"Gold share" is ... "Gold share": definition, features and requirements

This term is not new in the world, and in our country. But for sure many are now for the first time confronted with it, so rarely hear it in the media and in unspecialized circles, despite its importance. Therefore, it would be superfluous to make out what the "golden share" is, what rights it assigns to its owner, and what place it has among other securities.

A bit about promotions

For starters, it's worth to go over the basics briefly. The action (from the Latin actio - the right to something that can be protected in court) is a valuable issue (issue - issue) paper that gives its owner-shareholder certain powers:

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

Types of shares

The shares are divided into two large types:

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

Prefs are divided:

• On preferred shares - with a fixed dividend and the share of property, in case of liquidation;
• Accumulating (cumulative) - the obligation to pay dividends to their owners is accumulated for 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 constituent shares - giving the founders of the organization certain advantages.

The state and the term "golden share"

The concept of Golden Share denotes a certain preferred share, giving its owner a special number 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 the other holders.

Also, the "golden share" is a conditional name of corporate law, owned by the state, which is one of the shareholders of the corporation. Such powers are widely used in the British kingdom, Senegal, France, Malaysia, Belarus, Italy. Most often, such a Central Bank does not give the right to vote, but affirms the right of the state to veto change of any important principles of the company's charter.

Owners of "golden shares"

"Gold share" - what is this? In the family business, there is a practice of transferring such documents to a third-party participant in order to settle conflicts within the family concerning the methods of managing the company. 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 manager would not dispose of the business based solely on his interests.

To buy such a security is impossible - the "golden shares" do not belong to circulation in the securities markets.

"Gold share" and the rights granted by the "golden share"

As already mentioned, the most important thing that empowers Golden Share of its owner is veto on strategic decisions of other shareholders. We can say that in this way the state limits the subjective right of the corporation to manage its internal policy. But also the "golden" investor can by its authority prevent the decision to resell the company, its absorption by another corporation.

"Gold share" is and the right to block a decision to choose a person to the Board of Directors, to establish the maximum number of shares that can be owned by one or another of their holders. Sometimes owners of such documents receive an increased amount of dividends. Such a shareholder also has the right to detain the decision of the directors' meeting for a period of 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 type of securities is a big risk for the company. After all, its owner can help absorb the company, skipping the Board of Directors of the necessary persons, imposing a ban on important strategic decisions.

"Golden shares" in the Russian Federation

The concept was first announced in 1992, in Decree No. 1392 of the President of the Russian Federation "On measures to implement industrial policy in the privatization of state-owned enterprises." Then the head of state issued Decree No. 2284 specifying that the government of the country is competent to replace its shares of any corporation that is in federal ownership 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.

"Gold share" is in this case the protection of the enterprise from rash decisions of new owners.

According to these decrees, the government became eligible to appoint representatives on its behalf to the boards of directors and audit commissions of the newly-founded JSCs at the federal, regional and local levels of government. These representatives had the right of 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, liquidation of the OJSC;
• Change in the authorized capital;
• Conclusion of major transactions in favor of interested parties.

An important point - if the "gold CB" 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 its corporation from absorption by foreign capital. For example, "Yandex" transferred to Sberbank of Russia such a Central Bank with the right of veto for decisions related to the displacement of the main part of its investors.