Who is the code for?
This Code is designed for use by consumer retail co-operative societies in managing their ongoing withdrawable share capital. Co-operatives UK defines consumer co-operatives as those businesses where its members are its customers.
Only societies registered under the Co-operative & Community Benefit Societies Act 2014 have the option of issuing withdrawable share capital. This type of share is withdrawable by the member, subject to any conditions stated in the society’s rules. Societies have some exemptions from the Financial Services and Markets Act (FSMA 2000), including exemptions covering the approval of financial promotions.
Withdrawable share capital is nevertheless risk capital and, despite the exemptions, the FCA will expect a society to provide appropriate information regarding this risk to potential investors.
The governing principles of the Code are:
(a) Societies should take their responsibilities seriously to ensure the accurate, appropriate use and management of WSC, and to act fairly and reasonably in all their dealings with their members in relation to WSC;
(b) Societies should ensure that members are fully informed as to the nature of WSC and the risks attached to it, including using the explanation set out in the Appendix below;
(c) Information should be provided in the most accessible and easily understood form so members can understand how WSC accounts (Share Accounts) operate. This will include the information being made available in writing at relevant outlets, on the society's website, in other electronic forms as appropriate and in material provided when a Share Account is opened or important changes to terms are made;
(d) Societies should ensure literature is available which explains clearly the nature of WSC, the risks attached to it and the terms that apply to it, including timely notice of any changes in the terms and conditions applicable in their case and details of the procedure to be followed to deal with a member's complaint;
(e) Where societies have more than one type or class of share, clear information should be provided to members explaining any differences between such different types or classes.
This Code has been drawn up in conjunction with the FCA. It is not intended for new start societies planning to raise finance through withdrawable share capital. New start societies should refer to the community shares handbook.