Gold stock definition/Characteristics/free market/creation

The gold stock or golden stock  is a type of stock . This gives its holder the possibility of making certain political decisions of a company as if it had the majority of the capital stock . All this, regardless of the votes of the rest of the shareholders. Gold stock definition

The gold share, in other words, is one that offers the owner of the share the right of veto over the other shareholders in certain operations. A right that is always granted, even if it only owns, for example, 1% of the share capital. With regard to economic rights, this share is comparable to other shares. In other words, in the distribution of dividends, it will obtain those corresponding to its percentage in the capital stock. In the above example, the holder of the gold share will obtain the dividends  corresponding to 1% of the capital stock, even though he may make certain political decisions unilaterally. Gold stock definition

Gold Stock Characteristics

The main characteristics of the golden stock are the following:

  • The veto right of the gold share holder does not apply to all decisions made in the future of a company, but it does affect the most important ones. Examples 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 are not going to change, unless he approves them. Gold stock definition
  • The holder of the golden 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 stock was first created in the 1980s, when the privatization process of European public companies began. In this way, the governments ensured absolute control in the most important decisions of the companies after privatization, despite not owning 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. Gold stock definition

Gold stocks 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 share is a contradiction in the privatization process. Gold stock definition

Within 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. Gold stock definition

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