Going up: limit for individual investments in coops to be £100,000

The Treasury announced today an important change potentially affecting all cooperatives and ‘bencoms’ (societies for the benefit of the community) registered under the Industrial & Provident Societies Act. From next year, the maximum amount which an individual member can invest through the usual ‘withdrawable share capital’ route is to go up from the current £20,000 to £100,000.

There’s been criticism for some time that £20,000 is too low (the threshold was last increased in 1994).  Some agricultural cooperatives in particular have argued that the number of farmer-members in a typical agri-coop is small relative to the amount of capital that can be required,  and that therefore a £20,000 limit unduly restricts their development.  Co-operatives UK has also warmly welcomed the increase in the limit.

The increase to £100,000 will potentially apply to the rapidly growing number of community share issues, including those for community pubs, village shops, and community-led renewable energy projects.  Major projects using community share issues could now find it possible to raise quite significant amounts of capital.

The fundamental cooperative principle that all shareholder-investors have one vote regardless of how much they have invested remains, of course. But the new £100,000 limit will be discretionary and each individual coop and bencom will need to discuss whether they really want to have investments of this size held by individuals in their business.  One point to consider is whether, even with a one-member-one-vote rule, big investors might in practice be able to make their views count for more.  Another is the cash flow implications for a business if an individual with a major investment requested the return of their money.

The change is coming in during 2014.  The government has also tabled today in parliament a consolidation act covering coops and bencoms, and this is expected to get royal assent next year.  A consolidation act merely tidies up previous legislation (there are no new provisions) but is still a welcome move.

The Treasury report is available online here.

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s