The cost of energy crisis throwing up a lot of talk of nationalising private companies.
I understand that some companies have always been a part of government (example of Scottish Water) but how do we “take them back” if they are owned by shareholders? In my mind it’s like a compulsory purchase (UK wording) and the government buys all the shares at market rate…
Can someone ELI5?
In: 1
This sort of government taking, sometimes called eminent domain when it’s applied to real estate – where the government takes some land to build a park, almost always involves lawsuits over the price. Government appraisers say the business is worth £X and the business owners think the price should be £5X. eventually the courts decide. In some banana republic the government might decide the business is worth £1, and get the courts to back them. This sort of nationalization tends to really cut investment for years.
Basically the government would have to compensate the shareholders for the value of their shares. As other comments have said in countries that don’t follow the rule of law a government will just say “we’ll own this company now, take x or nothing”.
In the UK however the government generally obays the law, so it would have to pay the going rate for the shares. That might be the trading price on a given day, or if need be a price determined by a court.
The government would then own the company and be entitled to recieve all the profits from its operations.
The last time this happened was during the financial crisis when the government took over a number of banks and put them into a special government owned company called UK Financial Investments Ltd in which HM treasury was the sole shareholder.
The reason for that stare takeover was slightly different- banks were in danger of going bust because they couldn’t meet their debt obligations, so the UK government recapitalised them through government borrowing in return for becoming owners, which the government can do because governments are very secure organisations to lend to.
Over time once the balance sheets had been stabilised the various banks were sold back to the private sector. Although the UK government still owns about half of the company that owns NATWEST.
Just as one company buys and other company, but in this case the get an offer they cannot refuse
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