Conversion of Russian issuers’ ADRs (GDRs) into Local Shares

Conversion of Russian issuers’ ADRs (GDRs) into Local Shares

A depositary receipt is a security that is issued by foreign issuers, confirming an investor’s entitlement to a certain number of shares. Russian issuers’ depositary receipts have historically been issued by significant American and other foreign banks, including BNY Mellon, JPMorgan, Citibank, Deutsche Bank, and other notable financial institutions.

Because of current sanctions against Russian companies, investors who fail to exchange their depositary receipts for Russian company shares in a timely manner risk losing their entire investment. However, the process of conversion presents several formal and practical challenges that many investors are reluctant to face. Some are choosing to forfeit their investments in exchange for lower market values of the shares. However, the depositary receipt conversion process comprises surmountable difficulties, and understanding them can reveal that they are not insurmountable.

GFLO Consultancy provides solutions and successful support to investors on the conversion of their Russian ADRs and GDRs into their underlying shares. The aim is to address these issues and prevent the loss of investors’ investments.

Our services include:

  1. Free assessment of your case.
  2. Free initial consultation.
  3. Fast turnaround time, which is particularly crucial due to the limited remaining conversion period.
  4. Our international expertise covers North America, Europe, Middle East, and Asia.
  5. We have one of the best offers for conversion presently available in the market, where all work is carried out by our own Russia-eligible lawyers.
  6. We possess practical expertise in the latest conversion process for Russian ADRs.

What is the process for converting ADRs and GDRs?

Step 1: Opening an account with a Russian depository or broker

To convert a Russian ADR and acquire underlying shares, an investor must establish a depositary or brokerage account with an organization that has an account with the National Settlement Depository (NSD).

Currently, foreign organizations with such accounts are scarce, and those that do are unwilling to credit shares received through the conversion of depositary receipts initially held in accounts from other organizations. Additionally, owning Russian issuer shares through a foreign structure presents a high risk of loss or restricted access to investments due to sanctions or counter-sanctions. Thus, opening an account with a Russian depositary or brokerage is ideal.

Typically, a depositary or brokerage account requires an investor’s personal presence. However, if the investor cannot come to Russia to open an account, they can issue a notarized and legalized (apostilled when applicable) power of attorney to a representative in Russia, who will open an account on their behalf.

Step 2: Withdrawing ADR or GDR instructions.

After an investor opens a deposit or brokerage account, they must complete a special instruction and send it to their depositary or broker to withdraw the depositary receipts. The forms for these instructions are available from foreign issuers who have released depositary receipts, but specific information is required from the Russian depositary or broker where the account is held for the deposit of underlying shares.

Once the instruction is filled out and submitted, the depositary or broker from which the investor holds the Russian ADR must instruct the issuer of the depositary receipts to transfer the shares to the investor and commence the process of withdrawing the depositary receipts from the investor’s account. However, the ease of this part of the depositary receipt conversion process depends primarily on the willingness of the depositary or broker from which the investor holds the depositary receipts to cooperate and assist with the conversion process.

Most American brokers work well with investors for the purpose of conversion, but many European brokers and depositaries are not very helpful and choose to distance themselves as much as possible from the conversion process. As a result, the conversion process may face hindrances or even become impossible.

Step 3: Submitting a counter-instruction

Once the broker or custodian that holds the Russian ADRs for the investor accepts an instruction to withdraw the depositary receipts and has instructed the depositary of the depositary receipts to transfer underlying shares to the investor, the final phase of the conversion process can commence. This involves submitting a counter-instruction to the Russian custodian or broker.

As a general rule, the investor submits the counter-instruction in person at the office of the Russian custodian or broker. However, a representative of the investor with a notarized and legalized power of attorney can do this, similar to opening a deposit or brokerage account.

If the counter-instruction is correctly completed and submitted, the Russian custodian or broker is obligated to credit the corresponding number of shares to the investor’s account, making them a direct shareholder of the Russian issuer.

What is Law 114-FZ and how does it impact investors?

On April 16, 2022, Russia passed Federal Law No. 114-FZ, also known as Law 114-FZ, which prohibits Russian issuers from trading their shares outside of Russia through depositary receipts. The law also obliges Russian issuers to terminate programs for issuing depositary receipts and agreements with foreign issuers of depositary receipts. 

Accordingly, foreign issuers of depositary receipts are required by Law 114-FZ to write off the depositary receipts and pay investors the amount of money provided for in the depositary agreements, which is usually lower than the market value of the shares. However, these consequences do not apply to investors who have already converted their depositary receipts. 

Despite formal requirements, in practice, foreign issuers are unable to write off the depositary receipts and pay investors. This is because of sanctions and counter-sanctions restrictions. 

Furthermore, Law 114-FZ states that investors’ rights to receive underlying shares will be determined on the date of entry into force of the law. This means that the purchase of depositary receipts after this date does not entitle investors to receive underlying shares, and thus their conversion becomes impossible. 

Moreover, the law allows investors to demand payment of all unpaid dividends after converting their depositary receipts and receiving shares from Russian issuers. This is relevant for investors holding depositary receipts of Russian issuers like Gazprom and Lukoil, which have distributed significant dividends that could not be paid to holders of depositary receipts due to sanctions and counter-sanctions restrictions.

Investors who wish to obtain previously paid dividends must submit a special statement directly to the Russian issuer. The Bank of Russia has also implemented temporary restrictions on operations involving underlying shares obtained through the conversion of depositary receipts. In accordance with these restrictions, Russian depositories and brokers are obligated to maintain a special record of converted shares and limit sales of these shares for each investor to 0.2% of the total number of shares.

As a rule, Russian depositories and brokers impose these regulations on all investors who received underlying shares through conversion. However, investors who obtained depositary receipts either previously or on the same date as the restriction’s introduction, namely March 1st, 2022, may request an exemption application by submitting a special statement to the Russian depository or broker to cancel the application of the imposed restrictions.

In conclusion, obtaining previously paid dividends can be a complex process that requires additional effort from investors. Investors should also be aware of the temporary restrictions introduced by the Bank of Russia while converting their depositary receipts and seek professional assistance if necessary.


To convert depositary receipts can be a complicated process that necessitates specific knowledge and experience on the part of the investor. The best course of action is to seek assistance from skilled professionals who can provide qualified support at each stage of the procedure. It is not worth risking your investments by neglecting to consult with experts. In this regard, GFLO Consultancy’s guidance may be highly valuable in ensuring the successful conversion of Russian ADRs in your specific case.