FOOTNOTES (DEFINITIONS):

*[1] Community Benefit Society (CBS) according to Co-ops UK: The 2014 Act requires a CBS to “carry on a business, industry or trade” that is “being, or intended to be, conducted for the benefit of the community”. The Financial Conduct Authority (FCA) focuses on four key characteristics of a community benefit society: (1) Purpose: The FCA says that “the conduct of a community benefit society’s business must be entirely for the benefit of the community.” (2) Membership: The FCA says “it is not usually appropriate for a community benefit society to give any particular group of members greater rights or benefits, because the society must be conducting its business for the benefit of the community. So, for example, we would expect to see community benefit societies run democratically on the basis of one-member-one-vote.“ (3) Application of profits: Any profit made by a community benefit society must be used for the benefit of the community. Profits cannot be distributed to members. (4) Use of assets: Community benefit societies must only use their assets for the benefit of the community. If a community benefit society is sold, converted, or amalgamated with another legal entity, its assets must continue to be used for the benefit of the community and must not be distributed to members. In addition to these four points, FCA registration guidance acknowledges that a community benefit society might define the community it serves, but this should not inhibit the benefit to the community at large, in other words, community benefit should not be restricted to members only. In the context of community shares, it is assumed that membership is open to any person who supports the purpose of the society, without the distinction found in co-operative societies between user and non-user members.

*[2] Community Shares according to Co-ops UK: Societies can issue a form of shares known as withdrawable share capital, which is unique to society law. Withdrawable share capital can be withdrawn from the society, subject to the society’s rules and any conditions set out in a share offer document. Most societies have rules that give the board discretionary powers to refuse or suspend withdrawals if it is financially prudent to do so. This means withdrawable share capital is fully at risk. Members could lose some, or all, of the money they invest. But they also have the scope to withdraw some, or all, of their capital when they need it, subject to consent. Unlike with transferable shares, members don’t have to find a willing buyer, or negotiate a price for their shares. Withdrawable share capital places a responsibility on a society to manage its capital prudently. It needs to establish reserves to provide for withdrawals, or to attract new share capital from new or existing members to replace capital that is being withdrawn. Most new societies suspend withdrawals for an initial period, typically three or more years, so that they can build up reserves to finance withdrawals. Voting rights in a society are normally attached to membership rather than share capital, with most societies adopting the co-operative principle of one-member-one-vote. Investment in share capital can be encouraged by offering a financial return on shares expressed as an interest rate, but the interest rate offered must be the minimum necessary to attract and retain the capital. Profits cannot be distributed in the form of a dividend on share capital.