A presentation prepared for CBC's Co-op Bank Crisis Conference on 17th January 2014

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 membership fee –
doesn't raise money

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
insolvency FSCS
●

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
All contractual debt with claim on
insolvency – gearing issue.

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 exemption for own
debt and for shares if not transferabl e
●

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
● Building societies and friendly societies
possible but limits to business they can do
●

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
● Building societies and friendly societies
possible but limits to business they can do
●