For a growth company whose revenue is earned in Vietnam, a United States listing almost never means listing Vietnamese shares in New York. It means listing American Depositary Shares (ADS): US-dollar securities issued by a US depositary bank, each representing a fixed number of shares of an offshore holding company that sits above the Vietnamese operating business.
The ADS structure solves the settlement, currency and custody problems of cross-border equity, but it also adds a contractual layer between investors and the issuer that changes who holds legal title, who votes, how dividends travel and what happens when something goes wrong.
This article explains how an ADS program is built, which documents govern it, and how the structure connects to Vietnamese law at each level of the chain, from the Vietnamese operating company up to the US investor.
What an ADS is, and what it is not
An ADS is a negotiable security issued under a deposit agreement between the issuer, a depositary bank and every holder and beneficial owner of ADSs.
Each ADS represents a stated number of ordinary shares (or a right to receive them) held by a custodian for the account of the depositary. It may also represent any other securities, cash or property the depositary holds in respect of those shares. The shares, together with that other property, are the “deposited securities”.
Three distinctions matter in practice:
- ADS versus ADR. The ADS is the security. The American Depositary Receipt (ADR) is the certificate that evidences a number of ADSs. Most ADSs today are uncertificated and held in book-entry form, so the terms are often used loosely, but the deposit agreement keeps them separate.
- ADS holder versus shareholder. The depositary (through its custodian or nominee) is the registered shareholder. The ADS holder is not a shareholder of the issuer and has only the rights the deposit agreement grants. Shareholder rights remain governed by the law of the issuer’s place of incorporation, typically the Cayman Islands for Vietnam-linked groups.
- Registered versus street-name holders. A registered ADS holder appears on the depositary’s register, either with an ADR or as a holder of uncertificated ADSs. Most investors instead hold a security entitlement through a broker that participates in The Depository Trust Company (DTC). Street-name holders must exercise every ADS right through their broker’s procedures.
The parties and documents in an ADS program
Who does what
| Party | Role in the ADS chain | Key point for Vietnam-linked issuers |
|---|---|---|
| Issuer (offshore holdco) | Signs the deposit agreement, registers the offering with the SEC, pays dividends on the underlying shares | Usually a Cayman Islands exempted company holding the Vietnamese business directly or through an intermediate holding company |
| Depositary bank | Issues and cancels ADSs, converts and distributes dividends, relays voting instructions, maintains the ADS register | Is not a fiduciary of ADS holders; acts only as the deposit agreement specifies |
| Custodian | Holds the deposited shares for the depositary in the home or regional market | Often located in a regional financial centre rather than in Vietnam, because the deposited shares are offshore holdco shares |
| DTC and brokers | Clear and settle ADSs in book-entry form | Vietnamese residents generally reach ADSs only through a licensed foreign broker, subject to Vietnamese outward investment rules |
| ADS holders | Hold ADS rights under the deposit agreement | Rights are contractual and indirect; see our companion article on ADS holder rights |
The document stack
Four documents define an ADS program. The deposit agreement (normally governed by New York law) sets out the mechanics and the allocation of risk. The form of ADR repeats its key terms. The issuer’s registration statement on Form F-6 registers the ADSs under the US Securities Act of 1933, while the underlying shares offered in an IPO are registered separately, typically on Form F-1.
Finally, the prospectus contains a section headed “Description of American Depositary Shares”, which summarises the deposit agreement for investors. That section is where most investors and many founders first meet the structure, and it is the template from which this series is built.
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How ADSs are created and cancelled
Issuance
ADSs are created when shares (or evidence of rights to receive shares) are deposited with the custodian. After the depositor pays the depositary’s issuance fee and any taxes or transfer charges, the depositary registers the corresponding number of ADSs in the names requested and delivers them, usually into DTC. In an IPO, the issuer deposits newly issued shares and the underwriters receive ADSs for distribution.
Withdrawal and cancellation
A holder can surrender ADSs and take delivery of the underlying shares at the custodian’s office, again against fees and taxes. The deposit agreement makes this right to withdraw non-derogable: it may be suspended only for temporary closure of transfer books, blocking for a shareholders’ meeting or a dividend, unpaid fees or taxes, or where withdrawal would breach applicable law. This is the mechanism that keeps the ADS price aligned with the price of the underlying shares where those shares also trade elsewhere, because arbitrageurs can convert in either direction.
The depositary may also cancel ADSs if no deposited securities remain, if those securities have become apparently worthless, or if a ratio change leaves insufficient underlying shares.
Sponsored programs and program levels
A program built on a deposit agreement signed by the issuer is a sponsored program. US practice distinguishes Level I programs (over-the-counter trading, no listing), Level II programs (exchange listing of existing shares) and Level III programs (exchange listing combined with a capital raise). An IPO by a Vietnam-linked offshore holdco on Nasdaq or the NYSE is a Level III program in substance, with full SEC reporting as a foreign private issuer.
Connecting the ADS chain to Vietnam
There are two routes by which a Vietnam business can sit beneath US-listed depositary securities, and they are governed by different Vietnamese rules.
