The U.S. Treasury Can Freeze a Board Without Owning a Share

On September 14, the U.S. Treasury did something that looks strange if your mental model of control begins and ends with the cap table. OFAC replaced General License 52B with 52C and added an exclusion for transactions that affect or alter the governance of PDV Holding, Citgo Holding or CITGO Petroleum, expressly naming the appointment, removal and replacement of directors, officers and other governance officials.¹¹⁶

Treasury bought no shares and received no board seat. It inserted a sanctions permission gate above the normal corporate machinery.

That distinction is the whole story. OFAC itself explains that when property is blocked, title can remain with the owner while the powers and privileges normally associated with ownership cannot be exercised without authorization.³ Citgo is an unusually vivid version of that principle because PDVSA remains the 100% owner of PDV Holding, the Delaware company at the top of Citgo's U.S. chain.⁴

A founder can spend years negotiating who gets one board seat and whether a vote needs 50% or 66.7%. Citgo is the reminder that a percentage can be perfectly accurate and still fail to answer who can make the next move. Treasury has no line on the cap table and can still become the first call before the board packet changes.

Corporate lawyers usually separate economics from governance because the two already drift apart inside ordinary companies. Preferred stock can carry vetoes. Dual-class stock can give a small economic holder large voting power. A board can keep management authority even when a shareholder owns a majority.

Sanctions add another layer: exercisability.

Delaware's baseline is straightforward. Section 141 says a corporation's business and affairs are managed by or under the direction of its board.⁵ The same section provides that voting stockholders can generally remove directors by the required majority, subject to statutory and charter exceptions.⁵ Section 228 allows stockholders, unless the certificate says otherwise, to take actions by written consent that they could take at a meeting if the required voting threshold signs and delivers the consent.⁶

Those are corporate rights. Sanctions law can determine whether a transaction exercising those rights may legally occur.

The Venezuela Sanctions Regulations define a "transfer" extremely broadly. The term reaches acts that create, surrender, convey or alter a right, remedy, power, privilege or interest in property. The examples include powers of appointment, appointment of agents or fiduciaries, judicial process and the exercise of other powers.¹⁵ That breadth helps explain why a governance action can become a sanctions event even when no share certificate changes hands.

This is where founder shorthand becomes dangerous. "I own 60%, so I control the board" compresses at least two propositions. You have a corporate right that may be sufficient to elect or remove directors. You also need the legal ability to exercise that right when the time comes.

Founders love percentages because Excel rarely asks for a specific licence.

OFAC's general explanation of blocked property is almost unnervingly clear: the owner can retain title while the normal powers and privileges of ownership are prohibited without authorization.³ The org chart can therefore remain unchanged while the practical control path is suspended. The shareholder is still the shareholder. The switch attached to one of the shareholder's most important rights is somewhere else. The cap table is doing its job. We are the ones asking it to moonlight as a sanctions lawyer.

Citgo's ownership chain looks simple on the company's own site. PDVSA owns 100% of PDV Holding. PDV Holding owns 100% of Citgo Holding. Citgo Holding is the sole stockholder of CITGO Petroleum.⁴ Four boxes and three arrows. Consultants have charged more for less.

The hard question has been who is legally entitled to pull the levers at the top of that chain.

In 2019, competing Venezuelan authorities claimed the power to control PDVSA and, through it, Citgo's U.S. parents. The Delaware Court of Chancery case Jiménez v. Palacios records what happened next. After the United States recognized Juan Guaidó's interim government, the court treated that recognition as binding for purposes of the dispute and assumed the validity of the recognized government's appointments to PDVSA's board under the act of state doctrine.⁷

The opinion records that the newly constituted PDVSA board then used ordinary Delaware corporate mechanics. Acting as PDV Holding's sole stockholder, it used a Section 228 written consent to elect a new PDV Holding board. That board installed an officer, and the process ran down the chain through Citgo Holding to CITGO Petroleum.⁷ The court did not resolve the ultimate composition of the Citgo entity boards at that pleading-stage decision because the underlying consents were not properly before it.⁷

The legal paperwork was recognizably corporate. The authority behind the signature came from a foreign-policy decision.

Delaware is very good at telling you what a sole stockholder can do. The answer becomes more interesting when competing authorities disagree over who gets to move the sole stockholder's hand. It is a rare org chart where a recognition decision in Washington changes who gets to use the shareholder pen.

