A law has been adopted that expands the grounds for a “golden share” to be introduced

Pepeliaev Group advises that on 11 January 2023 a Federal Law [1] came into force that expands the opportunities for the state’s special right to be used to participate in the corporate governance of companies (a “golden share”).  

What is changing

Please be reminded that that a “golden share” is a special right of the state to participate in the management of joint stock companies that allows a veto to be imposed on the general shareholders’ meeting passing resolutions on such issues as amending the charter or changing the issued capital, reorganisation/liquidation, performing major transactions and interested-party transactions.

According to the Explanatory Note to the draft law ( No. 1213301-7), the amendments introduced “will allow the grounds to be expanded for the opportunity for a resolution to be passed on the state using a special right (a “golden share”) with respect to joint stock companies with public ownership, and efficient control to be exercised over their activity”.

The Law supplements the list of grounds for a “golden share” to be established with situations when the state disposes of the block of shares it owns in the joint stock company thus decreasing its membership interest in the issued capital to 25% or less. Unlike the first version of the draft law, the adopted version contains a limitation: this ground applies only to companies of strategic significance for ensuring national defence and state security in accordance with Federal Law No. 57-FZ dated 29 April 2008.


Following the adoption of the law the state has obtained more opportunities for introducing the right to a “golden share” in joint stock companies. However, the adopted law does not solve any of the issues relating to this institution, including the limits within which it can be used.  The substance of the “golden share” as a phenomenon that involves the state interfering with the affairs of private entities and limiting their rights to freely carry out entrepreneurial activity predetermines that grounds for doing so for which the law provides need to be in place (article 55(3) of the Russian Constitution).  The institution of the “golden share” should be an exceptional phenomenon which has stringent limits.  Therefore, the regulation of the “golden share” deserves much more profound reforms, in particular, in terms of the grounds for it to be used and the limits within which it can be used.

What will not change

Regardless of the efforts of the business community, such issues of the institution are still relevant, as:

  • A provision, which is elastic in nature, on the introduction of the “golden share” whereby it is aimed at “protecting the morality, health, rights and lawful interests of Russian nationals” [2]. Such purpose is abstract.  Moreover, currently there are multiple other tools to achieve it.  It appears necessary to narrow down the list of purposes, for which the “golden share” can be introduced, to “ensuring the defence capability and security of the state”.

  • The lack of a requirement to provide a well-grounded decision containing the purpose to be achieved and a justification that the proposed interference of the state authority in using the special rights granted by the “golden share” is necessary and proportionate.  Currently, the state, which has a “golden share”, may actually use the right of a veto arbitrarily. 

  • The constituent entities of the Russian Federation and municipalities having “golden shares”.  It appears that this is not in line with the purpose of the institution, since the issues of national defence and state security are issues within the federal jurisdiction. 

  • The unlimited validity period of “golden shares”.  Currently, the validity period of “golden shares” is unlimited and depends solely on a decision of the competent authority[3].

What to think about and what to do

The question is whether business should wait for a substantive reform of the institution of “golden shares”. 

The regulatory issues of the institution of the “golden share” were actively discussed in 2022.  This issue was raised at the corporate governance session at the St Petersburg International Legal Forum 2022, at round tables of the Civic Chamber of the Russian Federation, by the Moscow Government's  Centre for Legislative Initiatives and by OPORa Rossii, which is an all-Russian organisation of entrepreneurs.

Amendments have been drafted to the legislation, which provide for more extensive reforms of the institution.  

Currently, Russia’s leading business associations have supported the need to expand the reform of the institution of the “golden share”. Such associations include:  the Chamber of Commerce and Industry of the Russian Federation, OPORa Rossii and the Russian Union of Industrialists and Entrepreneurs.

The Russian Government claims that in terms of corporate governance its task is to search for a balance of interest for business and the state. Nevertheless, the adoption of the law at hand, which expands the opportunities for the state authorities to arbitrarily interfere with companies’ business activity, results in a substantial imbalance in favour of the state. 

It is obvious that the discussion of the topical issues of the “golden share” will not cease this year.  We believe that the business community, supported by state authorities, will make an effort to continue reforming this institution.  This is necessary in order to ensure the stability and independence of business entities when they make corporate decisions, to support the balance between public and private interests, and to improve Russian corporate legislation, which will be beneficial to the investment prospects of the Russian jurisdiction and the development of the national economy.

Help from your adviser

Pepeliaev Group’s lawyers are ready to assess the legal implications of the adopted law for your company.  If necessary, we are ready to assist you in building a strategy for contesting the actions and decisions of state authorities and officials when they implement and exercise the special right of the state to participate in the management of joint stock companies (the “golden share”) and to develop measures to protect the rights and lawful interests of the company and its management.

[1] Federal Law No. 617-FZ “On amending article 38 of the Federal Law ‘On the privatisation of state and municipal property’” dated 29 December 2022.
[2]  Article 38 of Federal Law No. 178-ФЗ “On the privatisation of state and municipal property” dated 21 December 2001” (as amended and supplemented as at 11 January 2023)
[3] A limited validity period of a “golden share” of up to 3 years was provided for by Russian President’s Decree No. 1392 dated 16 November 1992, the regulation which introduced this institution for the first time.

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