Golden share

Last updated

In business and finance, a golden share is a type of share of stock that lets its owner outvote all other shareholders in certain circumstances. Golden shares often belong to the government when a government-owned company is undergoing the process of privatization and transformation into a stock-company.

Contents

Purpose

This share gives the government organization, or other shareholder, the right of decisive vote in a shareholder 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. [1]

History

The term arose in the 1980s when the British government retained golden shares in companies it privatised, an approach later taken in many other European countries, as well as the former Soviet Union.[ citation needed ] It was introduced in Russia by a Decree of the President of the Russian Federation (Boris Yeltsin) on November 16, 1992. [2]

People's Republic of China

In 2013, the People's Republic of China introduced golden shares termed "special management shares". [3] Since then, golden shares have been utilized by Chinese Communist Party (CCP) general secretary Xi Jinping's administration to expand control over private companies, particularly technology companies. [3] [4] [5] During the 2020-2021 Xi Jinping administration reform spree, the government used strategic share acquisitions to increase its golden share holdings. [6] : 275  In 2021, The Economist and Reuters described the Chinese government's stake in ByteDance as a golden share investment. [7] [8]

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. [9] 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. [10]

Other golden shares ruled illegal include the Spanish government's golden shares in Telefónica, 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 [11] as well by as Peer Zumbansen and Daniel Saam. [12]

Related Research Articles

<span class="mw-page-title-main">S.A. (corporation)</span> Type of corporation in countries that mostly employ civil law

The abbreviation S.A. or SA designates a type of limited company in certain countries, most of which have a Romance language as their official language and operate a derivative of the 1804, Napoleonic, civil law. Originally, shareholders could be anonymous and collect dividends by surrendering coupons attached to their share certificates. Dividends were paid to whomever held the certificate. Since share certificates could be transferred privately, corporate management would not necessarily know who owned its shares – nor did anyone but the holders.

Heathrow Airport Holdings is a company that operates and manages Heathrow Airport based in London, England. It was formed by the privatisation of the British Airports Authority as BAA plc as part of Margaret Thatcher's privatisation of government-owned assets, and was once a constituent of the FTSE 100 Index.

The Law of the People's Republic of China, officially referred to as the socialist rule of law with Chinese characteristics, is the legal regime of China, with the separate legal traditions and systems of mainland China, Hong Kong, and Macau.

<span class="mw-page-title-main">Xi Jinping</span> General Secretary of the Chinese Communist Party since 2012

Xi Jinping is a Chinese politician who has been the general secretary of the Chinese Communist Party (CCP) and chairman of the Central Military Commission (CMC), and thus the paramount leader of China, since 2012. Xi has been serving as the seventh president of China since 2013. As a member of the fifth generation of Chinese leadership, Xi is the first CCP general secretary born after the establishment of the People's Republic of China (PRC).

<span class="mw-page-title-main">EDP Group</span> Portuguese electric utilities company

EDP is a Portuguese electric utilities company, headquartered in Lisbon. It was founded in 1976 through the merger of 14 nationalised electricity companies.

<span class="mw-page-title-main">Altice Portugal</span> Portuguese telecommunication company

Altice Portugal S.A. is the largest telecommunications service provider in Portugal. Since 2 June 2015 the company has been a wholly owned subsidiary of Altice, a multinational cable and telecommunications company with a presence in France, Israel, Belgium, Luxembourg, Portugal, French West Indies/Indian Ocean Area, the Dominican Republic, and Switzerland. The assets in Portugal were sold to Altice in 2015 per request of Oi SA to reduce debt. The African assets were mostly sold for the same reason. Portugal Telecom, SGPS SA was split in separate companies: PT Portugal and Pharol, which owns a 27.5% stake in Oi.

<span class="mw-page-title-main">Eletrobras</span> Brazilian electric utilities company

Centrais Elétricas Brasileiras S.A. is a major Brazilian electric utilities company. The company's headquarters are located in Rio de Janeiro.

