What privileges a golden share gives to its holder
In the financial world, shares are divided into several types, depending on their functions and powers for their holder. One of those securities that offer special rights is the golden share. It opens up opportunities for its holder that no other type has.
Golden shares are most common in the United Kingdom, and they can be managed by the company that carried out the privatization process. This type of paper allows the state to retain control over such a business to a greater or lesser extent. At the same time, the share carries special privileges, the list, and conditions of which are fixed in the corporate charter.
A share can have a number of advantages, but most often it grants the right to veto decisions of board members and shareholders who hold a different type of paper. For example, holders of golden shares can prevent the sale of a company or cancel a takeover. In addition, such securities allow you to block the change of management and cancel the appointment of a new member of the board. Owing to this type of shares, there is a limit on the number of securities an investor may hold.
The availability of golden shares is a useful tool to manage the company in a particular situation. For example, the owner of this type of paper in the family business can be a trusted person who is not on the list of family members. In this way, golden shares play the role of a tool to resolve business conflicts and disputes within the family.
Another option when the use of a golden share is provided for is in the case of a company whose structure includes units with a high degree of independence. At the same time, they are not subsidiaries. The golden share here is a guarantee that a competitive business will not be able to buy one of the divisions or create an association that will reduce the opportunities for the activities and work of the main company.
Holders of a golden share can also, in some cases, expect higher dividends compared to holders of other types of securities. However, this does not mean that the income from such a share will definitely be higher, in this case, it all depends on the initial conditions of the company. In addition, it should be understood that all the benefits of a golden share make sense only when they are clearly spelled out in the charter of business. Only then will owning it make sense. Often there are conditions in the charter within which the privileges of the paper will be valid. Otherwise, the company itself may suffer from shareholders and their uncontrolled rights. For example, holders of the paper can collude with other shareholders or investors and influence board appointments or business processes.