Route 1: offshore holdco above the Vietnamese operating company
This is the dominant route for founder-led and venture-backed groups. Founders and investors hold shares in a Cayman Islands holding company, which owns the Vietnamese operating company either directly or through a Singapore or Hong Kong intermediate holdco. The ADSs represent Cayman shares; the Vietnamese company issues nothing to US investors. The Vietnamese issues arise below the listed entity:
- Outward investment by Vietnamese founders. When Vietnamese individuals or companies contribute capital to, or swap their onshore shares into, an offshore holdco, the transaction is outward direct investment requiring an outward investment registration certificate and registration of the related foreign currency account and capital transfers with the State Bank of Vietnam, under the 2025 Law on Investment (in force from 1 March 2026) and its implementing decrees. Whether a certificate is required depends on the project and has changed from the 2020 regime, so each founder’s position should be reviewed individually. Restructurings completed informally before the IPO are a recurring diligence finding.
- Foreign investor status of the operating company. Once the offshore holdco owns the Vietnamese company, that company becomes foreign-invested. Foreign ownership caps, market access conditions and sub-licences (for example in e-commerce, logistics, fintech-adjacent services or real estate) must be satisfied at the operating level.
- Indirect transfer tax exposure. Transfers of offshore holdco interests that derive value from a Vietnamese company can fall within the capital transfer rules in Vietnam’s 2025 Corporate Income Tax Law and its implementing decree. Pre-IPO reorganisations, secondary sales by existing shareholders and later share sales should be modelled for this exposure.
- Dividend path. Distributions to ADS holders start as profit remitted by the Vietnamese company to its offshore parent. Remittance requires audited financial statements, settlement of tax obligations and no accumulated losses, and must pass through the company’s registered direct investment capital account. The ADS dividend timetable therefore depends on the Vietnamese annual audit and tax finalisation cycle.
Route 2: depositary receipts over shares of a Vietnamese company
Vietnam’s Law on Securities 2019 (as amended) lists depositary receipts as a type of securities, and the Government’s implementing decree (as amended) regulates two variants: the issue of new shares as the basis for depositary receipts offered abroad, and the registration of depositary receipts issued abroad on the basis of shares already outstanding in Vietnam.
Both require the issue to comply with foreign ownership limits applicable to the Vietnamese public company, a shareholders’ resolution approving the plan, and filings with the State Securities Commission. In practice, the foreign ownership cap is the binding constraint: shares underlying depositary receipts count as foreign-owned, so a company at or near its cap has no room for a program.
Route 2 remains rare. Route 1 is the realistic path for most Vietnamese technology, consumer and real-estate platforms that target US investors.
Legal architecture: which law governs what
An ADS structure layers several legal systems, and confusion between them is the root of many investor complaints:
- Cayman Islands law governs the holdco’s constitution, shareholder rights, meetings, dividends and the validity of share issues.
- New York law typically governs the deposit agreement and the ADSs, including the holders’ contractual rights against the depositary and the issuer, and the jury trial waiver.
- US federal securities law governs registration, disclosure, liability for misstatements and trading.
- Vietnamese law governs the operating company, its licences, its ability to pay dividends and remit money abroad, onshore taxes, and the outward investment approvals of Vietnamese shareholders.
A good prospectus explains each layer. A good diligence process tests each layer separately, because a defect at the Vietnamese level (for example an unregistered offshore restructuring or a licence held by a nominee) can impair the value of every ADS above it.
Practical checklist before launching an ADS program
- Confirm the offshore restructuring is fully registered in Vietnam, including outward investment registration certificates (where required) and SBV capital-account and foreign-exchange registrations for all Vietnamese founders.
- Map foreign ownership caps and conditional business lines at the operating company, and identify any nominee or contractual control arrangements that require disclosure or unwinding.
- Model capital transfer tax on the restructuring and on likely post-IPO share sales.
- Agree the ADS ratio with the depositary and underwriters so the ADS trades in a conventional US price range.
- Review the deposit agreement against the issuer’s articles: meeting notice periods, voting procedures, rights offerings and the treatment of non-cash distributions.
- Prepare a dividend policy that reflects Vietnamese profit remittance conditions, not only Cayman solvency tests.
Frequently Asked Questions
Are ADS holders shareholders of the issuer?
No. The depositary, through its custodian or nominee, is the registered shareholder. ADS holders have contractual rights under the deposit agreement and can become shareholders only by surrendering ADSs and withdrawing the underlying shares.
Can a Vietnamese joint stock company list ADSs directly in the US?
Vietnamese law permits depositary receipts over shares of Vietnamese public companies under the Government’s implementing decree, subject to foreign ownership limits, a shareholders’ resolution and State Securities Commission filings. Most groups instead list through an offshore holding company.
Why are most Vietnam-linked US listings structured through the Cayman Islands?
Cayman companies are familiar to US underwriters and investors, allow flexible share classes and capital management, and separate the listed entity from Vietnamese foreign ownership caps. The trade-off is the outward investment and tax compliance required to build the structure.
What happens to the ADS if the deposit agreement terminates?
Holders receive at least 90 days’ notice and may surrender ADSs for the underlying shares. After the termination date the depositary may sell the deposited securities and hold the net proceeds for holders who have not surrendered.
Conclusion
An ADS program is a contract wrapped around a share. For a Vietnam-based group, the strength of that contract depends on the integrity of everything beneath it: the Cayman holdco, the registered outward investment of its founders, the licences of the operating company and the ability to move profit offshore. Building those foundations before the F-6 is filed is the difference between a smooth listing and a qualified diligence report.
Disclaimer: this article provides general information only and is not legal 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 investor guidance on depositary receipts, and Vietnamese legal texts can be checked in the national legal documents database. See also our capital markets practice on ADS programs for Vietnam-linked issuers.
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.
