What is a golden share?
A golden share is a privileged share that gives its holder veto or special approval rights over defined corporate decisions, out of all proportion to its stake in the capital. It is usually a single share of low nominal value; its power comes not from economic weight but from the rights attached to it in the articles of association. Decisions such as amending the articles, mergers, liquidation, major asset disposals or share transfers above a set threshold cannot pass without the golden share’s affirmative vote.
Where it is used
- Privatisations: the state sells a majority in companies it considers strategic while keeping control points through a golden share.
- Founder protection: in some structures founders retain control through supervoting shares or veto privileges.
- Investment rounds: investor vetoes are usually structured as protective provisions attached to a separate share class, functionally close to a golden share.
The legal dimension
The Court of Justice of the European Union has held in a series of judgments that golden shares retained by states in privatised companies breach EU law where they disproportionately restrict the free movement of capital; that case law shows public golden shares can be defended only on narrow and proportionate public interest grounds. In the private sphere the issue is not free movement but the balance of power between shareholders: the scope of the veto, its duration and the decisions it touches are the core of preferred share design. Because a veto can paralyse the company, deadlock resolution mechanisms should be drafted alongside it.
Turkish context
Under the Turkish Commercial Code No. 6102, privileges are created in the articles of association and may cover matters such as dividends, liquidation proceeds, pre-emption and voting rights. Voting privilege is capped: no more than 15 votes may attach to one share, and the cap can be exceeded only by court decision for just cause. In practice, veto effect is achieved by making specified general assembly or board decisions conditional on the affirmative vote of a given share class. Some Turkish privatisations have likewise reserved privileged shares for the state. In investment rounds, vetoes written only into a shareholders’ agreement must be reflected in the articles to take effect at company law level.
Do: define the veto narrowly, decision by decision, limited by duration or thresholds, and embed the privilege in the articles. Don’t: build blanket vetoes covering everything, or assume a purely contractual veto is enough without support in the articles.
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