4.7 Application forms
All offer documents, of whatever type, should include an application form. Application forms can be very simple, requiring no more than the name and address of the applicant, and the amount of share capital they are purchasing. But most societies will ask for additional information, to provide them with greater legal protection, to improve the membership administration processes, or to gather other personal information about the applicant. Societies should ensure the form is fully compliant with the requirements of the Data Protection Act.
The application form should always be attached to the offer document, to encourage applicants to read the document. This can be reinforced by asking applicants to sign or acknowledge a statement saying they have read the offer document and understood the terms and conditions of the offer.
Some societies use application forms as a marketing tool. For instance, the form might contain a series of tick boxes to encourage applicants to invest more than the minimum amount, or it might invite applicants to nominate a beneficiary in the event of their death, encouraging them to think of the offer as a long-term investment.
A society’s rulebook will normally specify who can and cannot become a member of the society. Even though legal restrictions on the minimum age at which a person can join a society have been removed, many societies still have rules setting a minimum age for membership, and if this is the case, the application form should make this clear. Some societies restrict applications to people who live or work in a specific geographical area, or do not allow applications by people who live outside the UK.
Occasionally, societies will receive requests for joint membership and shareholdings. Such applications should be treated as an application from an unincorporated association or partnership, which is responsible for its own affairs. All parties to the joint application must be eligible for membership, and one of the applicants must act as the nominee representing the interests of the joint applicants. Joint applicants are treated as one member with one vote. Some societies have rules that allow for nominee shareholdings, where a nominee administers shareholdings on their clients’ behalf, and the clients are individual members of the society, each with their own membership rights (see Section 3.2.4). The application form may also accommodate applicants buying shares as gifts for third parties (see Section 5.9).
Societies should be aware of the potential for offers to be used for money laundering. Withdrawable share capital is exempt from money laundering regulations, so there is no legal obligation on societies to carry out identity checks on applicants (see Section 7.3.6). However, societies planning to make online offers or accept applications from people living outside the UK, may want to put secondary measures in place to check the identity of investors. These can include restrictions on methods of payment, or restricting investment to applicants with a UK bank account. Co-operatives UK has a Code of Best Practice for consumer societies issuing withdrawable share capital that provides guidance on the prevention of money laundering.
Some societies have developed online application and payment systems. Putting aside the set-up costs of establishing these systems, and concerns about online security, societies may find this a very efficient way of administering an offer, although it may exclude some potential investors. It may also affect the geographical spread of applications, with a consequent effect on the identity of the community. These issues are addressed in greater detail in Section 5.6.
If you have any questions or suggestions for new information you would like to find in the Handbook, contact the team by email at [email protected]