The gold action or golden action is a type of action that gives its owner the possibility of making certain political decisions of a company as if it had a majority of the share capital , regardless of the votes of the other shareholders.
This means that the holder of the gold share has the right of veto over the other shareholders in certain operations, even if he only owns, for example, 1% of the share capital. With respect to economic rights, the gold share is comparable to the rest of the shares. That is, in the distribution of dividends you will get the corresponding to your percentage in the share capital. In the previous example, the owner of the gold share will obtain the dividends corresponding to 1% of the share capital, even if he can make certain political decisions unilaterally.
Characteristics of the gold stock
The main characteristics of the golden action are the following:
- The right of veto that the owner of the gold share possesses does not apply to all the decisionsthat are made in the future of a company, but it does affect the most important ones. Examples of these are merger , spin-off or dissolution agreements, the sale of certain assets or changes in the company’s board of directors. Thanks to this, the holder of the gold share ensures that the fundamental aspects of the company will not be modified, unless he approves them.
- The owner of the gold share is usually the Government or a public entity. However, gold shares can be issued to any private entity.
Reasons for its creation
The gold action was first created in the 1980s, when the process of privatization of European public companies began. In this way, governments secured absolute control over the most important decisions of companies after privatization, despite not having the majority of the company’s capital stock. The first government to use these gold shares was the British government of Margaret Thatcher in 1984.
The gold stock and the free market
Since its creation, it has caused much controversy because its characteristics violate the principles of the free market . It is criticized that the existence of the gold action is a contradiction in the privatization process.
Within the scope of the European Union they were declared illegal during the 2000s for breaking the principles of the single market and the free movement of capital. However, in many countries gold stocks are still used by their governments.