Last week, the news came out that the upcoming takeover of NAC Breda (NAC) by the English City Football Group (CFG) is over. The Noad Foundation, an advocacy group consisting of representatives of NAC's youth academy, fans and former players, has blocked the takeover by using the special control rights associated with the “golden share” it holds. This short contribution will discuss the concept of the golden share in football clubs and how this was able to block such a takeover.
For a long time, it looked like NAC would be taken over by Abu Dhabi Sheikh Mansour bin Zayed Al Nahyan's football group, CFG. CFG is a globally active group that already includes football clubs such as Manchester City, New York City FC and Girona FC. In addition, in recent years, CFG has taken over clubs in Australia, Belgium, Japan, France and India, among others. The purchase price is said to be around 7 million euros. Although the plans for the takeover met with a lot of resistance from fans, NAC's fate seemed sealed. For example, fans have repeatedly expressed the fear of becoming a subsidiary club of Manchester City, so that a multitude of loan players could be stored in Breda. This would not improve the chances of NAC youth players to advance to the first team.
NAC's three major shareholders, all wealthy businessmen and accounting for around two-thirds of the issued share capital, were very sympathetic to the takeover and saw CFG as the ideal buyer. To this end, one of the major shareholders, Wim van Aalst, addressed a letter to NAC's minority shareholders. In this letter, he tried to convince the other shareholders of the takeover by CFG. Despite the efforts of the majority shareholders, the takeover was therefore unsuccessful because the Noad Foundation did not agree to the deal. As the holder of the so-called golden share, the foundation has special control rights that mainly focus on ensuring the continuity and integrity of NAC, and the Noad Foundation also has a say in matters concerning traditions and values such as the club's name, colors and logo.
Professional football organizations (BVOs) often have a complex organizational structure consisting of multiple companies, foundations, etc. To ensure the integrity of the club, several BVOs, including NAC, have chosen to issue a golden share. In this way, the traditional legal order of the original football club, which has grown into a BVO over the years, can be maintained. A golden share is thus a figurative name for a special share that has special rights. It follows from Article 2:92 paragraph 1 of the Dutch Civil Code that, in principle, all shares have equal rights and obligations. However, paragraph 3 of the same article states that the statutes of a legal person may attach special rights to shares. It is important to note that such a gold share legally qualifies as a priority stock, which should not be confused with preferred shares. In the case of preferred shares, the shareholder is entitled to a fixed percentage of dividend. The shareholder is therefore not dependent on the company's performance, but receives a certain percentage of the company's nominal value anyway. Priority shares, on the other hand, are stocks that can be attached to special control rights. What these special rights are should result from the statutes of the relevant legal person.
Article 3 paragraph 1 of the NAC statutes shows that the share capital is divided into one or more ordinary shares with a nominal value of €100 and one or more priority shares with a nominal value of €1. The priority share, legally referred to as “Culture Priority Share”, does not attach any profit rights. One of these special rights associated with the gold share is therefore that the holder, the Noad Foundation, can block a takeover. This authority results from Article 10 paragraph 1 of the statutes, which states that the transfer of one or more shares requires prior approval from the meeting of priority stock holders. However, this right of approval is not unlimited. For example, Article 10 paragraph 4 shows that if the meeting of holders of priority shares refuses a transfer, it will nominate one or more candidate third party (s) who are willing and able to take over all offered shares. To this end, the Noad Foundation has led the local alliance NAC=BREDA as a prospective buyer, which will soon talk to the current majority shareholders about a possible takeover. By the way, this does not mean that if the shareholders agree to a takeover by the alliance, the matter is settled; the takeover also needs to be approved by the Supervisory Board, KNVB and the Municipality of Breda. The other special control rights associated with the gold share are contained in Article 12 paragraph 5 of the statutes. For example, the management requires approval from the meeting of priority shareholder holders for decisions concerning, among other things, the name, logo, club colors, business activities, location and business structure of NAC Breda. The golden share therefore comes with far-reaching control rights. Where in normal business, fans will notice little or nothing about such a priority share, it can be decisive in the decisive phase of an acquisition.
Gold stocks are not uncommon in Dutch professional football; ADO Den Haag, Feyenoord, Vitesse, Fortuna Sittard and FC Den Bosch, among others, have added such a continuity guarantee to their business structure. BVOs that want to establish such a structure must take a legal form whose capital can be divided into shares. In short, the legal person that operates the professional football activities and therefore also holds the KNVB license must be a B.V. or N.V. The image below paints a simplified picture of such a corporate structure of a BVO with a gold share.
The problems surrounding the takeover of NAC have once again proven the impact and value of a golden share for BVOs. The rationale behind such priority shares is that the interests of supporters, among others, are safeguarded and the association's traditional legal order is maintained. To this end, an incoming shareholder cannot make far-reaching changes without the prior consent of the holder of the gold share that could affect the identity of the club. At NAC, the holder of the gold share can not only guarantee identity and continuity, but also block a takeover. For selling shareholders, this situation can be frustrating, as they are limited in the ability to transfer their shares. Nevertheless, gold stocks are indispensable in professional football to prevent acquired clubs from losing their identity without supporters being able to do anything about it. At least for now, CFG's takeover of NAC is over. The fact that the majority shareholders will soon relinquish their shares seems to be a given, but it remains to be seen which party will take control of the shares.
Stef van der Veldt
lawyer
.svg)
