agreement, without negligence or bad faith; the depositary is not a fiduciary and owes holders no fiduciary duty;
- are not liable if prevented or delayed by law or circumstances beyond their reasonable control, or for exercising permitted discretion;
- are not liable for a holder’s inability to benefit from a distribution not made available to it, or for special, consequential or punitive damages;
- have no obligation to join litigation on a holder’s behalf, may rely on documents believed genuine, and are not liable for securities depositories or settlement systems;
- in the depositary’s case, have no duty to determine or advise on the issuer’s tax status or to help holders obtain treaty relief, reduced withholding or refunds.
The issuer and depositary give each other indemnities. For the issuer, the indemnity to the depositary is a contingent liability that should be understood by the board, especially where corporate actions in Vietnam (for example a restructuring requiring regulatory approval) could delay or complicate distributions.
5. Transfer mechanics under the ADS deposit agreement: conditions, DRS and Profile
Conditions to depositary action
Before delivering or registering a transfer of ADSs, making a distribution or permitting withdrawal, the depositary may require payment of taxes and third-party charges, proof of identity and signatures, and compliance with its procedures. It may refuse to deliver or register transfers when transfer books are closed or whenever it or the issuer considers it advisable.
The non-derogable withdrawal right
The right to cancel ADSs and withdraw the underlying shares may be suspended only for temporary delays (closed books, a blocking period for a shareholder meeting or a dividend), while fees or taxes are unpaid, or to comply with law. No other provision of the deposit agreement can limit it. This is the holder’s most important structural protection.
DRS and Profile
Under the Direct Registration System and its Profile Modification feature, a DTC participant claiming to act for a registered holder of uncertificated ADSs can instruct the depositary to move those ADSs into DTC without the holder’s prior authorisation. The depositary does not verify the participant’s actual authority, and its reliance on Profile instructions is agreed not to be negligence or bad faith. Registered holders, typically founders and pre-IPO investors after conversion, bear the operational risk of unauthorised transfers and should control their broker relationships accordingly.
6. Information rights and jury trial waiver in the ADS deposit agreement
The depositary makes available for inspection communications it receives from the issuer as a holder of deposited securities that the issuer makes generally available, and sends them on if the issuer asks. Holders may inspect the ADS register, but not to contact other holders about matters unrelated to the issuer’s business or the ADSs.
Most deposit agreements now include a jury trial waiver: to the extent permitted by law, holders waive the right to a jury trial for claims against the issuer or depositary relating to the shares, ADSs or deposit agreement, including claims under US federal securities laws. Enforceability is decided by the court case by case. The waiver does not operate as a waiver of compliance with US federal securities laws. Jury waivers are separate from forum provisions; issuers should check that the deposit agreement, the articles and any exclusive-forum clause in the F-1 work together.
Due-diligence checklist: ADS deposit agreement risk allocation
| Clause | Issuer / founder question | Investor question | Vietnam linkage |
|---|---|---|---|
| Fees and revenue sharing | Are reimbursements disclosed and governed? | What is the all-in cost per ADS per year? | Dividend frequency depends on onshore remittance calendar |
| FX conversion | Is the methodology disclosed? | How does the spread compare with market? | Distributions sourced from VND profits |
| Amendment | Which changes need 30 days’ notice? | Has the agreement been amended since IPO? | None direct; monitor F-6 amendments |
| Termination | Delisting and take-private sequencing | What happens to proceeds and withdrawn shares? | Indirect transfer tax; registration updates |
| Liability and indemnity | Size of contingent indemnity | Recourse limited to negligence or bad faith | Onshore regulatory delays as force majeure |
| DRS / Profile | Founder holdings after conversion | Controls over broker instructions | Outward investment basis for founder holdings |
| Jury waiver and forum | Consistency with articles and F-1 | Litigation strategy | Enforcement against onshore assets is a separate question |
Frequently Asked Questions
Can the depositary increase fees under the ADS deposit agreement without holder consent?
Yes. The issuer and depositary may amend fees without consent, but increases take effect for outstanding ADSs only 30 days after notice. Holders who disagree can sell or withdraw.
What happens under the ADS deposit agreement if the issuer delists from the US exchange?
If no other US listing or OTC arrangement is made, the depositary may terminate the program on at least 90 days’ notice, then sell the deposited shares and hold the proceeds for holders.
Is the depositary a fiduciary for ADS holders under the ADS deposit agreement?
No. Deposit agreements expressly state the depositary has no fiduciary duty and is liable only for negligence or bad faith in performing specified obligations.
Can a take-private of a Vietnam-operating group trigger Vietnamese tax?
Potentially. A change of control at the offshore holdco may be treated as an indirect transfer of the Vietnamese company’s capital under current corporate income tax rules, so it should be modelled early.
Conclusion: the ADS deposit agreement in practice
The deposit agreement is a long-term risk-allocation instrument, not a formality. For Vietnam-linked issuers, the clauses that matter most (fees, amendment, termination and liability) are tightly connected to onshore realities: profit remittance, licensing, indirect transfer tax and the outward investment position of founders. Reviewing them together before the IPO, and again before any delisting or restructuring, reduces surprises for both the company and its investors. A practical next step is to run the checklist above against your current deposit agreement and onshore licence file.
Disclaimer: this article provides general information only and is not legal or tax advice for any specific matter. The law is stated as of 2 November 2026 and may change.
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Further reading: the U.S. Securities and Exchange Commission publishes guidance on depositary receipts, and Vietnamese tax and corporate texts can be checked in the national legal documents database. See also our capital markets practice.
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.
