Don’t invest unless you’re prepared to lose all the money you invest. This is a high-risk investment and you are unlikely to be protected if something goes wrong. Take 2 mins to learn more

Don’t invest unless you’re prepared to lose all the money you invest. This is a high-risk investment and you are unlikely to be protected if something goes wrong. Take 2 mins to learn more

An introduction: co-operatives & community shares

Community shares are a way to invest in co-operatives that are run by their members. Find out how they work and why you could consider investing in them.


 - 26 February 2024

We have partnered with Bristol Energy Cooperative to help them raise capital to grow their solar rooftop portfolio. Bristol Energy Cooperative develops renewable energy and energy efficiency projects, with – and for – the benefit of the community. Ahead of their new share offer on the Triodos crowdfunding platform in April, we wanted to let you know more about co-operatives and community shares.

According to the Community Shares Unit, since 2012, over £200m has been raised by more than 126,000 people in community shares across the UK. This is across over 500 co-operative and community business including shops, pubs, renewable energy schemes, housing projects, community hubs and much more.

What are co-operatives (or co-ops) and community benefit societies?

A co-op is a business or organisation that’s owned and controlled by its members, to meet their shared needs. The members can be its customers, employees, residents or suppliers, who can have a say in how the co-op is run.

Co-ops are typically owned by the workers, customers or local community. This means co-ops focus not just on making a profit, but how they bring value to their members and community.

Community benefit societies are obliged by law to conduct business for the benefit of the community, and all profits must be used for this purpose. Co-operative societies are allowed to distribute some of their profits to members, but they must not conduct their business “with the object of making profits mainly for the payment of interest, dividends or bonuses on money invested or deposited with, or lent to, the society or any other person.”

What are community shares?

Community shares is a user-friendly name that many community benefit societies and co-operatives use to describe their share offers. These offers tend to be for shares that are withdrawable (see explanation below) and non-transferable. The rules of the society or co-operative will set out the terms of their own shares.

Community shares are not regulated by the FCA

The Financial Conduct Authority (FCA) doesn’t regulate withdrawable, non-transferable shares offered by societies or co-operatives. This means investors can’t complain to the Financial Ombudsman Service (FOS) and don’t have access to the Financial Services Compensation Scheme (FSCS) if things go wrong.

What does withdrawable mean?

Withdrawable shares means that an investor can present their shares to the society or co-operative board for withdrawal, meaning purchase. Purchase is at the board’s discretion and subject to sufficient funds being available. The society or co-operative rules will explain what the process of withdrawal is.

One member, one vote

Voting rights in a society are normally attached to membership rather than share capital, with most societies adopting the co-operative principle of one-member-one-vote. The specific rules of the society or co-operative will determine which issues are put to members for decision.

Why do community shares pay interest and is it guaranteed?

Unlike shares in companies, community shares pay interest (not dividends) at a target interest rate set by the society or co-operative before the share offer. The interest rate offered must be the minimum necessary to attract and retain the capital. Profits cannot be distributed in the form of a dividend on share capital.

The payment of interest is not guaranteed and is dependent on the organisation being able to afford to pay the interest (so on its financial performance) and at the board’s discretion.

What are the risks of investing community shares?

Investing in community shares comes with risk as the payment of interest is not guaranteed and the ability to redeem the shares (by the organisation buying back the shares or withdrawing them) is not guaranteed. Most societies choose to have an asset lock, similar to those found in charities and Community Interest Companies, which prevents any residual assets being distributed to members or subscribers in the event of the enterprise being wound-up. This means that members cannot benefit from the sale of the society or its assets. You should not invest more than you can afford to lose.

Can I hold community shares in my IFISA?

No, community shares are not eligible to be held in an Innovative Finance ISA.