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Members Capital in Co-ops and Bencoms

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Members Capital in Co-ops and Bencoms
Ian Snaith
Co-operative Ways Forward Conference
January 2014

Published in: Business, Economy & Finance
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Members Capital in Co-ops and Bencoms

  1. 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. 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. 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. 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. 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. 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. 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

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