Mahindra Satyam, which has announced ‘winding down' of ADS (American Depository Shares) as it faces cancellation of its registration from SEC (Securities and Exchange Commission), will soon serve termination notices on holders of ADS.

ADS holders in the US who are not able to or eligible to open brokerage accounts in India to convert the shares into their Indian equivalents do not have to worry much.

After termination of Depository Agreement, the company would hold underlying shares in a specific account in India. Citibank (Depository) would then shares and pay back to their original holders proportionately. This, however, is after paying relevant taxes in India.

ADS holders, who surrender their receipts and receive the underlying equity securities and are eligible to open brokerage accounts in India, have two ways to deal with their ADS. They could either hold the shares or sell them on the Bombay Stock Exchange or National Stock Exchange.

Those who don't want to take these two options will have seven months to offload their shares in the OTC market and exit.

Revocation of registration

Mr Vineet Nayyar, Chairman, has indicated that the company would face cancellation of its registration as it failed to meet US regulatory norms. Revocation of registration would lead to complete halt of trade of ADS.

US broker-dealers would not be permitted to effect transactions in the ADS or even in the underlying equity shares for which they might be exchanged. It may also be difficult or impossible for non-US broker-dealers to effect transactions in India for US residents in the ADSs or even in the underlying equity shares for which they might be exchanged.

The company will not be required to file reports with SEC any longer after the cancellation of registration.

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