That history matters in 2026 because the recognition context changed again. Reuters reported on September 9 that opposition-controlled bodies that had supervised Citgo for seven years were preparing to wind down after Washington formally recognized Venezuelan interim President Delcy Rodríguez's government. Reuters also reported that Citgo's existing board was expected to remain in place and that a court-approved sale of the holding company remained unexecuted while awaiting U.S. Treasury approval.⁹ Five days later, Treasury issued GL52C with the new governance exclusion. Reuters described the amendment as preventing unauthorized changes to governance at Citgo and its U.S. parents.⁸

The sequence does not turn Treasury into the shareholder. It shows that formal ownership, recognition of the person entitled to act for that owner, Delaware corporate law and sanctions authorization can all sit in the same control chain. A board appointment can be valid under one layer and stalled by another.

General License 52C is easy to misread if you start with its title. It authorizes a broad class of transactions involving PDVSA and entities at least 50% owned by PDVSA for established U.S. entities, subject to conditions and exclusions.¹ Then paragraph (d) carves things back out.

The carve-outs include equity transactions restricted under the Venezuela sanctions framework, enforcement of liens or judgments that would transfer or alter blocked property, and a new paragraph (d)(9) covering any transaction that affects or alters the governance of PDV Holding, Citgo Holding or CITGO Petroleum. The licence specifically names appointments, removals and replacements of directors, officers and other governance officials. That governance paragraph did not appear in the superseded 52B.¹¹⁶

So the precise statement is narrower than "Treasury owns a veto." GL52C is a general licence. OFAC says general licences publicly authorize categories of transactions that would otherwise be prohibited, while a specific licence is a case-specific authorization for a particular person or transaction.¹¹ GL52C leaves governance-changing transactions outside its blanket authorization. A separately granted authorization could change the answer for a particular transaction. The public licence itself does not promise that result.

Meanwhile, Citgo is not generally frozen as an operating company. OFAC says the authorization in paragraph (a) of General License 7C remains in effect and automatically renews in 18-month periods. That licence covers transactions involving PDV Holding, Citgo Holding and their subsidiaries when the only Government of Venezuela entities involved are those companies and their subsidiaries, subject to its conditions and exclusions.¹⁰

The result is a permissions architecture that looks odd from inside a normal boardroom and perfectly logical from inside a sanctions programme. Covered Citgo activity can remain authorized under one licence while a governance change falls outside another. Sanctions compliance has achieved the corporate version of read-only mode: the refinery can keep refining while the org chart waits for permission.

The matrix below is the useful way to see the arrangement. It separates ordinary corporate authority from the sanctions gate and the creditor process. OFAC's role is regulatory permission, not a shareholder vote.

A founder should care about that distinction because "control" is used lazily in financing and M&A. One person may have positive authority to cause an action. A different actor may hold a negative gate that can stop it. The second actor does not need the economics, the votes or a board seat to matter.

The refinery gets a standing licence for covered operations. A board refresh can require a different permissions path. Somewhere, a governance committee is discovering that "succession planning" can become a sanctions workstream.

Citgo's creditor litigation makes the same point from the opposite direction. Shareholders are not the only people who can push on control. A court-approved buyer can still be waiting outside the sanctions gate with a very expensive closing binder.

Crystallex won an arbitral award against Venezuela and obtained a U.S. judgment. It then sought to attach PDVSA's shares of PDV Holding, the company above Citgo. In 2019, the U.S. Court of Appeals for the Third Circuit affirmed the finding that PDVSA could be treated as Venezuela's alter ego for the attachment proceeding and that the PDV Holding shares could be reached under the applicable sovereign-immunity and enforcement framework.¹²

That decision opened the judicial route toward a sale. It did not remove the sanctions route sitting over execution.

OFAC's FAQ 808 says creditors do not need a specific licence merely to initiate or continue U.S. litigation against a blocked person, and they may seek writs of attachment without OFAC authorization. Enforcement is different. A specific licence is required for a settlement or for execution, garnishment or another judicial process that would transfer or otherwise alter blocked property.¹³

OFAC made the Citgo point explicit in March 2026. FAQ 1246 says General License 52 does not authorize the sale of the Citgo-related shares in the Crystallex case and that a specific OFAC licence is required before any sale executes.¹⁴ GL52C now repeats the same idea in its own exclusions for settlement and judicial enforcement involving blocked property.¹

As of September 9, Reuters reported that a judge-approved bid for Citgo's holding company remained unexecuted and awaited final U.S. Treasury approval, with appellate challenges still pending.⁹ That is an extraordinary corporate-control stack: a creditor can win the attachment theory, a court can run a sale process and approve a buyer, and the ownership change can still sit behind a sanctions licence.

Eight years of litigation can get you remarkably close to closing. It cannot generate the Treasury permission at the end.

This is the part founders should steal from the Citgo case. A claim can be legally strong and operationally incomplete. The same is true of a consent right, a drag-along, a call option or a board appointment if another legal regime controls execution. Your documents may give you the right to demand the move. They do not always give you the ability to complete it.

