1. Introduction to community shares
This Handbook sets out guidance for societies and practitioners who provide advice on community shares, a term used to describe withdrawable, non-transferable share capital of co-operative and community benefit societies.
The Financial Conduct Authority (FCA) is the registering authority for societies in the United Kingdom. The FCA must maintain arrangements designed to enable it to determine whether persons are complying with requirements imposed on them by or under the mutuals legislation.
The FCA also has distinct responsibilities under the Financial Services and Markets Act 2000 (FSMA), including regulation of financial promotions. Offers by societies of their non-transferable shares are exempt from most of these regulations. The FCA does not regulate those exempt promotions.
If a financial promotion appears to show a society is not meeting its condition for registration as a co-operative or community benefit society, the FCA can act in its role as registering authority. They have the power to cancel the registration of a society if it does not comply with society legislation.
This Handbook was originally produced by the Community Shares Unit (CSU), under the supervision of a Technical Committee composed of representatives from the FCA, HM Treasury, the Charity Commission, and an independent legal adviser.
The Handbook and any subsequent revisions are now accountable to the Co-operative and Community Capital Committee (CCCC) established in 2020 as a Member Group of Co-operatives UK and accountable to the Co-operatives UK board.
Section 1 of the Handbook provides an introduction to community shares for business advisers. The remainder of the Handbook provides guidance on two main matters:
- The requirements of co-operative and community benefit society legislation
- Good practice relating to the promotion of community shares
The legal requirements guidance addresses matters covered by legislation or case law with which societies must comply. Where appropriate, the Handbook highlights these requirements by using the imperative ‘must', and in some places refers to relevant legislation by name.
The good practice guidance looks at the underlying principles, ethics and standards of behaviour expected from societies offering community shares. The term ‘should’ is used when referring to these voluntary, but desirable, practices.
The CSU and FCA are working together to promote good practice by societies making community share offers. While the CSU has no formal powers to require societies to follow the guidance set out in this Handbook, it has established the Community Shares Standard Mark as a way to recognise and promote good practice. The Mark is awarded to community share offers by practitioners who have been licenced by the CSU to carry out this work on its behalf. The Handbook is regularly updated, based on comments and feedback from practitioners, and acts as a means of sharing good practice.
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