Golden Share

Definition

A golden share is a type of share that provides its holder with special voting rights, specifically the ability to veto certain actions, such as changes to the company’s articles of incorporation or major acquisition proposals. This share is particularly valuable because it typically controls a majority of voting rights, often at least 51%. Golden shares have been prominently employed in the United Kingdom and Brazil as a tool for governments to retain control over state-run companies even after privatization.

Golden Share vs Ordinary Share Comparison

Examples

• Example 1: The UK government issues a golden share for British telecommunications to retain control and influence decisions after privatization.
• Example 2: A government-owned oil company in Brazil holds golden shares to influence major contracts and partnerships while still being a public entity.

Related Terms

• Shareholder Rights: Rights that shareholders have with respect to their ownership stake. Golden shares provide enhanced rights compared to ordinary shares.
• Takeover Defense: Strategies and tools used to prevent hostile takeovers, wherein golden shares are often a key asset.
• Privatization: The process through which a government sells a government-owned enterprise, potentially retaining a golden share for control.

Fun Formulas and Diagrams

    graph TB;
	    A[Golden Share] -->|Veto Power| B[Corporate Decisions]
	    A -->|51% Voting Rights| C[Control Over Acquisitions]
	    D[Ordinary Share] --> E[Equal Voting Rights]
	    D --> F[Dividend Entitlement]
	    E -->|No Acquisition Blocking| C

Humorous Quotes & Fun Facts

• “Owning a golden share without knowing the power it holds is like owning a book just to collect dust – it won’t take you anywhere!”

• Did you know? The concept of a golden share was notably used by the British government when privatizing British Gas in the 1980s, ensuring they could still control the flow of gas… and puns!

Frequently Asked Questions

1. What is the main purpose of a golden share?

   • The primary purpose is to maintain control over strategic decisions in a company, ensuring that specific changes cannot be made without the approval of the golden shareholder.

2. Who typically issues a golden share?

   • Golden shares are often issued by government entities or in situations where companies are privatized but the issuing body wishes to keep some degree of control.

3. Are golden shares common globally?

   • While popular in the UK and Brazil, golden shares are less common elsewhere and their legality and functionality can vary greatly.

4. Can a golden shareholder profit just like regular shareholders?

   • Generally, yes, although they primarily exercise control rather than focus on profits; thus, dividend entitlements can vary.

5. What happens if a golden share is sold?

   • The new owner will acquire the veto power and rights associated with the golden share, assuming they maintain the requisite voting threshold.

6. Can ordinary shareholders challenge the golden share?

   • No, the golden shareholder has special rights that typically provide them with insurmountable control over specific corporate decisions.

Recommended Resources

• Investopedia - Golden Shares
• “Corporate Law: Theory and Practice” by J. L. Rink
• “The Company: A Short History of a Chartered Institution” by H. C. Rodriguez

Test Your Knowledge: Golden Share Challenge 🚀

Thank you for exploring the concept of Golden Shares! Be vigilant in the corporate world; you might hold the golden ticket one day! 🏆