SOMERSET RULES
Somerset Co-operative Services (SCS) a Somerset based Co-operative CIC announced at its recent AGM the launch of the Somerset Rules - a new and unique set of I&PS Model Rules for a multi-stakeholder co-operative, combining the accountability and democracy of co-ops with the social reporting and investment opportunities associated with social enterprise
The Somerset Rules permit different stakeholder groups to have a balanced voice in the business, they enable the co-operative to bring in non-user members with limited rights, and issue withdrawable and transferable shares, whilst ensuring accountability and internal democracy.
The Somerset Rules explicitly refer to all seven co-op principles - a first in the UK. They also include built in social accounting to maintain strong social returns, as well as establishing a Commonwealth Council, again, unique in the UK. The Rules are written in plain English - rather than legalese - wherever possible.
More about the Rules
Introducing a new IPS: the Multistakeholder Co-operative (Somerset Rules)
Registered under the Industrial and Provident Societies Acts 1965-1978
If you are registering a social enterprise, consider using these new rules. They have a number of advantages that you may benefit from:
- * different stakeholder groups can have a balanced voice in the business
- * co-operative rules ensure accountability and internal democracy
- * ability to issue transferable and withdrawable shares
- * bring in 'non-user' members with limited rights
- * built in social accounting to maintain strong social returns
- * mission orientated rules set a clear vision and direction
- * future proofed against changes in the law
- * plain english rather than legal english wherever possible
There are already several excellent sets of cooperative rules already available from other promoting bodies – notably Co-operatives UK (worker co-ops, community co-ops and many others) and Catalyst Collective (fully mutual housing cooperatives).
However, these new rules will have some important applications. If your enterprise serves more than one distinct group of beneficiaries (for example, producers and consumers) you can ensure that neither group can dominate – even when the number of members from each group is very different.
If you need to raise finance, and either do not wish to overload the business with debt, or have an element of risk that puts off many lenders, these rules are fully equipped to issue both withdrawable share capital (which is lightly regulated and cheap to issue) and transferable share capital (more attractive to some more adventurous investors). Investors can be user members of the co-operative, or non-users with only enough power to protect their investment – or a mixture of the two.
You can determine the specific mission that your enterprise is being formed to carry out, and ensure that its progress is regularly checked against this mission, and against the tried and tested co-operative principles. You can be sure as a founder member that the enterprise will stick to its values over the long term, because social reporting and evaluation is written into the rules in just the same way as financial accounting.
The rules have advanced systems suitable for larger co-operatives, but can equally function with minimal bureacracy to serve the needs of a smaller group with limited resources.
If you wish to register a co-operative using these rules, you can make up to six amendments with no extra charge. Please check our list of pre-amended variants, which include rules for Community Land Trusts, Community Supported Agriculture Schemes, Common Ownership Co-operatives and others.
Email registrations@somerset.coop
List of Rules
Standard Multistakeholder Co-operative
A flexible template with all possible uses and functions left open. Not the simplest rules, but well futureproofed.
Common Ownership Multistakeholder Co-operative
In these rules, the indivisible reserve is fixed at 50% of all profits and returns on investment to non-user members are limited to 3% above bank lending rates. In addition, non-user members are denied any voting rights. On dissolution, all shares are repaid at par.
Multistakeholder Co-operative Lite
For those wanting to avoid complex rules and burdensome requirements. These rules are based on the Common Ownership variant described above, but with additional simplification. There are only user members, and voting is by simple ballot of all present (though if one class disagrees with the outcome, they can request a further meeting). There are no 'key decisions' unless they are requested by a meeting.
Multistakeholder Workers Co-operative
This is designed for co-operative entrepreneurs wanting to build up and sell an equity stake in their business. It allows for members to build up shares in the business as it grows, based on their contribution to its success, and then become investors (non-user members) when they leave the co-op and benefit from the rise in value of their shares. At the same time, 20% of profits are always transferred to an indivisible reserve for the benefit of future members.
Secondary Co-operative
Suitable for co-operatives working together, whether it is to raise finance, develop a brand or franchise, or provide mutual aid.
Co-operative Community Land Trust
A community land trust with many of the features of a housing co-operative, but with the opportunity for members of the local community to join: control is split 60/40 in favour of tenants. It is based on Common Ownership Rules, but members cannot receive a co-operative dividend. Non-user members may be either investors, or supporters and specialist advisors, but they do not vote.
Community Supported Agriculture Co-operative
In this template, producers and consumers each control precisely 50% of the votes, allowing for a fair balance of their interests within the co-operative.
Employment Creation Co-operative
This is designed for enterprises that are initiated by social entrepreneurs with the intention of creating employment and allowing those employees to take an increasing role in the running of the business over time. Employees have 50% control, with 25% control for members of the local community and 25% for outside investors. If used for an existing business, the established owners and managers could become investor members and founder directors. The owner directors could then be gradually replaced with elected directors (either employees or community representatives) over a four year period.
