Community Shares – can Australian co-operatives issue them?

The term “community shares” is not a term with an accepted legal definition. It was coined in the United Kingdom by the Development Trust Association. Today, community share offers in the UK are supported by the Community Shares Unit27.

A community share offer generally refers to non-transferable, withdrawable share capital issued by co-operative entities28. Community share offers are made to the public and a person who takes up these shares becomes a member of the co-operative entity.

Under the CNL, it is possible for a member to request that the co-operative repurchase the member’s shares. Additionally, shares in a co-operative are repayable, if a membership is cancelled because the member has become inactive. In this sense, shares in Australian co-operatives are withdrawable29.

This is in contrast with company shares, which are generally not withdrawable whilst the company is operating.

The obligation on a co-operative to repay share capital is tempered by the ability for the rules to restrict or prohibit members from requesting a repurchase and board’s power to protect the co-operative’s financial viability30.

Whilst the withdrawable nature of community shares is frequently used to describe this category of share capital, it is possible, and indeed advisable, that there be restrictions on the withdrawal of these shares. There is little evidence about the rate at which community shares are withdrawn in the UK, however it appears that shareholders tend to leave their investment in the co-operative entity, because of their investment motivation.