2.2.3 Non-user investor shares

Whereas membership and investment is normally open to anyone who supports the purpose of a community benefit society, in a co-operative society the FCA makes a distinction between user and non-user members. It provides the following registration guidance to co-operative societies that intend to raise capital from non-user members:

• “The rules of a society which wants to raise capital from non-user investor members expressly provide for non-user investor shares, and the terms attached to these shares are clearly stated
• The voting rights of non-user investor shareholders are restricted by the rules of the society. The society’s rules prevent this category of shareholders voting on a motion to convert the co-operative to a company. Societies can, however, include a power to elect one or more non-user investor share representatives to the board
• Ultimate control of the society remains with members other than non-user investor members at all times. Non-user investor members do not together have voting rights that when combined would result in user-members losing control of the society.”

Unlike under European statute, where the collective voting power of investor-members is limited to no more than a quarter of the total, the FCA does not explain what it means by ultimate control. It could be assumed to mean that user members must always be in position to win a vote on a resolution, including a special resolution, which would mean that user members must collectively hold at least 75% of the votes.