<span class="mw-page-title-main">CPFL Energia</span> Electric energy company in Brazil

CPFL Energia (former name: Companhia Paulista de Força e Luz) is the second largest non state-owned group of electric energy generation and distribution in Brazil and the third biggest Brazilian electric utility company, after Eletrobras and Energisa. The corporation is composed by CPFL Brasil, CPFL Piratininga, CPFL Paulista, CPFL Geração, CPFL Renováveis, Rio Grande Energia (RGE) and SEMESA. Each of these companies operates as a holding company that owns dozens of other companies. Its headquarters are located in Campinas, the third-largest city in state of São Paulo. In 2017, it was purchased by the Chinese utility State Grid Corporation of China, a state-owned enterprise under State-owned Assets Supervision and Administration Commission of the State Council.

A variable interest entity (VIE) is a legal structure defined by the Financial Accounting Standards Board (FASB) for situations where control over a legal entity may be demonstrated through means other than voting rights. A public company with a financial interest in such entities may be subject to certain financial reporting requirements.

A state-owned enterpriseof China is a legal entity that undertakes commercial activities on behalf of an owner government.

<span class="mw-page-title-main">Cyberspace Administration of China</span> Central Internet regulator in China

The Cyberspace Administration of China is the national internet regulator and censor of the People's Republic of China.

CSC Financial Co., Ltd. trading as China Securities, is a Chinese investment bank and brokerage firm established by CITIC Securities and China Jianyin Investment in 2005 in a 60–40 ratio, as a successor of bankrupted China Securities Co., Ltd. (CSC). However, the firm now majority owned by Jianyin Investment's parent company Central Huijin Investment and an asset managing subsidiary of Beijing Municipal People's Government.

<span class="mw-page-title-main">Xi Jinping Thought</span> Set of policies and ideals from Xi Jinping

Xi Jinping Thought on Socialism with Chinese Characteristics for a New Era, commonly abbreviated outside China as Xi Jinping Thought, is an ideological doctrine created during General Secretary Xi Jinping's leadership of the Chinese Communist Party (CCP) that combines Chinese Marxism and national rejuvenation. According to the CCP, Xi Jinping Thought "builds on and further enriches" previous party ideologies and has also been called as the "Marxism of contemporary China and of the 21st century". The theory's main elements are summarized in the ten affirmations, the fourteen commitments, and the thirteen areas of achievements.

<i>Commission v Portugal</i> EU law case

Commission v Portugal (2010) C-171/08 is an EU law case, relevant for UK enterprise law, concerning European company law. Following a trend in cases such as Commission v United Kingdom, and Commission v Netherlands, it struck down public oversight, through golden shares of Portuguese telecommunications companies.

<span class="mw-page-title-main">State Administration for Market Regulation</span> Chinese government agency

The State Administration for Market Regulation is a Chinese ministerial-level agency directly under the State Council of the People's Republic of China responsible for market supervision and management. SAMR was established in 2018. It is China's primary antitrust regulator.

<span class="mw-page-title-main">Xi Jinping's cult of personality</span> A cult of personality developing around CCP General Secretary Xi Jinping

A cult of personality has been developing around Xi Jinping since he became General Secretary of the ruling Chinese Communist Party (CCP) and China's paramount leader in 2012.

The Data Security Law of the People's Republic of China governs the creation, use, storage, transfer, and exploitation of data within China. The law is seen to be primarily targeted at technology companies which have grown increasingly powerful in China over the years. The law is part of a series of interlocking but related national security legislation including the National Security Law of the People's Republic of China, Cybersecurity Law and National Intelligence Law, passed during Xi Jinping's administration as part of efforts to strengthen national security.

In 2020, the Chinese Communist Party (CCP) and various Chinese regulatory bodies, under CCP General Secretary Xi Jinping, began a regulatory spree, strengthening regulations, issuing fines, and introducing or modifying laws. Though mostly targeted at disrupting the growth of "monopolistic" technology companies, the government also introduced other reforms with implications for large swathes of the economy and life in China. Actions taken included the implementation of restrictions on for-profit tutoring and education companies, the refinement of existing rules for limits on minors playing online video games, and the introduction of new antitrust rules.

