GOLDEN SHARE
Mission & Legacy
Why choose this option?
Structure and Purpose
The golden share model safeguards a company's mission or social purpose. This may become especially important as a company grows and is subject to market influences and/or takes on outside investors. Practically, it requires adding a special class of shares (typically 1%) with specific veto powers.
KEY FEATURES
Special Veto Powers: The golden share typically holds veto rights over changes to the company's mission, purpose, or other key constitutional provisions.
Minimal Economic Rights: Golden shares usually have no dividend rights and limited economic participation in the company.
Held by Independent Entity: The golden share is typically held by a group of stewards or a foundation related to the company's mission or specialists in holding such shares.
Governance and operational considerations
Golden shares are designed to have veto power over specific, significant decisions rather than routine operations and typically only affect critical issues like changes to the company charter, mergers and acquisitions, or other fundamental shifts in company structure or purpose. Day-to-day management decisions and operations generally remain unaffected.
Clarity, flexibility, and long-term accountability
The golden share model can be implemented at any stage of a business's development. Specific veto powers and associated rights can be tailored to the company's needs and allow for creativity in structuring to protect areas the founders don't want to compromise on.
The golden share model provides a robust mechanism for ensuring long-term commitment to a company's purpose: It helps prevent ‘mission drift’ if or when new owners or investors join the company.
In some cases, it may make traditional fundraising more challenging. However, the golden share model can appeal to investors interested in both impact and financial returns, serving as a clear signal to differentiate businesses committed to long-term impact.
Golden shares can protect a company's legacy by preventing unwanted takeovers, as they often include veto rights over major corporate actions like mergers or acquisitions. This helps prevent the company from being absorbed by another entity that might not share its values or mission.
Protecting your legacy
The legal framework of a golden share model ensures that the companies founding principles and mission continue to guide the organisation long after the original founders have departed. This protects the company's legacy and ensures that its unique contribution to society or its industry remains intact over time.
Is it right for you?
Most suitable for:
You (or your organisation) have a strong commitment to a specific social or environmental mission.
You want to ensure your company's purpose remains intact over the long term.
You're concerned about potential mission drift as your company grows or takes on new investors.
Stage of your business
The golden share model can be implemented at different stages:
For startups or early-stage businesses, it's easier to implement from the beginning.
For established businesses, it can be used to secure the mission as part of a long-term strategy.
Fundraising considerations
Consider how a golden share might impact your ability to raise capital:
It may attract impact investors who prioritise mission-aligned businesses.
However, it could deter traditional investors who expect significant control.
Governance preferences
Evaluate your desired governance structure:
A golden share allows you to maintain control over critical decisions related to your mission.
It can provide stability during transitions like mergers or acquisitions.
Legal and structural flexibility
You can customise the specific veto powers and rights associated with the golden share.
It allows for creativity in structuring the organisation to protect areas you don't want to compromise on.
Long-term vision
If you want to ensure your company's mission outlasts your personal involvement, a golden share can help.
It's particularly useful if you're planning for succession or eventual exit while maintaining the company's purpose.
Investor relations
Think about how it will affect your relationship with other shareholders:
A golden share doesn't typically affect day-to-day operations or economic rights of other shareholders.
However, it does limit certain decision-making powers of other investors, which may require clear communication and alignment.
How does it work?
What are the risks?
There may be complex legal frameworks to navigate across different jurisdictions.
Golden shares can create tension between majority and minority shareholders.
A golden shareholder could prevent changes that the board and majority of shareholders want to pursue. This could hamper the company's ability to change direction or pivot when needed and/or align with changing corporate strategies and market conditions.