The Golden Share (or how to guarantee State control in privatized companies).

When the State decides to dispose of its shareholdings and leave them – totally or partially – in private hands, there is no guarantee that the services of public interest that these companies offered will be sufficiently protected.

For this reason, several of the States that privatized their public companies (energy, gas, telecommunications, electricity, airlines, couriers, etc.) rushed to foresee, in their respective legislations, certain control instruments that made them holders of special prerogatives, limiting private autonomy and guaranteeing a certain influence in the management control of these recently privatized companies. This is the origin of the so-called “Golden Shares” or, in its Spanish denomination, “Special Shares”.  



Although, because of its name, it is usually understood that the concept necessarily includes the ownership of a company share, it must be stated that Golden Shares are special rights over shares that do not necessarily imply the real ownership of them. but grant their holders significant control power in the company by the recognition of certain restrictive powers.

As an example, the following:

– Submission of decisions to prior authorization.

– Veto rights.

– Participation in the appointment of members of the administrative bodies.

The fact that the state legislation recognizes this right in favour of governments does not entail the obligatory nature of its use. In fact, its simple existence is a sufficient deterrent mechanism to discourage the adoption of certain business decisions.  


Position of the CJEU

Following the criteria of the European Commission, the jurisprudence of the CJEU has established that each Member State is free to privatize or nationalize its companies, provided that the provisions of the European Regulation are not breached.

In this regard, the principles of freedom of establishment (Article 49 TFEU) and circulation of capital (Article 63 TFEU) are particularly relevant, since they may be affected by the use of these prerogatives. Thus, at the EU level, any limits that hinder foreign shareholding in privatized companies will be considered illegal, as was the case with the Azioni d’Oro that the Italian state maintained in the privatized company Azienda Elettrica Milanese (STJUE of 6 December, cases C-463/04 and C-464/04), or as happened with the derogation of the Spanish Privatization Law of 1995 as well.

This means that the use of Golden Shares for governments to control privatized companies shall always be:

a) Exceptional

b) Based on general interest (non-discriminatory, based on objective criteria, suited to achieving the desired objectives).

c) In accordance with the peremptory norms of the TEU and the TFEU.

As can be seen, although the use of the state Golden Share is not prohibited, the jurisprudence of the CJEU supposes a drastic cut for these powers of control over the companies that were public in the past. Likewise, it must be taken into account that the establishment of a Golden Share entails serious damages for the company and its shareholders, as it hinders the freedom to make decisions in the affected areas.  


María Roldán

Área Legal, en Devesa & Calvo Abogados

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