<span class="mw-page-title-main">Chinese property sector crisis (2020–present)</span> Financial crisis

The Chinese property sector crisis is a current financial crisis sparked by the 2021 default of Evergrande Group. Evergrande along with other Chinese property developers, experienced financial stress in the wake of overbuilding and subsequent new Chinese regulations on these companies' debt limits. The crisis spread beyond Evergrande in 2021 to such major property developers as Country Garden, Kaisa Group, Fantasia Holdings, Sunac, Sinic Holdings, and Modern Land.

<span class="mw-page-title-main">China Internet Investment Fund</span> Chinese state-owned investment fund

The China Internet Investment Fund, is a China Government Guidance Fund. The fund focuses on the internet sector including cybersecurity, artificial intelligence, big data, cloud computing and other services that are in line with national strategies and help develop the digital economy of China.

References

  1. ↑ "Our Ownership". NATS Holdings . Archived from the original on 21 April 2014. Retrieved 19 December 2013.
  2. ↑ Tatyana A. Tchilimova, Anna I. Serebrennikova, Irina A. Sofronova (January 18, 2020). "Golden Share as a Tool of Corporate Strategic Management of the State". Advances in Economics, Business and Management Research. 114: 525–7. doi: 10.2991/aebmr.k.200114.122 . Archived from the original on 7 February 2024. Retrieved 7 February 2024.{{cite journal}}: CS1 maint: multiple names: authors list (link)
  3. 1 2 Wei, Lingling (March 8, 2023). "China's New Way to Control Its Biggest Companies: Golden Shares" . The Wall Street Journal . Archived from the original on 2023-03-08. Retrieved 2023-03-09.
  4. ↑ "Xi Jinping's grip on Chinese enterprise gets uncomfortably tight" . The Economist . November 26, 2023. ISSN   0013-0613. Archived from the original on 2023-11-26. Retrieved 2023-11-27. State investors have also been taking "golden shares", tiny stakes that grant outsized voting powers, in China's internet giants. In October it was revealed that a government agency had taken a 1% stake in a subsidiary belonging to Tencent, China's mightiest internet titan.
  5. ↑ McGregor, Grady (April 2, 2023). "Golden Grip" . The Wire China . Archived from the original on April 15, 2023. Retrieved April 15, 2023.
  6. ↑ Zhang, Angela Huyue (2024). High Wire: How China Regulates Big Tech and Governs Its Economy. Oxford University Press. doi:10.1093/oso/9780197682258.001.0001. ISBN   9780197682258.
  7. ↑ "China's communist authorities are tightening their grip on the private sector" . The Economist . 2021-11-18. ISSN   0013-0613. Archived from the original on 22 November 2021. Retrieved 2021-11-22.
  8. ↑ "Fretting about data security, China's government expands its use of 'golden shares'". Reuters . 2021-12-15. Archived from the original on 24 February 2022. Retrieved 2022-02-24.
  9. ↑ "Business | BAA 'golden share' ruled illegal". BBC News . 2003-05-13. Archived from the original on 2008-09-22. Retrieved 2016-04-02.
  10. ↑ "Portugal's holding of golden shares in Energias de Portugal is contrary to European Union law" (PDF). Curia.europa.eu. Archived (PDF) from the original on 2016-03-04. Retrieved 2016-04-02.
  11. ↑ Adolff, Johannes (1 August 2002). "Turn of the Tide? The 'Golden Share' Judgments of the European Court of Justice and Liberalization of the European Capital Markets". German Law Journal. 3 (8). doi:10.1017/S2071832200015273. S2CID   142085251. Archived from the original on December 12, 2007. Retrieved January 24, 2008.
  12. ↑ Zumbansen, Peer C; Saam, Daniel (November 15, 2007). "The ECJ, Volkswagen and European Corporate Law: Reshaping the European Varieties of Capitalism". German Law Journal. 7 (11): 1027–1051. doi:10.1017/S2071832200006167. Archived from the original on July 19, 2011. Retrieved January 24, 2008.
This page is based on this Wikipedia article
Text is available under the CC BY-SA 4.0 license; additional terms may apply.
Images, videos and audio are available under their respective licenses.