In
business
Business is the practice of making one's living or making money by producing or buying and selling products (such as goods and services). It is also "any activity or enterprise entered into for profit."
Having a business name does not separ ...
and
finance
Finance is the study and discipline of money, currency and capital assets. It is related to, but not synonymous with economics, the study of production, distribution, and consumption of money, assets, goods and services (the discipline of f ...
, 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
In finance, stock (also capital stock) consists of all the shares by which ownership of a corporation or company is divided.Longman Business English Dictionary: "stock - ''especially AmE'' one of the shares into which ownership of a compan ...
-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
In corporate governance, a company's articles of association (AoA, called articles of incorporation in some jurisdictions) is a document which, along with the memorandum of association (in cases where it exists) form the company's constituti ...
, 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 Airp ...
, 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
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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-ei ...
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 est ...
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 networkin ...
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 located primarily in Europe, Europe. The union has a total area of ...
. 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 th ...
's holding of golden shares in
Energias de Portugal
EDP - Energias de Portugal (formerly Electricidade de Portugal) is a Portuguese electric utilities company, headquartered in Lisbon. It was founded in 1976 through the merger of 14 nationalised electricity companies.
History
EDP was founded as ...
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
Repsol S.A.
El Nuevo Herald, 2012-05-31[Originally an init ...]
,
Endesa,
Argentaria
Banco Bilbao Vizcaya Argentaria, S.A. (), better known by its initialism BBVA, is a Spanish multinational financial services company based in Madrid and Bilbao, Spain. It is one of the largest financial institutions in the world, and is presen ...
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 (german: Niedersachsen ; nds, Neddersassen; stq, Läichsaksen) is a German state (') in northwestern Germany. It is the second-largest state by land area, with , and fourth-largest in population (8 million in 2021) among the 16 ...
'' (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 L ...
and Daniel Saam.
References
External links
Information on Golden Shares at the Adam Smith Institute(archived)
{{DEFAULTSORT:Golden Share
Corporate finance