Website Cookie Policy

We use cookies to give you the best possible online experience. If you continue, we’ll assume you are happy for your web browser to receive all cookies from our website.
See our cookie policy for more information.

Practice Areas

More Information

thepartners@wrigleys.co.uk

Leeds: 0113 244 6100

Sheffield: 0114 267 5588

FOLLOW WRIGLEYS:

Send us an enquiry
Close

The Co-operatives, Mutuals and Friendly Societies Bill: A new way to raise and retain capital for Co-operatives?

16 September 2022

What does the proposed new legislation mean for co-operatives?

A new Co-operatives, Mutuals and Friendly Societies Bill (Bill) has been introduced in Parliament which proposes a way for co-operatives, friendly societies and mutual insurers to grow and develop their organisations while maintaining their commitment to member ownership and control. This is important as it will enable co-operatives to compete on a more even playing field with their corporate counterparts and increase their impact across all sectors.

The current legislation which governs the raising of capital for co-operatives is somewhat inflexible. The Bill would enable co-operatives to raise more money by issuing equity shares that are repayable at the option of the society, rather than being withdrawable at the option of the members.

By introducing repayable shares, the Bill would enable co-operatives to raise amounts in excess of the current £100,000 holding limit for withdrawable shares. The Bill would also provide legal certainty as to whether co-operatives can choose to repay non-withdrawable shares. These changes have the potential to lead to large capital-driven co-operative societies raising millions of pounds more each year in equity, which could then be used to invest in important initiatives tackling issues such as decarbonisation, technology and the current cost of living crisis. It remains to be seen whether the Companies Act restrictions on a company buying back its own share capital might apply to a co-operative society repaying its repayable share capital.

In addition, the Bill would give co-operative societies the option of adopting a statutory provision guaranteeing that any capital surpluses would be ‘non-distributable’ among members. It is important to note that this would not affect the application of members’ surpluses or interest payments on share capital. Most co-operative societies currently include non-distributable capital surplus provisions in their rules. However, as rules of a co-operative can be amended by its members from time to time, such rules-based provisions are often insufficient to provide the solid legal guarantee sought by many investors. Including a statutory provision may increase opportunities for investment and asset growth in co-operative societies given the increase in legal certainty. The additional available capital surplus could then be re-invested in economically, environmentally and socially productive enterprises.

The Bill would enable co-operatives to secure increased investment whilst retaining their democratic structures and ensuring they work in the interest of their members. Co-operatives UK’s head of policy, James Wright, confirmed that the Bill enjoys “widespread support” throughout the co-operative sector and has encouraged co-operatives to show their support before the Bill’s second reading on Friday 28 October 2022.

If you would like to discuss any aspect of this article further, please contact Peter ParkerHayley Marsden, Susannah Allen or any member of our Charities and Social Economy team on 0113 244 6100.

You can also keep up to date by following Wrigleys Charities and Social Economy team on X.

The information in this article is necessarily of a general nature.  The law stated is correct at the date (stated above) this article was first posted to our website. Specific advice should be sought for specific situations. If you have any queries or need any legal advice please feel free to contact Wrigleys Solicitors.

 

 
 
 
 
 
 
 
 
 
 
 
 
 

 

 
 
 
 
 
 
 
 
 
 
 
 
 
Peter Parker View Biography

Peter Parker

Partner
Leeds

Hayley Marsden View Biography

Hayley Marsden

Associate
Leeds

17 Apr 2024

Independent schools’ development: policies for navigating the modern fundraising landscape

Independent schools face fundraising challenges in a tough climate. Learn best practices for compliant and effective fundraising policies.

09 Apr 2024

Charities Act 2022: new provisions introduced

What do the latest provisions mean for your charity?

09 Apr 2024

Cohousing Series: Navigating the Planning System

This article is the latest in our cohousing series following our team member as she develops her own cohousing scheme.