business Business is the practice of making one's living or making money by producing or Trade, buying and selling Product (business), products (such as goods and Service (economics), services). It is also "any activity or enterprise entered into for ...

and

finance Finance refers to monetary resources and to the study and Academic discipline, discipline of money, currency, assets and Liability (financial accounting), liabilities. As a subject of study, is a field of Business administration, Business Admin ...

, a golden share is a type of share of stock that lets its owner outvote all other shareholders in certain circumstances. Golden shares often belong to the government when a government-owned company is undergoing the process of

privatization Privatization (rendered 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 w ...

and transformation into a

stock Stocks (also capital stock, or sometimes interchangeably, shares) consist of all the Share (finance), shares by which ownership of a corporation or company is divided. A single share of the stock means fractional ownership of the corporatio ...

-company.

Purpose

This share gives the government organization, or other shareholder, the right of decisive vote in a shareholder meeting. Usually this will be implemented through clauses in a company's

articles of association In corporate governance, a company's articles of association (AoA, called articles of incorporation in some jurisdictions) is a document that, along with the memorandum of association (where applicable), forms the company's constitution. The ...

, 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.

History

The term arose in the 1980s when the

British government His Majesty's Government, abbreviated to HM Government or otherwise UK Government, is the central government, central executive authority of the United Kingdom of Great Britain and Northern Ireland.

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 country spanning Eastern Europe and North Asia. It is the list of countries and dependencies by area, largest country in the world, and extends across Time in Russia, eleven time zones, sharing Borders ...

by a Decree of the

President of the Russian Federation The president of Russia, officially the president of the Russian Federation (), is the executive head of state of Russia. The president is the chair of the Federal State Council and the supreme commander-in-chief of the Russian Armed Forces. I ...

(

Boris Yeltsin Boris Nikolayevich Yeltsin (1 February 1931 – 23 April 2007) was a Soviet and Russian politician and statesman who served as President of Russia from 1991 to 1999. He was a member of the Communist Party of the Soviet Union (CPSU) from 1961 to ...

) on November 16, 1992.

NATS Holdings NATS Holdings, formally National Air Traffic Services and commonly referred to as NATS, provides en-route air traffic control services to flights within the UK flight information regions and the Shanwick Oceanic Control, Shanwick Oceanic Cont ...

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

government of Brazil The Federal Government of Brazil (''Governo Federal'') is the national government of the Federative Republic of Brazil, a republic in South America divided into 26 states and a federal district. The Brazilian federal government is divided into th ...

holds a golden share in aircraft manufacturer

Embraer Embraer S.A. () is a Brazilian multinational aerospace corporation. It develops and manufactures aircraft and aviation systems, and provides leasing, equipment, and technical support services. Embraer is the third largest producer of civil air ...

to retain veto power over "strategic decisions involving military programs and any change in its controlling interest." The proposed acquisition of U.S. Steel by Nippon Steel involved the use of a golden share.

People's Republic of China

In 2013, the

People's Republic of China China, officially the People's Republic of China (PRC), is a country in East Asia. With population of China, a population exceeding 1.4 billion, it is the list of countries by population (United Nations), second-most populous country after ...

introduced golden shares termed "special management shares". Since then, golden shares have been utilized by

Chinese Communist Party The Communist Party of China (CPC), also translated into English as Chinese Communist Party (CCP), is the founding and One-party state, sole ruling party of the People's Republic of China (PRC). Founded in 1921, the CCP emerged victorious in the ...

(CCP)

general secretary Secretary is a title often used in organizations to indicate a person having a certain amount of authority, Power (social and political), power, or importance in the organization. Secretaries announce important events and communicate to the org ...

Xi Jinping Xi Jinping, pronounced (born 15 June 1953) is a Chinese politician who has been the general secretary of the Chinese Communist Party (CCP) and Chairman of the Central Military Commission (China), chairman of the Central Military Commission ...

administration Administration may refer to: Management of organizations * Management, the act of directing people towards accomplishing a goal: the process of dealing with or controlling things or people. ** Administrative assistant, traditionally known as a se ...

to expand control over private companies, particularly technology companies. During the

2020–2021 Xi Jinping administration reform spree In 2020, the Chinese Communist Party (CCP) and various Chinese regulatory bodies, under CCP General Secretary Xi Jinping, began a regulatory spree, strengthening regulations, issuing fines, and introducing or modifying laws. Though mostly targeted ...

, the government used strategic share acquisitions to increase its golden share holdings. In 2021, ''

The Economist ''The Economist'' is a British newspaper published weekly in printed magazine format and daily on Electronic publishing, digital platforms. It publishes stories on topics that include economics, business, geopolitics, technology and culture. M ...

'' and

Reuters Reuters ( ) is a news agency owned by Thomson Reuters. It employs around 2,500 journalists and 600 photojournalists in about 200 locations worldwide writing in 16 languages. Reuters is one of the largest news agencies in the world. The agency ...

described the

Chinese government The government of the People's Republic of China is based on a system of people's congress within the parameters of a Unitary state, unitary communist state, in which the ruling Chinese Communist Party (CCP) enacts its policies through people's ...

's stake in

ByteDance ByteDance Ltd. is a Chinese internet technology company headquartered in Haidian, 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 ap ...

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 union, supranational political union, political and economic union of Member state of the European Union, member states that are Geography of the European Union, located primarily in Europe. The u ...

. The European Court of Justice also held that

Portugal Portugal, officially the Portuguese Republic, is a country on the Iberian Peninsula in Southwestern Europe. Featuring Cabo da Roca, the westernmost point in continental Europe, Portugal borders Spain to its north and east, with which it share ...

'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 countries in the Americas **Spanish cuisine **Spanish history **Spanish culture ...

government's golden shares in

Telefónica , S.A. () is a Spanish multinational telecommunications company with registered office and headquarters located in two different places, both in Madrid, Spain. It is one of the largest telephone operators and mobile network providers in the ...

, 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. The golden share structure of Volkswagen AG and the travails of the German ''Land'' (

federal state A federation (also called a federal state) is an entity characterized by a union of partially self-governing provinces, states, or other regions under a federal government (federalism). In a federation, the self-governing status of the c ...

) of ''

Niedersachsen Lower Saxony is a States of Germany, German state (') in Northern Germany, northwestern Germany. It is the second-largest state by land area, with , and fourth-largest in population (8 million in 2021) among the 16 ' of the Germany, Federal Re ...

'' (Lower Saxony) are discussed by Johannes Adolff as well by as

Peer Zumbansen Peer Zumbansen is the inaugural professor of business law at the faculty of law of McGill University. Before joining McGill in January 2021, Zumbansen held the inaugural chair in transnational law at The Dickson Poon School of Law, King's College Lo ...

and Daniel Saam.

References

{{DEFAULTSORT:Golden Share Corporate finance Finance in China