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.

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The lurking danger of demutualisation

Vivian Woodell, the chief executive of the Phone Coop, has sent me an email link to a recent article in The Australian.  It begins, “The nation’s second-biggest wheat exporter, CBH Group, is facing calls to abandon its co-operative model amid rising investor interest in the agribusiness sector, with estimates that corporatisation could unlock $5 billion in value for more than 4000 growers.”

In fact, I understand indirectly from the Australian cooperative movement that this story comes from a Murdoch-owned newspaper trying to stir things up.  It’s good to know that there are many who believe CBH should stay resolutely cooperative.

Nevertheless, demutualisation – which has caused such problems in Britain over the past twenty years –  remains a worldwide threat to the cooperative movement, and one which needs to be tackled head-on.  This is yet another reason for the importance of discussing new capital instruments for coops.

Food security on agenda for 2014 coop summit in Québec

I was reminded last week, in a conversation with one of the members of the conference’s official Validation Committee,  that there is only a year to go until the second International cooperative Summit in Québec, hosted by Canadian cooperative bank and insurer Desjardins.  The dates are fixed (Oct 6-9), and the themes chosen.

Desjardins’ CEO Monique Leroux pushed the boat out last year for the first Québec summit, one of the main events organised for the UN International Year of Co-operatives.  Nothing daunted, she has agreed to do the same again next year.  She has talked of Québec becoming a kind of cooperative equivalent to the World Economic Forum’s annual Davos bash.

I was interested to hear that one of the themes focuses on agriculture and food security.  There are big agricultural coops in the UK but by and large we don’t hear much of them:  with one or two honourable exceptions, they tend to keep apart from the rest of the British cooperative movement.  Regrettably too, agricultural coops have historically tended to lead the way when it has come to demutualisation.  This is what happened, for example, to Ireland’s once extensive agricultural coop movement.

But internationally agricultural cooperation remains a central part of the movement (35% of all coops are engaged in some way with food, say the Québec organisers).  With food security increasingly on the global agenda, it’s right to be reminded of the role that coops can potentially play in trying to tackle the issue.