1.2.4 Return on investment
Unlike other types of business, it is not the object of a society to maximise profits for members and shareholders. The Financial Conduct Authority, which is responsible for registering societies, says that “the declared maximum rate of interest [on share capital] is the lowest rate sufficient to obtain the necessary funds from members who are committed to furthering the society’s objects”.
Section 2(3) of the Co-operative and Community Benefit Societies Act 2014 states that a “co-operative society does not include a society that carries on, or intends to carry on, business with the object of making profits mainly for the payment of interest, dividends or bonuses on money invested or deposited with, or lent to, the society or any other person”. To be a bona fide co-operative a society must conform to the International Co-operative Alliance’s (ICA) Statement of Identity, Values and Principles. The Third Principle of this Statement says that “members usually receive limited compensation, if any, on capital subscribed as a condition of membership”.
Although the 2014 Act makes no equivalent statement relating to community benefit societies, Section 2 (2)(ii) makes it clear that “the business of the society is being, or is intended to be, conducted for the benefit of the community”. This is generally taken to preclude conducting activities with the primary object of making distributable profits.
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