Golden share

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 -company.

This share gives the government organization, or other shareholder, the right of decisive vote, thus to vote all other shares, in a shareholders-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, the UK's main air navigation service provider, is an example of a company with a golden share.

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 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.

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])

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