The Legality of Golden Shares in the European Union

Author:Mr Jeff Soal
Profession:Gibson, Dunn & Crutcher


The European Court of Justice has held1 that national laws conferring on a state special rights in the form of golden shares do contravene the fundamental principle of freedom of movement of capital between Member States and between Member States and third countries. However, such golden shares are permissible if they can be justified on specified grounds (in particular public policy or public security) or by overriding requirements of the general interest which are non-discriminatory and satisfy the principles of proportionality and legal certainty.

In comparing the decisions in relation to three cases, which were brought simultaneously before the ECJ, some useful guidance can be obtained as to when golden shares may be permissible.


Portuguese, French and Belgian legislation permitted the holding by their respective governments of golden shares in certain privatised companies which conferred on them certain rights. In summary these rights were:

in respect of Portugal, a prohibition on the acquisition by foreign nationals/entities of more than a specified number or value of shares in undertakings operating in the banking, insurance, energy and transport sectors;

in respect of France and Portugal, a requirement that prior notification and authorisation was to be given where a limit on the number of shares or voting rights held was exceeded; and

a right to oppose, retrospectively, decisions concerning the transfer of shares or the granting of security over certain assets (France and Belgium) or the taking of certain actions by the board of directors (Belgium).


The ECJ held that:

the Portuguese rule was clearly unlawful and its justifications (see below) not valid.

the French requirement of prior authorisation and right to oppose share transfers were both unlawful and not justified; and

the Belgian legislation, although prima facia unlawful, was justifiable on the grounds stated (see below).

It is important therefore to consider the justifications put forward by each country but in order to do so it is necessary to set out below a more detailed summary of the relevant legislation in each jurisdiction.


The restrictions in Portugal were twofold. Firstly, the Portuguese legislation provided that its privatisation legislation may limit the overall amount of shares which may be acquired or subscribed for by foreign entities or entities the majority of the share capital of which is held by foreign entities and may also lay down rules fixing the maximum value of their respective participations in the capital of any company and the corresponding methods of control, non-compliance with which, in the circumstances to be prescribed, will be penalised by the forced sale of any shares exceeding those limits, loss of voting rights conferred by those shares or the validity of those acquisitions or subscriptions.2

In fifteen different decree-laws under this Article maximum foreign participations of between five and forty per cent. were specified in undertakings operating in the banking, insurance, energy and transport sectors.

The second offending piece of legislation provided that: "The acquisition inter vivos, with or without consideration, by a single natural or legal person, of shares representing more than 10% of the voting capital, and the acquisition of shares which, when added to those already held, exceeds that limit in companies which are to be re-privatised, shall require the prior authorisation of the Minister for Financial Affairs".3


The French legislation concerned a golden share held by the government in Socit Nationale Elf-Aquitaine and provided:

(a) that any direct or indirect shareholding by a natural or legal person, acting alone or in conjunction with others, which exceeds the ceiling of one tenth, one fifth or one third of the capital of, or voting rights in, the company must first be approved by the Minister for Economic Affairs; and

(b) the right to oppose any decision...

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