2.1.3 Community benefit societies

The purpose of a community benefit society is to serve the broader interests of the community, in contrast to co-operative societies that serve the interests of members. The 2014 Act requires a community benefit society to “carry on a business, industry or trade” that is “being, or intended to be, conducted for the benefit of the community”. But the Act does not provide any further definition or description of what a community benefit society is, creating a reliance on the FCA’s registration guidance. The FCA focuses on four key characteristics of a community benefit society:

Purpose: The FCA says that “the conduct of a community benefit society’s business must be entirely for the benefit of the community.” There can be no alternative or secondary purposes, including any that may preferentially benefit the members.  

Membership: In common with all societies, community benefit societies are expected to have members who hold shares. The FCA expects community benefit societies to be run on a democratic one-member-one-vote basis.

Application of profits: Any profit made by a community benefit society must be used for the benefit of the community. Unlike a co-operative society, profits cannot be distributed to members of a community benefit society. Interest on share capital is an operating expense and should be subject to a declared maximum rate (see Section 6 for more details).

Use of assets: Community benefit societies must only use their assets for the benefit of the community. If a community benefit society is sold, converted, or amalgamated with another legal entity, its assets must continue to be used for the benefit of the community and must not be distributed to members. This lock on the assets of a community benefit society can be reinforced by adopting the prescribed wording for a statutory asset lock (see Section 2.4).

The FCA registration guidance acknowledges that a community benefit society might define the community it serves, but this should not inhibit the benefit to the community at large, in other words, community benefit should not be restricted to members only. The FCA does not provide guidance on who can be a member of a community benefit society. In the context of community shares, it is assumed that membership is open to any person who supports the purpose of the society, without the distinction found in co-operative societies between user and non-user members. 

If you have any questions or suggestions for new information you would like to find in the Handbook, contact the team by email at communityshares@uk.coop