A golden share is a share with special voting rights that allow the holder to outvote other shareholders, usually in restricted circumstances. It may also give the holder other special rights.
Common powers attached to golden shares are:
- veto powers,
- the ability to block any one shareholder from acquiring more than a certain proportion of ordinary shares,
- the power to block a takeover.
Golden shares are commonly introduced by the founders of a company (see founders' shares) and by governments during privatisations. The use of government held gold shares, particularly those used to block foreign takeovers, has been ruled illegal in the EU.
Some companies have retained a golden share in a former subsidiary or associate that has been spun-off. This releases some value, but prevents a competitor from taking over the spin-off. The lower likelihood of a takeover bid will reduce the value of the spin-off.
Another example of the use of golden shares include family companies that wish to give a trusted, impartial outsider (almost certainly a trustee) powers sufficient to help resolve conflicts without involving them in running the company under normal circumstances.
Golden shares may also be used to protect a company ethos, values or social commitments. This, again, relies on the golden share being held by trustees or a non-profit organisation that will use the special powers of the golden share to balance the powers of the ordinary shareholders when necessary. A very prominent example of this are the Reuters Thompson founder shares.