3.2.7 Maximum shareholdings
All societies must have a rule that stipulates the maximum shareholding a member may have. Many societies set their maximum shareholding at the maximum permitted by law for withdrawable share capital, currently £100,000. This maximum does not apply to corporate members that are registered co-operative societies or community benefit societies, where no upper limit applies.
Careful consideration should be given to the proportion of total capital any one individual or corporate entity can invest in a society, in order to limit dependency on larger investors. Societies seeking to raise less than £1m in capital, may choose to set a maximum shareholding limit, below the legal limit, typically 5% to 10% of the total capital required by the society (see also Section 4.5.6). A society may also choose to limit the maximum amount that another society can invest in it, or at least to have special reasons for allowing another society to invest more than 10% of the total capital it requires.
There is no legal maximum limit for transferable share capital issued by a society. For reasons explained in Section 2.2.3, the Community Shares Unit does not advise societies to offer transferable share capital to the general public.
Most societies also adopt rules that set a minimum shareholding for membership. This can vary from a nominal £1 to as much as £1,000 or more. A higher minimum shareholding may be justified if the society does not charge an annual subscription, in order to cover the cost of providing membership services. However, a high minimum shareholding may be a barrier to membership, which could contravene the co-operative principle of open membership, for societies registering as co-operatives. This can be mitigated by establishing mechanisms to allow members to invest in instalments to reach the minimum level.
A society may decide to adopt a higher minimum and/or lower maximum shareholding for a particular share offer than is stated in its rules. This is normal practice for new societies where the targets for an initial share offer might make this a prudent strategy.
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