4.6.1 Purpose

Open offers are integral to the capital flow of established societies, enabling people to join or terminate membership, and as members, to invest or withdraw share capital. Open offers should not be made by societies if the board has suspended the right to withdraw share capital.

There are two main reasons why a society may make an open offer of membership and investment. The first is to stimulate and support the organic growth of the enterprise through increased membership and investment. The second reason for making an open offer is to provide liquidity for its share capital, with new investment generating the funds to cover withdrawals. This is appropriate where the society has a trading relationship with its members, and it is normal to expect a turnover in membership and investment.

Any society making an open offer needs to consider what action it may take if it attracts more share capital than it needs, and the associated problems of over-capitalisation.  It should only use share capital to finance its stated business, industry or trade, and not invest it in other activities that are not part of its stated purpose. Societies may need to consider what actions it will take to prevent over-capitalisation. This could include introducing limits to the maximum individual shareholding of members below the statutory maximum.  Section 2.3 provides further guidance on over-capitalisation and a society’s discretion to return members’ share capital.  

If you have any questions or suggestions for new information you would like to find in the Handbook, contact the team by email at communityshares@uk.coop