Mutual Trading Multistakeholder Co-operative
Co-operatives with mutual trading status (that is, they trade exclusively with their own members) can benefit from relief on corporation tax. The rules have been modifed to show the only participants in surpluses being contributors, and all contributors participating; further, 100% of assets are distributed on dissolution. There are no transferable shares.
Insert your own variant here!
There is considerable scope for including amendments from one of our variants in others – for example, you can have a secondary co-operative lite, or a community land trust with simple voting arrangements. We are happy to work with you to create the idea arrangement for your co-operative.
Prices for registration:
Registrations and conversions: £190, or
£90 followed by three quarterly payments of £40
Whole rules amendments: £70
How to register
1. Have you got the right rules? Take advice from an experienced co-operative development worker. If there is no CDB near to you, you may wish to consult with Co-operatives UK's excellent legal team. We do believe these are good rules, but they aren't right for every co-op. There may be a cheaper, simpler or more appropriate option.
2. Choose the template from our list that best corresponds to your requirements. You may feel that there are further changes that you would like to make – please discuss these with ourselves or someone else with experience of social enterprise legal structures.
3. Choose a name for your co-operative in 1.1. Note that it is conventional with I&P societies to use the full 'Limited' in the name rather than the short 'Ltd' used by companies. You can check to see if anyone else has thought of the same name by looking at http://mutuals.fsa.gov.uk. You may also wish to check if the corresponding internet domain is available first – we recommend http://uk.domains.coop.
4. Add the registered office (a UK postal address – not a PO Box – with postcode) that should be used for all important correspondence at 1.2.
5. Add a mission statement at 1.3. This should be a brief statement of the social, environmental and economic purpose of your organisation for now and in the future. It should relate not just to the existing membership but also to potential future members and other stakeholders. It could be as simple as 'meet the needs of members' or as detailed as you wish. Your mission should provide direction towards well defined and unambiguous outcome, but allowing a great deal of flexibility in the route. The outcome may never be fully achievable; if it is, it may go out of date too quickly. It may be something that can be achieved both directly and indirectly by the co-operative. If it is describes fairly concrete outcomes, it will be easier to tell in future whether the co-op is remaining true to its mission, and to measure how effective it is. Bear in mind that it will be the benchmark against which future achievements must be assessed.
6. In 1.5 (f), you need to identify who the users of the cooperative are. Select one or more of the stakeholder groups suggested here, or define your own:
* Employees
* Volunteers (all, or those with regular hours)
* Service users (or prospective service users)
* Contractors
* Suppliers (from certain sectors?)
* Tenants (or prospective tenants)
* Customers (all, or regulars?)
* Residents of the area defined as .....................
* Other co-operative enterprises (in sector / region)
People and organisations belonging to these groups will (subject to approval by the committee, and any probationary period you may have in force) be able to join the co-operative. But don't be tempted to be too detailed – there is plenty of scope for adding clarity in a separate membership policy. You need to number each class as you create it, in order to easily refer to them elsewhere. Bear in mind that the numbering is used to allocate people to classes by default – if someone would be eligible for membership in more than one class, they should be allocated to the lowest numbered class.
7. In 1.5 (g), you can also identify non-user stakeholders. They may play a significant role in the organisation, but they will always be limited to 25% of voting strength. User members must have principal responsibility for directing the cooperative. Some types of non-user member might include:
*Investors
*Expert advisors
* Partner organisations
* Local authority representatives
* Volunteers (all, or those with regular hours)
* Service users (or prospective service users)
* Customers (minimum transaction . ..........................)
* Residents of the area known as .....................
You may wish to create more than one class for the same stakeholders, if they can choose between different types of share. For example, if you would like to offer both transferable and withdrawable shares to investors, you need to create two classes for investors.
8. In 1.8 you must describe the type of share issued to each class – either non-withdrawable, withdrawable, transferable or withdrawable and transferable. Be aware that the issue of
transferable securities is governed by the Financial Services Marketing Act and other regulations.
9. Finally, 2.7 d is the clever bit. This is where you can specify the relative voting strengths of the different user members. Nonuser members are limited to 25% (or may have no voting
rights at all, if you chose the common ownership variants). So, for example, if you want a co-operative in which service users control 50% of votes, and local residents and employees 25%
between them (with only local residents having withdrawable shares) and outside investors and local agencies being nonuser members with 25% of votes, then you might have the following arrangement:
Service users have class number 1, local residents class 2 and employees class 3. Classes 1 and 2 are withdrawable. Investors have class 4 and 5 (4 is withdrawable and 5 is transferable). Local agencies have class 6.
Voting among user members is as follows: class one has 67%, classes 2 and 3 combined have 33%. That accounts for 100% of the user members votes: but in a general meeting with nonuser
members, non-users have 25% control, so each of the user members' proportions are effectively three quarters of their full amount – 50% and 25%.
Did you follow that? It is a little complex, and you will more than likely want to keep things a bit more straightforward than that. Just ask for advice if you are uncertain.