This term is not new both in the world and in our country. But surely, many now are facing him for the first time, before he is rarely heard in the media and in non-specialized circles, despite his importance. Therefore, it will be useful to make out what the “golden share” is, what rights it gives its owner, and what place it has among other securities.
A bit about stocks
To get started, it’s worth a brief run through the basics. A share (from Latin actio - the right to anything that can be defended in court) is a valuable issue (issue - issue) paper giving its holder shareholder certain powers:
- The right to receive part of the income of the enterprise that issued it.
- The right to participate in the management of the issuing organization.
- The right to receive an appropriate share of the company's property in the event of bankruptcy or liquidation.
Types of shares
Shares are divided into two large types:
- Simple - the most common and typical. Their owner has the right to pay him dividends (his share of the organization’s profits), 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 exchange, they receive dividends identical in volume.
- Prefs (privileged) - their owners do not have a vote at the general meeting, but dividends are accrued to them in the first place. However, it is the owners of prefs who decide on the liquidation or reorganization of the corporation. They also have the right to vote if the adoption of any decision of the remaining shareholders somehow changes their duties and powers.
Prefs are divided:
- on privileged ones - with a fixed amount of dividend and share of property, in case of liquidation;
- accumulating (cumulative) - obligations to pay dividends to their owners are accumulated over a certain period of time.
In addition, there is a separation of shares by anonymity (registered and bearer). In some countries, it is possible to have the so-called constituent shares - giving the founders of the organization certain advantages.
State and the term "golden share"
The concept of Golden Share denotes a particular preferred share that gives its owner a special series of advantages that none of the shareholders of this company have. According to the company's charter, the list of these privileges should not even be disclosed to other holders.
Also, the "golden share" is the conventional name of a corporate law owned by the state, which is one of the shareholders of the corporation. The United Kingdom, Senegal, France, Malaysia, Belarus, Italy widely use such powers. Most often, such a Central Bank does not give a voting right, but it asserts the state’s right to veto changes to any important principles of the company's charter.
Gold Share Holders
"Golden share" - what else is it? When conducting family business, there is a practice of transferring such documents to a third party in order to resolve conflicts within the family regarding company management practices. There are also cases when large corporations, making their divisions independent enterprises, became holders of the "golden share" of the latter so that the new leader does not dispose of the business based solely on his interests.
It is impossible to purchase such a security - the "gold shares" do not belong to the circulation in the Central Bank markets.
Golden Share and rights granted by the 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 restricts the subjective right of the corporation to manage its domestic policy. But also a "golden" investor can prevent the decision to resell the company, its absorption by another corporation.
The “Golden Share” also represents the right to block a decision to elect a person to the Board of Directors, to set a limit on the number of shares that a particular holder may 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 issuance of this kind of securities is a big risk for the company. After all, its owner can contribute to the takeover of the company by letting the necessary persons into the Board of Directors, imposing a ban on important strategic decisions.
Golden Shares in the Russian Federation
The concept was first announced in 1992, in the decree No. 1392 of the President of the Russian Federation “On measures to implement industrial policy in the privatization of state enterprises”. Then, the head of state issued decree No. 2284, specifying that the government is authorized to replace its shares in a federal corporation with a "golden share". Such a decision was necessary when transferring state enterprises in the process of privatization to the status of joint stock companies.
"Golden share" in this case represents the protection of the enterprise from the rash decisions of the new owners.
According to these decrees, the government became authorized to appoint representatives on its behalf to the boards of directors and audit commissions of newly-made public companies at the federal, regional and local levels of government. These representatives had the right to veto:
- to make any changes or additions to the company's charter document ;
- for approval of the charter in the updated version;
- approval of liquidation balances, collection of the liquidation commission and, in fact, the liquidation of OJSC;
- change in share capital;
- conclusion of major transactions in favor of interested parties.
An important point - if the "golden Central Bank" is alienated by its owner, then it immediately loses its status, gaining the rank of an ordinary unprivileged security.
The "Golden Share" is also the desire to protect your corporation from absorption by foreign capital. For example, Yandex transferred to the Sberbank of Russia such a Central Bank with the right of veto on decisions related to the removal of the bulk of its investors.