5.8 Shares as gifts

It is acceptable to promote the sale of shares as gifts to third parties, subject to the active agreement and eligibility of the gift recipient to become a member of the society. The gift recipient must confirm that they are eligible and agree to become a member before the shares are issued in their name (in the case of a minor, this would be upon the recipient reaching the age required to become a member according to the society’s Rules). A deadline should be set for receiving this confirmation, together with a statement made to both the giver and the recipient that if the confirmation is not received by that date, or if the recipient is not eligible or willing to become a member, then the giver will be refunded.  As with all refunds, any administrative charges should be clearly stated and be reasonable.

In the case of time-bound share offers, the shares are not normally issued until the closing date of the share offer, and this date can be used as a deadline for receiving confirmation from gift recipients. But if a society decides to extend this deadline beyond the closing date of the offer, then the funds should be held in suspense either until confirmation is received or the deadline has passed. Additionally, the society should make both the giver and the recipient aware of the difference between the closing date and the confirmation deadline, explaining the consequences for the recipient if the offer is over-subscribed prior to them confirming their application for membership. 

Eligibility for membership is set out in the rules of a society. The most common restriction on membership is a minimum age requirement. Even though there is no legal minimum age for membership of a society, many societies have rules stating a minimum age, typically 16 or 18.  If the society has a minimum age rule, it must make this clear in its share offer document and in any associated literature relating to shares as gifts.

If a society promotes the sale of shares as a gift for a person below the minimum age for membership, then the following administrative arrangements should be made. The giver must be eligible for membership in their own right, as the purchase of shares will be in their name, and treated as their property, and subject to the same terms and conditions that apply to the whole share offer. The giver should nominate the gift recipient as their beneficiary.  The society should obtain the personal details of the gift recipient. On the day the recipient becomes eligible for membership, the society should write to both the giver and the recipient, asking the giver to consent to the withdrawal of the allocated share capital, and asking for recipient’s consent to membership of the society and the re-investment of the share capital. Normally, the recipient’s consent should be obtained before the giver’s consent is requested, in case the recipient does not wish to accept the gift in the form of shares, in which case it will be up to the giver to determine what will happen to the share capital, subject to the society’s terms and conditions for withdrawal.

A society should be clear on the practicalities involved in gifting to minors, to ensure that the process does not inadvertently become a form of share ‘transfer’. 

• The share offer document needs to be clear that the maximum individual investment amount permitted in the Rules or by statute includes any share capital held on behalf of the recipient, that is intended for gifting once the recipient reaches the age permitted to become a member according to the society’s Rules.
• The society must follow its Rules, and in all correspondence and record keeping, it must refer to the process of enacting a withdrawal from the society of the amount that has been agreed to be gifted, and then this same amount is re-deposited. It is important that this is not treated as a transfer.
• The language the society uses is important, the focus needs to be on transparency and clarity, so there is no risk of transgressing the Rules.
• The society's shareholding/withdrawal policy should state that withdrawal in the case of the gifting process is not subject to the same restrictions of having to wait until year end and having to wait in turn for funds to be available for withdrawal.
• This gifting process is not something that affects general guidance about limitations to withdrawals, see Community Shares Finance Guide - Managing withdrawals 

Alternatively, if the gifting is of existing share capital from a member back to the society, the process is that this should be dealt with as a transfer on the ‘Statement in Changes in Equity’, from share capital to reserves. It should not be classed as donation income.