"Golden share" is "Golden share": definition, features and requirements

2024 Author: Howard Calhoun | [email protected]. Last modified: 2023-12-17 10:16

This term is not new in the world and in our country. But for sure, many now have encountered it for the first time, so rarely do we hear it in the media and in non-specialized circles, despite its importance. Therefore, it would be useful to analyze what a "golden share" is, what rights it gives its owner, and what place it has among other securities.

A little about promotions

First of all, it's worth briefly going over the basics. A share (from the Latin actio - the right to something that can be defended in court) is a valuable emissive (issue - issue) paper that gives its owner-shareholder certain powers:

1. The right to receive part of the income of the enterprise that issued it.
2. The right to participate in the management of the issuing organization.
3. The right to receive an appropriate share of the company's ownership in the event of bankruptcy or liquidation.

Types of shares

Shares split into two largetype:

1. Simple - the most common and typical. Their owner has the right to pay him dividends (his share of the profits of the organization), to participate in the policy of the enterprise (most often this is a vote at a meeting of shareholders) and to receive part of the property as a result of the liquidation of the company. All shares of this type have the same value on the stock exchange, they receive identical dividends in terms of volume.
2. Prefs (preferred) - their owners do not have a vote at the general meeting, but dividends are paid to them in the very first place. However, it is the owners of prefs who make the decision to liquidate or reorganize the corporation. They also have the right to vote if the adoption of any decision by the other shareholders somehow changes their duties and powers.

Prefs are split:

• for preferred - with a fixed dividend and share of property, in case of liquidation;
• accumulative (cumulative) - obligations to pay dividends to their owners accumulate over a certain period.

In addition, there is a division of shares by anonymity (registered and bearer). In some countries, it is possible to have so-called founding shares - giving the founders of the organization certain benefits.

The government and the term "golden share"

The concept of Golden Share denotes a certain preferred share that gives its owner a special number of advantages that none of the shareholders of thiscompanies. According to the company's charter, the list of these privileges should not even be disclosed to other holders.

Also, "golden share" is a conventional name for a corporate law owned by the state, which is one of the shareholders of the corporation. Such powers are widely used by the Kingdom of Great Britain, Senegal, France, Malaysia, Belarus, Italy. Most often, such a Central Bank does not give the right to vote, but approves the state's right to veto changes to any important principles of the company's charter.

Owners of "gold shares"

"Golden share" - what else is it? In a family business, there is a practice of transferring such documents to an outside participant in order to resolve conflicts within the family regarding company management practices. It is also not uncommon for large corporations, making their subdivisions independent enterprises, to become holders of the latter's "golden share" so that the new leader does not manage the business based only on his own interests.

It is impossible to buy such a security - "golden shares" do not belong to circulation on the Central Bank markets.

"Golden share" and rights conferred by "golden share"

As already mentioned, the most important thing that Golden Share gives its owner is a veto on the strategic decisions of other shareholders. We can say that in this way the state limits the subjective rightcorporations to manage their internal policies. But also the "gold" investor can, by his authority, prevent the decision to resell the company, to take it over by another corporation.

"Golden share" also represents the right to block the decision to elect any person to the Board of Directors, to establish a limit on the number of shares that one or another of their holders can own. Sometimes the owners of such documents receive an increased amount of dividends. Such a shareholder also has the right to delay the decision of the meeting of directors for up to six months.

In most cases, except for those when the "golden share" is in the hands of the state, the issue of this kind of Central Bank is a big risk for the company. After all, its owner can contribute to the takeover of the company by letting the necessary people into the Board of Directors, imposing a ban on important strategic decisions.

Gold shares in Russia

The concept was first announced in 1992, in Decree No. 1392 of the President of the Russian Federation "On measures to implement industrial policy during the privatization of state-owned enterprises." Then the head of state issued Decree No. 2284, specifying that the government of the country is en titled to replace its federally owned shares of any corporation with a "golden share". Such a decision was necessary when transferring state-owned enterprises in the process of privatization to the status of joint-stock companies.

"Golden share" represents inin this case, protecting the enterprise from reckless decisions of new owners.

According to these decrees, the government became authorized to appoint representatives at the federal, regional and local levels of government on its own behalf to the boards of directors and audit commissions of the newly created JSCs. These representatives had the power of veto:

• to make any changes or additions to the charter document of the company;
• for approval of the charter in the updated version;
• approval of liquidation balance sheets, collection of the liquidation commission and, in fact, for the liquidation of OJSC;
• change in authorized capital;
• make big deals for the benefit of stakeholders.

An important point - if the "golden securities" is alienated by its owner, then it immediately loses its status, acquiring the rank of an ordinary non-preferred security.

"Golden Share" is also a desire to protect your corporation from being taken over by foreign capital. For example, Yandex handed over to Sberbank of Russia such a Central Bank with the right to veto decisions related to the displacement of the main composition of its investors.