In business and finance, a golden share is a nominal share which is able to outvote all other shares in certain specified circumstances, often held by a government organization, in a government company undergoing the process of

privatization Privatization (also privatisation in British English) can mean several different things, most commonly referring to moving something from the public sector into the private sector. It is also sometimes used as a synonym for deregulation when ...

and transformation into a stock-company.

Purpose

This share gives the government organization, or other shareholder, the right of decisive vote, thus to vote all other shares, in a shareholder meeting. Usually this will be implemented through clauses in a company's articles of association, and will be designed to prevent stakebuilding above a certain percentage ownership level, or to give a government, or other shareholder, veto powers over any major corporate action, such as the sale of a major asset or subsidiary or of the company as a whole. In the context of government-owned golden shares, this share is often retained only for some defined period of time to allow a newly privatised company to become accustomed to operating in a public environment, unless ownership of the organisation concerned is deemed to be of ongoing importance to national interests, for example for reasons of national security.

NATS Holdings NATS Holdings, formerly National Air Traffic Services and commonly referred to as NATS, is the main air navigation service provider in the United Kingdom. It inherited the traditions of UK air traffic control, which (founded over Croydon Air ...

, the UK's main air navigation service provider, is an example of a company with a golden share.

History

The term arose in the 1980s when the British government retained golden shares in companies it privatised, an approach later taken in many other European countries, as well as the former Soviet Union. It was introduced in

Russia Russia (, , ), or the Russian Federation, is a transcontinental country spanning Eastern Europe and Northern Asia. It is the largest country in the world, with its internationally recognised territory covering , and encompassing one-eig ...

by law on November 16, 1992. In 2021, ''

The Economist ''The Economist'' is a British weekly newspaper printed in demitab format and published digitally. It focuses on current affairs, international business, politics, technology, and culture. Based in London, the newspaper is owned by The Eco ...

'' and

Reuters Reuters ( ) is a news agency owned by Thomson Reuters Corporation. It employs around 2,500 journalists and 600 photojournalists in about 200 locations worldwide. Reuters is one of the largest news agencies in the world. The agency was esta ...

described the

Chinese government The Government of the People's Republic of China () is an authoritarian political system in the People's Republic of China under the exclusive political leadership of the Chinese Communist Party (CCP). It consists of legislative, executive, m ...

's stake in

ByteDance ByteDance Ltd. () is a Chinese internet technology company headquartered in Beijing and incorporated in the Cayman Islands. Founded by Zhang Yiming, Liang Rubo and a team of others in 2012, ByteDance developed the video-sharing social network ...

as a golden share investment.

Legal challenges

The British government's golden share in BAA, the UK airports authority, was ruled illegal by European courts in 2003, when it was deemed contradictory to the principle of free circulation of capital within the

European Union The European Union (EU) is a supranational political and economic union of member states that are located primarily in Europe. The union has a total area of and an estimated total population of about 447million. The EU has often been de ...

. The European Court of Justice also held that

Portugal Portugal, officially the Portuguese Republic ( pt, República Portuguesa, links=yes ), is a country whose mainland is located on the Iberian Peninsula of Southwestern Europe, and whose territory also includes the Atlantic archipelagos of ...

's holding of golden shares in Energias de Portugal is contrary to European Union law since it presented an unjustified restriction on free movement of capital. Other golden shares ruled illegal include the

Spanish Spanish might refer to: * Items from or related to Spain: **Spaniards are a nation and ethnic group indigenous to Spain **Spanish language, spoken in Spain and many Latin American countries **Spanish cuisine Other places * Spanish, Ontario, Can ...

government's golden shares in Telefonica, Repsol YPF,

Endesa Endesa, S.A. (, originally an initialism for ''Empresa Nacional de Electricidad, S.A''.) is a Spanish multinational electric utility company, the largest in the country. The firm, a majority-owned subsidiary of the Italian utility company Enel, ...

, Argentaria and

Tabacalera Tabacalera, formerly the Compañía Arrendataria de Tabacos, was a Spanish tobacco monopoly whose origins date back to 1636, making it the oldest tobacco company in the world. In 1999, the company merged with SEITA of France to form Altadis, ...

. The golden share structure of

Volkswagen AG Volkswagen AG (), known internationally as the Volkswagen Group, is a German multinational automotive manufacturer headquartered in Wolfsburg, Lower Saxony, Germany. The company designs, manufactures and distributes passenger and commercial ...

and the travails of the German ''Land'' (

federal state A federation (also known as a federal state) is a political entity characterized by a union of partially self-governing provinces, states, or other regions under a central federal government ( federalism). In a federation, the self-gover ...

) of '' Niedersachsen'' (Lower Saxony) are discussed by Johannes Adolff as well by as Peer Zumbansen and Daniel Saam.

References

External links

Information on Golden Shares at the Adam Smith Institute
(archived) {{DEFAULTSORT:Golden Share Corporate finance