Holding an American Depositary Share is not the same as holding a Share

Dr Jonathan Milner has flagged his intention to call a general meeting of Abcam PLC, an English company listed on the Nasdaq stock market, where he will seek to replace the current Chairman. However, his open letter suggests potential hurdles which investors in English companies listed on US and other foreign stock exchanges may face when trying to exercise shareholder rights.


Dr Milner was one of the founders of Abcam, which has become the world’s leading supplier of protein research tools to life scientists.  He stepped down from the Board of Abcam in October 2020.  In his open letter, Dr Milner says: “An Extraordinary General Meeting is an opportunity for shareholders to send a clear message to the Abcam board that we are dissatisfied with the company’s recent performance and that it needs to immediately focus on governance, execution, and cost control”.  He goes on to say that he is seeking to replace the current Chairman and take on the role of Executive Chair. 

The right to demand a general meeting

The right to demand that the directors of a company call a general meeting is an important shareholder right under English company law.  Under section 303 of the Companies Act 2006 (CA 2006), the directors of a company are required to call a general meeting once the company has received requests from a shareholder or shareholders holding at least 5% of the company’s voting share capital. 

Shareholders can require resolutions to be put before a general meeting they have convened, which can include the replacement of directors. 

The issue

Dr Milner is one of the largest investors in Abcam, with ownership of 6.3% of the company. However, in his open letter, he suggests that the right to demand a general meeting has been eroded: “The ADR Agreement with Citibank of the 26th of October 2020 left out the right for significant shareholders to call an Extraordinary General Meeting which is enshrined in UK law and therefore constitutes a serious breach.” 

As an English company listed on a US stock exchange, Abcam’s investors hold American Depositary Shares (ADSs).  ADSs are issued by a depositary bank and represent one or more shares of a non-US issuer held by the depositary bank. The main purpose of ADSs is to facilitate trading in shares of non-US companies in the US markets.  Abcam investors, including Dr Milner, will therefore not themselves hold Abcam shares; these will be held by the depositary who will issue ADSs which represent those shares.  The rights vested in shareholders under English law will therefore be vested in the depositary as shareholder (as opposed to the investors holding ADSs). 

There will be a Deposit Agreement which governs the relationship between the depositary, on the one hand, and the holders of ADSs, on the other.  Whether holders of ADSs have a right to direct the depositary to enforce its rights as a shareholder will depend on how that Deposit Agreement is drafted.  In this regard, it is interesting to note that the summary of the Deposit Agreement in Abcam’s registration statement says:

“As an owner of ADSs, we will not treat you as one of our shareholders, and you will not have direct shareholder rights. The depositary will hold on your behalf the shareholder rights attached to the ordinary shares underlying your ADSs. As an owner of ADSs you will be able to exercise the shareholders rights for the ordinary shares represented by your ADSs through the depositary only to the extent contemplated in the deposit agreement. To exercise any shareholder rights not contemplated in the deposit agreement you will, as an ADS owner, need to arrange for the cancellation of your ADSs and become a direct shareholder.” 

It would appear that the right to demand a general meeting is not one of the rights which Abcam ADS holders are able to exercise through the depositary. There may be steps an ADS holder could take to seek to enforce their rights, but that will depend on close scrutiny of the Deposit Agreement, the company's constitution and other legal considerations.


There are a number of English companies with foreign listings, particularly on US stock exchanges.  This is a trend which has been growing in recent years. Investors should, however, be aware that holding a listed security, such as an ADS, is not the same as holding a share. Holders of ADSs may be missing out on some important shareholder rights under English law. 

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