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Golden shares: a two-minute explainer

Mostly used by the British and Brazilian governments, they were designed to protect companies key to national security from international takeovers

BAE Systems PLC - Golden shares: a two-minute explainer

Golden shares are a type of holding that gives its owners special powers.

For example, the owners can veto certain strategy decisions, block other investors to build up a significant stake and stop a takeover by another company.

They have the same profit and voting rights as ordinary shares, although one golden share will correspond to 51% of voting rights.

They have been implemented by governments to retain some level of control over companies that used to be state-run but ended up going private during the 1980s and 1990s, mostly in the defence and energy sector.

It’s an accepted practice in the UK and Brazil but it has been ruled unlawful in the European Union.

Britain defended its decision at the time saying it could protect firms from hostile takeovers, especially from international suitors, considering their key role in national security.

However, this system has been criticised for the huge powers given to just one party.

Only a handful of companies listed on the London Stock Exchange have golden shares, including BAE Systems PLC (LSE:BA.) and Rolls-Royce Holdings PLC (LSE:RR.), as well as some of Babcock International (LSE:BAB)’s dockyard assets.

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