Need Co-op Shares Be in GB£?

 Last April Dave Hollings of Co-operative and Mutual Solutions Limited asked me two questions. He’s kindly given me permission to shares the Q & A’s on here.

Both questions are about co-operative societies. Apparently they were raised by a co-operative consortium planning to operate across national boundaries. there’s currently lots of interest in that model in the worker co-op sector. For example, both Altgen and uniteddiversity are working on developing the model.

This post is on Question 1 the next one will be on Question 2.

Q 1 Does the minimum shareholding have to be in pounds or could it be in US dollars?

It would be interesting to designate share capital in US dollars (or any other currency) to see whether the FCA raise a problem on registering the rules but we can’t be sure of the outcome until a court (or the FCA on rule registration) come down on one side or another. Anyone know of a society already registered with shares not in £GB?

Here’s why: There is no direct law on societies as far as I know. However, the leading Company Law case, Scandinavian Banking Group PLC says that company shares can be in any currency or different classes in different currencies so long as a PLC has enough in sterling to meet the minimum of £50,000 that they are required to have issued – because that has to be in sterling.

By analogy, the argument against allowing non-sterling shares in a society is that the maximum holding in section 24 is expressed in sterling. However, that only applies to withdrawable shares so maybe non withdrawable shares could be designated in e.g. US Dollars. The problem with that is that sections 37 to 40 dealing with nominations of shares by members and other transfers on the member’s death impose a limit stated in the Act in sterling. Maybe that means that all shares have to be designated in sterling so that those limits are clear.

On the other hand, the reason for the problem with the PLC £50,000 limit was that the EU Directive requires the limit to be set in national currencies and it has prioity over conflicting national law (pp 103-104 attached judgment). Society law is unaffected by any EU Directives in this area therefore that argument does not apply to them and maybe the courts would be willing to allow any currency to be used as they do for other purposes as is explained in the Scandinavian Banking Group case (attached). The rest of the judgment shows courts willing not to let the tail (e.g. amount required to requisition meeting) wag the dog of allowing shares in other currencies (p 104 paras B to E). That argument could be applied to sections 37-40 of the CCBSA 2014 in our context. That is in line with the courts’ wish to be liberal when it comes to facilitating commerce.

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Ian Snaith 2015

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