The document discusses the legal framework for members' capital in co-ops and Bencoms (benefit societies). It notes that shares can be withdrawable, transferable, or neither, and outlines other flexible terms for shares and loans from members. However, all capital is considered risk capital that is lost in insolvency. It also discusses investor protection regulations and exemptions. The main points are that using member capital to bank is difficult unless as a credit union, rules provide flexibility but limit returns, and societies prioritize stakeholders over capital providers.

1. Ways Forward for the Co-op Movement 17.01.14
Members' Capital in Co-ops and
Bencoms: Legal Framework
Ian Snaith
www.iansnaith.com
DWF LLP
Edits:
“Handbook of Co-operative and Community Benefit
Society Law”
To be published by Co-ops UK late 2014

2. Legal Framework for Capital
Shares can be:

Withdrawable unless society is
bank. New £100K limit on
holdings from 01.08.14 (was
£20K) or

Transferable – no buy back by
society but no holding limit or

Neither – nominal or

3. Legal Framework for Capital
Other share terms flexible
subject to limited return
principle – fixed low interest.

All risk capital – investment
lost on insolvency

Credit unions' withdrawable
capital allowed but regulated
as banks & compensation on


4. Legal Framework for Capital
Loans from members can be:

Secured over society assets

Unsecured

May well rank after existing
loans e.g. bank

What the market accepts

5. Legal Framework for Capital
Investor Protection

Factual inaccuracy can mean
contract invalid – contract law

No prospectus needed if
shares/debt not transferable or at
all for housing assocs & charities
plus many small scale issue
general exemptions

Limited financial promotion

6. Legal Framework for Capital
Main Points:

Bank with member capital difficult
unless credit union(s)

Much flexibility subject to limited
return rule – may be enforced
more rigorously from 01.08.14

Societies prioritise other
stakeholders over capital
providers

7. Legal Framework for Capital
Main Points:

Bank with member capital difficult
unless credit union(s)

Much flexibility subject to limited
return rule – may be enforced
more rigorously from 01.08.14

Societies prioritise other
stakeholders over capital
providers