Legal News for UK Co-ops and Mutuals
This is a blog where brief information about developments in UK Co-op and mutual law will be reported. Readers of this blog will also find Linda Barlow's Co-operatives UK Blog at http://www.uk.coop/blogs/linda.barlow helpful. For an network of academics working on co-ops, mutuals and social enterprises visit http://blogs.kent.ac.uk/r-comuse/2012/09/welcome-to-r-comuse/
- Name: Ian Snaith
- Location: Leicestershire, United Kingdom
Interested in sharing information and knowledge around legal issues for co-ops and social enterprises in the co-oplawnews blog and thoughts on random issues in the "real" blog.
Monday, June 24, 2013
Monday, June 17, 2013
Co-op Bank Capital: The Plan to List the Bank
- The detailed proportion of the bank's ordinary shares that will be held by minority shareholders rather than the Group will not be known until the detailed Exchange Offer ("Equity Swap") is made in October and the response of Target Security holders is known.
- There has been a genuine effort to develop an "equitable" solution to the problem.
- The existing outside investors in the Bank make a contribution by getting a new bundle of ordinary shares and debt securities which do not reflect the book value of the bank.
- So, watch out for a short term reduction in the credit rating of the "target securities" subject to the Equity Swap and of the bank's senior issuer credit rating - p5 Co-op Bank Plan Full Statement 17.06.13.
- The Co-op Group raises funds based on its own credit worthiness and invests in ordinary shares in the bank as well as investing the proceeds of the sale of the insurance businesses.
- The bank employees and management participate in cost cutting and a refocus of the business.
- The Co-op group avoids selling other profitable businesses to bail out the Bank
- The requirements of UKLA and the Disclosure and Transparency, Prospectus and Listing Rules as they apply to Ordinary Shares will impose a level of transparency and accountability on the management of the Bank and, indirectly, of the Group that will be healthy and useful to Co-op Directors and members.
Friday, June 14, 2013
Capital: The old Co-op conundrum re-emerges....
"Interestingly, the Co-op Group already has the legal powers to issue transferable shares to its members in the form of what its rule book calls Member Investor Shares. Were the Co-op Group to pursue this idea, it would create a major new financial instrument for cooperatives to develop further. Behind the scenes, recent lobbying by the co-operative banking sector has aimed to ensure that transferable shares of this kind are recognised under Basel III Tier 1 rules as core capital."
"For co-operatives registered as industrial and provident societies capital raises difficult legal and regulatory issues.Shares classified as withdrawable give the holder an exit possibility as the society can pay the money back and cancel the shares. This is contrary to the usual rule that corporate bodies (e.g. companies) are not permitted to buy back their own shares without special procedures and safeguards for creditors and remaining shareholders. However, apart from withdrawable shares held by other societies, only up to £20,000 worth of those shares can be held by any person (individual or company).Non-withdrawable shares in societies are not subject to any limit on the value of a holding but they probably cannot be bought back by the society at all under the governing common law rule in Trevor v Whitworth. This is unfair to societies as companies, as long as they follow certain procedures and provide some safeguards, can buy back their own shares out of profits available for distribution or, in the case of private companies, even from capital not so available.Primary legislation is needed to deal with this issue and to put societies in the same position as companies in that respect. If that were passed, it would significantly ease the position of all co-operative societies, including the Co-operative Group."