What is a Golden Share?
In company law, a “Golden Share” (“GS”) is a unique class of share that grants its holder special rights, specifically the right to control the composition of the board of directors of the Company in which the share has been allotted. If you’re considering creating a golden share in your company, this blog post will guide you through the necessary steps.
A golden share creates a new share class in the share capital of a Company and the rights attached to it allows its holder to control the composition of the board of directors, granting such rights as appointing a director (or director’s!) or vetoing their appointment. The holder of a such a share would also have the right to remove any or all directors of a Company. These shares are especially valuable for companies looking to create a Group Structure. The Group Structure can facilitate the lending of funds between Associated Companies.
Why create a Golden Share?
A golden creates a “Group of Companies” under the provisions of the Companies Act 2014 by creating a Holding / Subsidiary relationship between the shareholder (new holding company) and issuing company (subsidiary company), thereby facilitating the lending of funds from one entity to the other which may otherwise be prohibited under Section 239 of the Companies Act.
By grouping companies in this way, you create a legal group under which the lending of funds, which may otherwise be prohibited, may be facilitated. Since the Companies Act removed the requirement for Groups to be audited, this has become a very attractive option for Irish Companies who wish to carry out inter-group lending while retaining audit exemption.
Creation & Allotment
Step 1: Altering the Company Constitution
The first step is to amend your company’s constitution. This involves:
- Determine the Share Class: A golden share must be designated as a separate class of shares within the Company’s constitution, and it must encapsulate the unique rights required under the Companies Act 2014.
- Draft the revised constitution: The company issuing the golden share needs to amend its Constitution to create a new class of shares, being the golden share. This share will have certain rights and obligations, particularly in relation to voting rights, board composition and other powers. Practitioners need to be precise in their drafting and ensure the language used in the new constitution is unambiguous and falls within the scope of section 7(2)(a) of the Companies Act 2014.
- Adoption of New Constitution by Special Resolution of the Members: The new draft Constitution needs to be formally adopted by the Members via a special resolution. This requires at least 75% of votes in favour. A company will need to give proper notice of the meeting and provide details about the proposed changes. Alternatively, you may pass the resolution by way of a written resolution should all the members agree.
- File with the Companies Registration Office (CRO): After the resolution passes, you have 15 days to file the amended constitution with the CRO.
Step 2: Allotting the Golden Share
With your constitution updated, it’s time to allot the golden share to the proposed shareholder.
Here’s how to do it:
- Board Approval for Allotment: The board must approve the allotment of the golden share. This usually involves passing a board resolution that specifies the number of shares being issued, their nominal value. You must also review the company constitution to ensure that you comply with any regulations in relation to pre-emption rights etc.
- Issue the Share Certificate: Once the allotment is approved, a company can then issue a share certificate to the new holder. This document serves as legal proof of title.
- Notify the CRO: Finally, you need to notify the CRO of the new allotment. This is done through a filing of a Form B5 Return of Allotments.
Final Steps & Tidy Up!
After you have created and allotted your new share, it is essential that your Company Secretary updates the Company Registers (otherwise known as the Statutory Company Books) to reflect the changes made. You will need to update the Register of Members, the Register of Allotments and also issue a new Share Certificate.
Creating a golden share can be very advantageous for your company, allowing you to create a Group Structure to facilitate the lending of funds through your Group.
If you require any assistance in your Company Secretarial transactions, such as share allotments or transfers, Crowley Corporate will be delighted to help!
Disclaimer: Specific advice should be obtained in relation your company / query as the above advice is general in form. All our blogs are provided for educational and practical purposes and should not be treated as professional / legal advice. For any specific queries you may have please contact our office
