Issue of depositary receipts for shares

Separation of control and profit entitlement of shares

There are two rights attached to shares: the right to cast votes in the general meeting of the company and the right to receive distributions from the company.

There may be a good reason for separating these rights, for example, in the case of employee participation, which allows employees to share in the company’s capital and profit, but leaves the control of the company in the hands of the entrepreneur.

Separating the two rights may also be a solution when transferring assets to the next generation. An entrepreneur can give their children an interest in the company, while remaining in control themselves. This is not only a great way to let successors become acquainted with the business, it is also a tax-friendly way to do so.

The issue of depositary receipts

Control and profit entitlement can be separated by issuing depositary receipts for shares. This means that the shares are transferred to a foundation created for this purpose.

This foundation then issues a depositary receipt for each share. These depositary receipts give the holder the right to the distributions on the shares received by the foundation. The voting rights on the shares remain with the foundation. So, in short, the holders of depositary receipts receive distributions on the shares in the company’s capital while the board of the foundation exercises control over those shares.

Want to know more?

The factual and legal framing of depositary receipts for shares is complex. Asking the right questions is therefore important to get the right solution.

Questions such as: Can the control of a company also be distributed more finely? What if a third party wants to take over all the shares? Who is on the board of the foundation?

Please feel free to contact our lawyers or civil-law notaries for an exploratory chat. They will be happy to talk to you.