Golden shares are a class of non-voting shares which give the holders control over the Board of Directors as they are entitled to appoint and determine the composition of the Board.
Section 239 Companies Act 2014 prohibits a company from making a loan, quasi loan or guarantee to a director of the company or to a person connected with such a director, or indeed a connected company.
One of the main reason behind the creation of a golden share is to create a group structure which will in turn permit lending to connected persons/companies.
When a company issues a golden share in itself to another company it becomes a subsidiary under the definition of Section 7 (2) (a) (i) Companies Act 2014.
As a group structure is now formed the company is permitted to lend to connected persons/companies under Section 243 Companies Act 2014.
It has the added benefit of shareholders not having to give up voting or equity rights.
In order to create and issue a Golden share a special resolution of the members is required. The Constitution of the company must be amended to include the new share class and the specific provisions associated with it.
Once documentation is completed CRO filings are required and the companys registers must be updated.
The Register of Beneficial Ownership (RBO) will also need to be reviewed and updated if necessary.
Another reason for a golden share is to give control to a particular shareholder.