Golden Share
Encyclopedia
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
and transformation into a stock
-company.
, and will be designed to prevent stakebuilding above a certain percentage ownership level, or to give a government veto powers over any major corporate action, such as the sale of a major asset or subsidiary or of the company as a whole.
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 organization concerned is deemed to be of ongoing importance to national interests, for example for reasons of international security.
It was introduced in Russia
(Zolotaya Aktsiya, "Золотая Акция" in Russia
n) by a law initiated by the President on November 16, 1992.
, the UK airports authority, was ruled illegal by European courts, deemed contradictory to the principle of free circulation of capital within the European Union
. But taking in account the implications of this decision—especially the transitional state in countries which are candidates to join the Union—it allowed provisions to use Golden Shares in strategically important areas.
Other golden shares ruled illegal include the Spanish government's golden shares in Telefonica
, Repsol YPF
, Endesa
, Argentaria and Tabacalera
.
The Golden Share structure of Volkswagen AG and the travails of the German Land (Federal State) of Niedersachsen (Lower Saxony) are discussed by Johannes Adolff, Turn of the Tide? The 'Golden Share' Judgments of the European Court of Justice and Liberalization of the European Capital Markets, available in the German Law Journal as well as Peer Zumbansen
and Daniel Saam, The ECJ, Volkswagen and European Corporate Law: Reshaping the European Varieties of Capitalism, CLPE Research Paper 30/2007, (also published in 7 German Law Journal 1027 [2007])
The European Court of Justice also held that Portugal’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.
Share (finance)
A joint stock company divides its capital into units of equal denomination. Each unit is called a share. These units are offered for sale to raise capital. This is termed as issuing shares. A person who buys share/shares of the company is called a shareholder, and by acquiring share or shares in...
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
Privatization is the incidence or process of transferring ownership of a business, enterprise, agency or public service from the public sector to the private sector or to private non-profit organizations...
and transformation into a stock
Stock
The capital stock of a business entity represents the original capital paid into or invested in the business by its founders. It serves as a security for the creditors of a business since it cannot be withdrawn to the detriment of the creditors...
-company.
Purpose
This share gives the government organization the right of decisive vote, thus to veto all other shares, in a shareholders-meeting. Usually this will be implemented through clauses in a company's Articles of AssociationArticles of Association (law)
The term articles of association of a company, or articles of incorporation, of an American or Canadian Company, are often simply referred to as articles . The Articles are a requirement for the establishment of a company under the law of India, the United Kingdom and many other countries...
, and will be designed to prevent stakebuilding above a certain percentage ownership level, or to give a government veto powers over any major corporate action, such as the sale of a major asset or subsidiary or of the company as a whole.
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 organization concerned is deemed to be of ongoing importance to national interests, for example for reasons of international security.
History
The term arose in the 1980s when the British government retained golden shares in companies it privatized, and later in many other European countries.It was introduced in Russia
Russia
Russia or , officially known as both Russia and the Russian Federation , is a country in northern Eurasia. It is a federal semi-presidential republic, comprising 83 federal subjects...
(Zolotaya Aktsiya, "Золотая Акция" in Russia
Russia
Russia or , officially known as both Russia and the Russian Federation , is a country in northern Eurasia. It is a federal semi-presidential republic, comprising 83 federal subjects...
n) by a law initiated by the President on November 16, 1992.
Legal challenges
In 2003 the UK government's golden share in BAABAA plc
BAA Ltd. is the Spanish-owned operator of six British airports and Naples Airport in Italy, making the company one of the largest transport companies in the world. BAA stems from British Airports Authority and is owned by a consortium led by Grupo Ferrovial, a Spanish firm specialising in...
, the UK airports authority, was ruled illegal by European courts, deemed contradictory to the principle of free circulation of capital within the European Union
European Union
The European Union is an economic and political union of 27 independent member states which are located primarily in Europe. The EU traces its origins from the European Coal and Steel Community and the European Economic Community , formed by six countries in 1958...
. But taking in account the implications of this decision—especially the transitional state in countries which are candidates to join the Union—it allowed provisions to use Golden Shares in strategically important areas.
Other golden shares ruled illegal include the Spanish government's golden shares in Telefonica
Telefónica
Telefónica, S.A. is a Spanish broadband and telecommunications provider in Europe and Latin America. Operating globally, it is the third largest provider in the world...
, Repsol YPF
Repsol YPF
Repsol YPF, S.A. is an integrated Spanish oil and gas company with operations in 29 countries...
, Endesa
Endesa (Spain)
Endesa, S.A. is the largest electric utility company in Spain. The firm, a majority-owned subsidiary of the Italian utility company Enel, has 10 million customers in Spain, with domestic annual generation of over 97,600 GWh from nuclear, fossil-fueled, hydroelectric, and renewable resource power...
, Argentaria and Tabacalera
Tabacalera
Tabacalera is a Spanish tobacco monopoly which was established in 1636, making it the oldest tobacco company in the world . In 1999 the company merged with SEITA of France to form Altadis. Its brands included Ducados and Fortuna....
.
The Golden Share structure of Volkswagen AG and the travails of the German Land (Federal State) of Niedersachsen (Lower Saxony) are discussed by Johannes Adolff, Turn of the Tide? The 'Golden Share' Judgments of the European Court of Justice and Liberalization of the European Capital Markets, available in the German Law Journal as well as Peer Zumbansen
Peer Zumbansen
Peer Zumbansen is a professor of law at Osgoode Hall Law School, in Toronto, Canada, and holds the Canada Research Chair in Transnational Economic Governance and Legal Theory. He is a founding member of the German Law Journal and a founder and editor in Chief of the CLPE Comparative Research in Law...
and Daniel Saam, The ECJ, Volkswagen and European Corporate Law: Reshaping the European Varieties of Capitalism, CLPE Research Paper 30/2007, (also published in 7 German Law Journal 1027 [2007])
The European Court of Justice also held that Portugal’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.