KEY POINTS:
The heyday of the golden share is over, the European Commission said yesterday, after the EU's highest court was advised to scrap a 47-year-old law protecting the German car maker Volkswagen from takeover.
In a key legal opinion, an Advocate General at the European Court of Justice argued that the so-called Volkswagen law, which caps shareholders' voting rights at 20 per cent, contravenes EU rules on the free movement of capital.
If confirmed by the European Court, the finding would require the German Government to change or axe the law and would seal a victory for Porsche, giving it more influence over the running of the company - and possibly prompting a takeover bid.
Porsche owns 27.4 per cent of VW but, because of the law, has the same voting rights as the German state of Lower Saxony, the second-largest shareholder with 20.5 per cent of the stock.
The case is being seen as a litmus test of the effectiveness of the European single market.
Oliver Drewes, a spokesman for the European Internal Market Commissioner, Charlie McCreevy, said that "less and less countries are having golden shares". He added that, while the commission may still take action against more member states, "the general trend is that golden shares are out. They are not very popular any more".
The German Government created the Volkswagen law in 1960, when the carmaker was privatised, to prevent a takeover. But Berlin argues that the law is not discriminatory because it gives any investor with a 20 per cent stake veto powers over major decisions.
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