The government plans to introduce the concept of golden share in the redevelopment of railway stations through the public-private-partnership (PPP) route, a move that is not prevalent in other infrastructure projects being developed with private funds.

“The concessionaire and the (selected bidder/consortium members) shall execute an agreement with the government (the Shareholders Agreement), providing for the issue and allotment of one non-transferable equity share of the company (the Golden Share) in favour of the government,” reads a clause in the Railways Ministry’s draft model concession agreement for redevelopment of stations.

The government is looking to redevelop some 50 stations, entailing an investment of about ₹50,000 crore.

The golden share entitles the government to appoint its nominee and also another of the project development agency (Indian Railway Stations Development Corporation or IRSDC), as non-retiring directors on the board of the concessionaire (the private operator).

The fineprint

The golden share carries an irrevocable undertaking by the concessionaire that the rights vested in the government shall not be abridged, abrogated or in any manner affected by any act done or purported to be done by the concessionaire or any of its associates or affiliates.

It also grants an irrevocable undertaking that any divestment of equity in the concessionaire will not affect the rights of the government and that the successors, assigns and substitutes of the concessionaire shall be bound by such undertaking and any other matter mutually agreed upon between the parties.

An affirmative vote of the government or its directors will be necessary for passing certain resolutions by the general meeting of the company or the meeting of the board of directors till the government holds the golden share.

These resolutions pertain to altering or adding to the provisions of the memorandum and to alter or add to the articles of association to change the name of the company, to purchase the company’s own shares or specified securities, to issue sweat equity shares, to issue further shares without pre-emptive rights to non-members or to convert loans or debentures into shares, to reduce the share capital, to remove the registered office of the company outside the limits of the State, to commence any new lines of business, to keep registers and returns at any other place than within city, town or village in which the registered office is situated.

It also includes consent to a director/s or their relatives or partner or firm or private company holding an office or place of profit, except that of managing director, manager, banker, or trustee for debenture-holders of the company, to make inter-corporate-loans and investments or guarantee/security to be given, if the aggregate amount thereof, exceeds the limit of 10 per cent of the company’s paid-up share capital, to apply to a court to wind-up the company, to wind-up the company voluntarily, for various other matters pertaining to the winding up of the company and any other matter which is required by the Companies Act, 2013 to be passed by a special resolution of the shareholders of the company.

The rights vested with the government on holding the golden share under the shareholders agreement, will be in addition to any other rights that the government may have under the concession agreement or any other project agreement.

The golden share will have identical rights and privileges of equity shares, with respect to dividend and all other matters, according to the draft model concession agreement.

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