4.5.3 Share capital liquidity
Societies should have a long term plan for providing share capital liquidity, and honouring the terms of withdrawable share capital set out in their rules. Section 2.3 describes five main methods for providing liquidity:
- Raising new share capital through an open offer
- Reinvestment of share interest (and dividends) by existing members
- Redemption of shares from reserves
- Reduction in capital requirements
- Replacement with loan capital.
The business plan should make it clear which of these methods will be used by the society. Some societies have reducing capital requirements, and plan to cease trading when the fixed assets of the society come to the end of their working life; if this is the case then it should be clearly stated in the offer document.
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