Co operative societies and community benefit societies are corporate bodies registered by the Financial Conduct Authority under the Co operative and Community Benefit Societies Act 2014, not by Companies House. To register, a society needs rules covering the items listed in section 14, normally at least three members, and must satisfy the FCA that it is a genuine co operative or that its business will be run for the benefit of the community. Members hold shares, usually withdrawable at par, and no individual member may hold more than £100,000 of withdrawable shares.

What is a registered society?

Section 2(1) of the 2014 Act allows a society carrying on any industry, business or trade to be registered either as a co operative society or as a community benefit society. On registration it becomes a body corporate by its registered name, with limited liability (section 3(3)). The FCA explains that societies registered before 1 August 2014 are “pre commencement societies”, previously known as industrial and provident societies.

The FCA’s role here is as registrar, which its guidance (FG15/12) describes as separate from its role as financial services regulator: Companies House registers companies, the FCA registers societies. Registration is not authorisation. A society that wants to carry on an activity regulated under the Financial Services and Markets Act 2000 must apply for authorisation as well.

Co operative or community benefit: what is the difference?

The condition in section 2(2)(a) differs for each type:

  • Co operative society: the FCA must be satisfied that it is a bona fide co operative. Section 2(3) excludes a society whose object is making profits mainly to pay interest, dividends or bonuses on money invested in or lent to it. The FCA generally treats a society as a bona fide co operative where it is “an autonomous association of persons united voluntarily to meet their common economic, social and cultural needs and aspirations through a jointly owned and democratically controlled enterprise”, the definition used by the International Co operative Alliance.
  • Community benefit society: the business must be conducted for the benefit of the community. The FCA reads this strictly: the business must be run entirely for the community, not to provide benefits contingent on membership, and profits cannot be distributed to people because they are members. Interest on shares is treated as a cost of capital rather than a distribution, unless paying it appears to be the society’s main purpose.

A community benefit society (other than a charity or regulated housing association) can adopt a statutory asset lock by including prescribed wording in its rules. FG15/12 says that once included, the wording cannot be removed. A co operative can include a non statutory asset lock, but it does not have the same effect.

How does registration with the FCA work?

Under section 2(2) the society must have at least three members, or two members that are both registered societies, and its registered office must be in Great Britain or the Channel Islands. Section 3(1) requires an application signed by the secretary and three members (or by the secretaries of two member societies) with a copy of the rules.

The FCA’s registration page explains the practical route:

  • most societies work with a sponsoring body and use its model rules, which the FCA has already accepted;
  • you can instead draft your own rules and apply through the Mutuals Society Portal;
  • application fees range from £40 to £950, depending on whether you use model rules unchanged, model rules with changes, or your own rules;
  • the FCA aims to register at least 90% of valid applications within 15 working days, after which the society appears on the Mutuals Public Register.

Under section 10 the last word of the name must be “limited” (or “cyfyngedig” for a society with its registered office in Wales), unless the FCA is satisfied the objects are wholly charitable or benevolent.

What must the rules contain?

The rules are the society’s constitution, doing the job that articles of association do for a company. Section 14 lists the items they must cover:

  1. name;
  2. objects;
  3. registered office;
  4. terms of admission of members;
  5. meetings, voting rights and how rules are made, altered or rescinded;
  6. appointment and removal of the committee and officers, and their powers and pay;
  7. the maximum shareholding per member under section 24;
  8. whether and on what terms the society may borrow or take deposits;
  9. whether shares are transferable and whether they are withdrawable, and how;
  10. audit under Part 7;
  11. withdrawal of members and claims of deceased or bankrupt members’ representatives;
  12. how profits are applied;
  13. custody and use of any common seal;
  14. whether and how funds may be invested.

Registered rules bind the society and its members as if each member had covenanted to observe them (section 15(1)). A member is not bound by a later amendment that requires them to take more shares or otherwise increases their liability to contribute capital, unless they consent in writing (section 15(2)). An amendment is not valid until the FCA registers it, and two signed copies must be sent (section 16).

How do member shares work?

All societies are limited by shares, but FG15/12 stresses that society shares behave differently from company shares. Their number can fluctuate, they stay at par value unless written down, they do not give the holder a share in the underlying value of the society, the society cannot hold its own shares, and votes are not in proportion to the number held.

Most societies issue withdrawable shares, which members cash in under the rules rather than selling. The FCA sees it as a sign of compliance where the board can suspend withdrawals and only allows them when the society can afford to pay. Section 24 caps any member’s interest in withdrawable shares at £100,000, with exceptions including members that are themselves registered societies. Transferable shares need board consent to each transfer, and the FCA regards a market allowing capital gains as normally inconsistent with registration.

Interest can be paid on shares, but the FCA expects it only where the society can afford it, and not as a substitute for dividends. FG15/12 also notes that non transferable withdrawable shares are not controlled investments under the 2000 Act, so their issue is outside the FCA’s financial promotion rules. The society must keep a register recording each member’s shareholding (section 30).

What are the annual obligations?

Section 89 requires the annual return, balance sheets and any relevant auditor’s report to reach the FCA within seven months of the year end. The FCA’s annual return page adds that the AR30 form and accounts must be signed by two directors and the secretary, gives the example of a 31 March year end being due by 31 October, and says the deadline cannot be extended. If a society fails to submit, the FCA can cancel its registration, so members lose limited liability, or prosecute, with a fine of up to £1,000 per offence.

On audit, section 84 lets a society disapply the duty to appoint a qualified auditor for a year if, in the preceding year, assets did not exceed £5.1 million and turnover did not exceed £10.2 million (for charities, gross income not over £250,000). The resolution must be passed at a general meeting with less than 20% of votes cast against it and less than 10% of voting members against. The option is not available to a society that is a subsidiary, has a subsidiary, or holds deposits other than withdrawable share capital.

How might a community share offer work?

Illustration only. Villagers form a community benefit society to buy and run the local shop. They use a sponsoring body’s model rules with a statutory asset lock, apply with the secretary and three founder members signing, and the society is registered. It then raises £120,000 from 200 members in withdrawable shares of between £50 and £5,000 each, one member one vote regardless of holding. One supporter offers £150,000: the society can only accept £100,000 of it as withdrawable shares because of section 24. Profits go back into the shop or to community projects.

Can a society or company change status?

Under section 112 a society can convert into a company, amalgamate with one or transfer its engagements to one by special resolution, after which its registration is cancelled. A “special resolution” here means a resolution passed by at least 75% of eligible members voting, with at least 50% of eligible members voting, then confirmed by over 50% at a second meeting held between 14 days and one month later (section 113). A company can go the other way under section 115, and a charitable society can convert into a charitable incorporated organisation under section 229 of the Charities Act 2011. FG15/12 says a community benefit society converting to a company should not distribute assets to its members.

What mistakes come up most often?

  • Confusing a community benefit society with a community interest company, which is a company registered at Companies House.
  • Assuming FCA registration covers regulated financial activities.
  • Missing the seven month annual return deadline, which the FCA cannot extend.
  • Acting on a rule change before the FCA has registered it.
  • Offering returns on shares that look like a profit share, which can put registration at risk.
  • Forgetting tax: a society is a body corporate and so a “company” for corporation tax under section 1121 of the Corporation Tax Act 2010.

For the company alternatives, see our guides to the company limited by guarantee and the private company limited by shares.

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Sources

Reviewed by Christine Anderson, Broker, Solar Protect. Last reviewed 8 October 2026. Part of Accountapedia, the Solar Protect guide to UK tax and accounting. This page is general information, not personalised advice.