Calling OFAC an owner would blur the very mechanism worth understanding. OFAC does not appear in the stock ledger. It does appear on the closing checklist.

An owner normally has economic rights and corporate rights created by stock ownership. OFAC has neither simply because it administers sanctions. Its power comes from federal law restricting transactions and from licences that authorize transactions which would otherwise be prohibited. OFAC's own blocked-property guidance emphasizes that title remains with the blocked person while the exercise of ownership powers can be prohibited.³

That is useful to think of as a form of negative control over specific actions. Treasury can stop or condition a governance transaction that falls within the sanctions regime. It does not thereby receive the affirmative authority to run Citgo, vote PDVSA's shares for its own account or manage the refinery under Delaware law. Section 141 still places management of the corporation with the board, subject to the corporation's governing documents and applicable law.⁵

The distinction matters because negative control is easy to omit from an ownership analysis. A capitalization table shows ownership. A voting schedule shows formal approval thresholds. Neither document necessarily shows the government licence, court order or regulatory consent that determines whether a decision can be implemented.

Silicon Valley has spent years engineering share classes so founders can preserve control with less economic ownership. Citgo shows the inverse problem: an owner can keep 100% of the top holding company shares while a regulator constrains a core ownership power. Nobody needs a clever voting formula when the transaction itself cannot proceed without permission.

This is also why the word "freeze" needs care. GL52C does not say that Citgo's existing directors lose authority or that Treasury has selected who must stay. The amendment removes general authorization for governance-altering transactions within the sanctions framework.¹² The practical effect can be a frozen board composition until another lawful route exists. The legal mechanism is a transaction restriction.

Treasury does not need a proxy card or preferred share for the gate to matter when someone tries to replace the directors.

Most founder governance models stop one question too early. They ask who can approve. Cross-border and regulated companies also need to ask who can execute.

For every decision that could change control, build a two-column map. The first column is the right on paper. The second is whether the right is exercisable today. Governance decks prefer verbs like "approves" because "approves, assuming the legal permission stack cooperates" ruins the table formatting. A row for "replace two directors" might identify the voting holder, the relevant charter or shareholder provision, the required consent form, every regulatory authorization and any court order or lien that could stop or redirect the action.

Then ask these questions:

• Who has the corporate right? Identify the shareholder, board, class vote or contractual consent holder and the exact document that creates the authority.
• What makes the action legally effective? Check delivery mechanics, record dates, board procedures, closing conditions and any jurisdiction-specific requirements.
• Which outside gate can stop implementation? For a sanctions-exposed company, review the applicable regulations, general licences and any specific licences. For a creditor-exposed company, add liens, attachment orders and sale orders.
• What changes if the actor changes? In a sovereign-linked or nominee structure, verify who is legally recognized to act for the owner, who can sign, and whether a change in recognition or authority breaks the chain.

Citgo is unusually geopolitical, but the diligence habit is ordinary. The mistake is treating an approval threshold as the end of the analysis. Founders routinely negotiate protective provisions down to the decimal while the larger execution dependency sits in another document set.

A useful board memo should therefore distinguish economic ownership, corporate authority and external permission even when all three point in the same direction today. If one changes, you should know which decisions stop working before the dispute arrives. This is especially important when the shareholder is a state entity, the shares secure debt, creditors are already enforcing judgments or the company sits inside a sanctions programme.

Your cap table is still necessary. It is simply incapable of answering a sanctions question. Asking it to do so is like asking the option pool to clear customs.

The September 14 amendment targets transactions that affect or alter governance. It does not itself remove the existing directors. Delaware law places management authority with the board, and OFAC says the core authorization in General License 7C for covered transactions involving PDV Holding, Citgo Holding and their subsidiaries remains in effect, subject to its terms and other applicable restrictions.⁵¹⁰

A general licence is a public, self-executing authorization for a category of otherwise prohibited transactions. OFAC can also issue specific licences to particular persons for particular transactions on a case-by-case basis.¹¹ GL52C's governance exclusion means the public licence does not supply the authorization. Whether OFAC would grant a specific licence for a particular board change depends on the application and applicable law.

OFAC says no for the Crystallex sale. FAQ 1246 states that a specific licence is required before the sale executes, and Reuters reported in September that the approved transaction remained unexecuted while awaiting Treasury approval.¹⁴⁹

If your company has sanctions exposure, sovereign ownership or serious creditor claims, ask counsel for a one-page control map before the next financing or board change. Put every appointment right, removal right, consent threshold, enforcement claim and regulatory licence on the same page. Then mark which ones are exercisable now.

Citgo's share register can tell you who owns the company. It cannot tell you whether the owner can replace the board this week. That second question is the one to answer before control becomes urgent.