A Non-Voting Depository Receipt (the “NVDR”) is a financial instrument that represents an interest in underlying listed securities, such as shares, transferable subscription rights, or share warrants, of a company listed on the Stock Exchange of Thailand (the “SET”).
In order to facilitate and promote foreign investment in the Thai capital market, the Thai NVDR Company Limited (the “Thai NVDR Company”), a wholly-owned subsidiary of the SET, was established on 4 October 2000. The Thai NVDR Company is responsible for issuing and managing NVDRs, which provide foreign investors with an alternative means of participating in the Thai securities market while complying with relevant legal restrictions on foreign ownership.
NVDRs provide foreign investors with largely the same financial benefits (e.g., dividends, rights issues, and warrants) as those available to direct shareholders of the underlying listed company. However, it is important to note that NVDRs do not confer any voting rights on the holder, which is the key distinction between NVDRs and the company’s ordinary shares.
The trading of NVDRs shall be conducted in the same manner as the trading of other securities listed on the Stock Exchange of Thailand. Accordingly, investors may apply the same trading procedures as those applicable to listed securities.
Previously, investors holding NVDRs could be either Thai or non-Thai, Nonetheless, the Capital Market Supervisory Board has issued the Notification TorThor. 8/2567 Re: Standard Conduct of Business, Management Arrangement, Operating Systems, and Providing Services to Clients of Securities Companies and Derivatives Intermediaries (the “NVDR Regulation”), effective on 1 April 2024, which introduces an update to the trading rules for NVDRs in the SET. Accordingly, securities companies shall not offer for sale, acceptance of transfer, nor the conversion of listed securities of or into NVDRs to any clients or its beneficiary, who possesses the Thai nationality.
Notwithstanding the foregoing, the above prohibition shall not be applicable to the clients who acquired NVDRs from the following cases:
NVDRs are classified as securities under the Securities and Exchange Act B.E. 2535 (as amended) (the “SEC Act”). Investors holding NVDRs and the underlying securities must consider their combined holdings when fulfilling reporting obligations.
In light of this, investors are required to submit a report to the Thai NVDR Company upon the acquisition or disposition of NVDRs, whether individually or in combination with the underlying securities. This report must be filed whenever such acquisition or disposition results in a change in the ownership or voting rights that reaches any multiple of five percent (5%) of the total voting rights of the target entity, in accordance with section 246 of the SEC Act.
For illustration purposes, if an investor holds shares of Company A and also holds NVDRs representing the shares of Company A as the underlying asset, both the shares and the NVDRs must be aggregated to determine the total holdings for the purpose of meeting the reporting threshold.
As a consequence of non-compliance of the above reporting requirement, investors, including the directors of a juristic person investors, who fail to comply with this reporting obligation may be liable to imprisonment for a term not exceeding two years or a fine not exceeding five hundred thousand baht, as well as a further fine of not exceeding ten thousand baht for every day during which the contravention continues, or both.
Conversion from foreign shares to NVDRs
There is no direct conversion between NVDRs and foreign shares. Pursuant to the NVDR prospectus, any conversion involving NVDRs must be executed through the trading system of the SET. In the event an investor holds foreign shares, the investor must first convert foreign shares to local shares through the trading system of the SET. Once the shares are local, the investor can then convert them to NVDRs by submitting a Trade Report order on the trading system. It should be noted that holding foreign shares may confer more extensive rights to the investor, including voting rights.
Conversion from NVDRs to foreign shares
Investors holding NVDRs who wish to convert them into foreign shares may request their brokers or custodians to facilitate the conversion through the Post-Trade System. If the foreign ownership limit for the particular security has not been reached, the conversion to foreign shares may occur immediately.
However, if the foreign ownership limit has been reached, the investor may request their participant to place the NVDRs in a queue for conversion within the Post-Trade System, while continuing to receive the same financial benefits during the waiting period.
For more in-depth information on any of the above, please reach out to Yaowarote Klinboon at
Yaowarote.k@wiseequitylegal.com or Karinevidch Olivero at karinevidch.o@wiseequitylegal.com
or Noraseth Ohpanayikool at noraseth.o@wiseequitylegal.com or Yanika Apisaksirikul at yanika.a@wiseequitylegal.com.
