# Section 390 — Indian Depository Receipts (IDRs)

## What is an IDR?

An Indian Depository Receipt (IDR) is:

> Any instrument in the form of depository receipt created by a Domestic Depository in India and authorized by a company incorporated outside India making an issue of such depository receipts.

### Plain English

Foreign companies cannot list their shares directly on Indian stock exchanges.
IDRs are a workaround: the foreign company deposits its shares with a Domestic Depository in India.
The Domestic Depository issues IDRs to Indian investors representing those underlying foreign shares.
Indian investors get exposure to a foreign company without dealing with cross-border share-holding mechanics.

## Powers of Central Government — Rule-Making

Notwithstanding anything in any other law in force, the Central Government may make rules for:

Clause	Subject
(a)	The offer of IDRs
(b)	Disclosure requirements in prospectus or letter of offer issued in connection with IDRs
(c)	The manner in which IDRs shall be dealt with in depository mode and by custodian and underwriters
(d)	Manner of sale, transfer or transmission of IDRs by foreign company (whether or not it has/will have place of business in India)

## Famous Example

Standard Chartered PLC — the first foreign company to issue IDRs in India (2010).

## Linkage

IDRs trigger application of:

Sections 34–36 (criminal/civil liability for mis-statement in prospectus) — via Section 391
Chapter XX (winding-up provisions — modified for foreign company place-of-business closure) — via Section 391

Worked example

### Example 1

Example 1: A US company wants Indian retail investors to invest in its shares without setting up an Indian subsidiary. It deposits underlying shares with a SEBI-registered Domestic Depository in India, which then issues IDRs to investors. — Result: Valid mechanism under Section 390. CG rules govern disclosure and offer norms.

### Example 2

Example 2: A foreign company issues IDRs but its offer document omits material disclosures. — Result: Section 391 triggers application of Sections 34–36 — civil and criminal liability for mis-statement applies as if it were an Indian company's prospectus.

⚠️ Common exam mistakes

Treating IDRs as shares — IDRs are depository receipts representing underlying shares; the holder typically has economic rights but not direct voting rights.
Believing CG rule-making power under Section 390 is limited by other laws — the section uses 'Notwithstanding anything contained in any other law'.
Confusing IDR with ADR/GDR — ADRs are issued in the US, GDRs in other foreign markets; IDRs are India-issued for foreign companies.

Bare-Act text Section 390 · Companies Act, 2013 · click to expand

Section 390: Notwithstanding anything contained in any other law for the time being in force, the Central Government may make rules applicable for — (a) the offer of Indian Depository Receipts; (b) the requirement of disclosures in prospectus or letter of offer issued in connection with Indian Depository Receipts; (c) the manner in which the Indian Depository Receipts shall be dealt with in depository mode and by custodian and underwriters; and (d) the manner of sale, transfer or transmission of Indian Depository Receipts by a company incorporated or to be incorporated outside India, whether the company has or has not established, or will or will not establish, any place of business in India.

Now that you've read this — what's next?

Move from understanding → mastery in 3 clicks. Each option below picks up from this lesson's topic.

🔥 Drill 5 Qs on this → ✍️ Adaptive practice →