Bill (HC Bill 12)

A

BILL

TO

Enable co-operative and community benefit societies to raise external share
capital for the purpose of making environmentally sustainable investment; to
make associated provisions about restricting conversion to company status
and the distribution of capital on winding-up; and for connected purposes.

Be it enacted by the Queen’s most Excellent Majesty, by and with the advice and
consent of the Lords Spiritual and Temporal, and Commons, in this present
Parliament assembled, and by the authority of the same, as follows:—

1 Green shares

(1) The Co-operative and Community Benefit Societies Act 2014 is amended as
follows.

(2) At the end of section 27 (power to invest) insert—

(4) 5This section is subject to section 27A (green shares).”

(3) After section 27 insert—

“Green shares

27A Green shares

(1) A registered society may issue one or more shares for the purpose of
raising external capital to make environmentally sustainable
10investment.

(2) A share issued under subsection (1) is to be known as a “green share”.

(3) A green share may be transferable but is not withdrawable.

(4) In this Act, investment is “environmentally sustainable” if it is in
economic activity which—

(a) 15contributes substantially to at least one of the environmental
sustainability goals; and

(b) does not do significant harm to the other environmental
sustainability goal.

BillPage 2

(5) The environmental sustainability goals are—

(a) to create an innovative, productive and low carbon society
which recognises the limits of the global environment and
therefore uses resources efficiently and proportionately
5(including acting on climate change); and

(b) to maintain and enhance a biodiverse natural environment with
healthy functioning ecosystems that support social, economic
and ecological resilience and the capacity to adapt to change
(for example climate change).

(6) 10The Treasury may by regulations revise subsections (4) and (5).

27B Green shares: issuance, rights and repayment

(1) A society may only issue green shares if it is authorised to do so by its
rules.

(2) The rules of any society may exclude or restrict the issue of green
15shares.

(3) A society may only repay a green share if it has, at the time of
repayment, at least one other issued share.

(4) The holder of a green share is—

(a) a member of the society;

(b) 20entitled to only one vote, regardless of—

(i) the value or number of shares they hold, and

(ii) any entitlement they have as a result of their
participation in the society otherwise than as a holder of
a green share;

(c) 25entitled only to the general level of compensation payable
under the rules of the society; and

(d) entitled, on redemption of the share or the earlier solvent
liquidation of the society, only to repayment of the nominal
value of the share and to no other bonus or part of any surplus.

(5) 30No holder of a green share, who is a member of a registered society only
by virtue of holding such a share, is entitled to propose, or vote in
respect of any resolution of that society under—

(a) section 109 (amalgamation of societies);

(b) section 110 (transfer of engagements between societies);

(c) 35section 112 (conversion of society into a company,
amalgamation with a company etc); or

(d) section 110 of the Insolvency Act 1986 (concerning a proposed
transfer or sale of business or property).

(6) The Treasury may by regulations make further provision about—

(a) 40the issuance of green shares;

(b) the rights of holders of green shares;

(c) the repayment of green shares;

(d) the determination of the terms and conditions of green shares;

(e) procedures for amending society rules about green shares.

27C 45Green shares: protections against tax and fraud loopholes

(1) This section makes provision for protections against—

BillPage 3

(a) abuse of green shares; or

(b) exploitation of tax loopholes resulting from the creation of
green shares.

(2) The Treasury may by regulations make provision to—

(a) 5remove opportunities for investment fraud;

(b) safeguard the tax system; or

(c)
protect the integrity of society status;

in relation to the matters in subsection (1).

(3) The Treasury may by regulations make provision for one or more pilot
10schemes for the introduction of some or all the provisions of this Act for
the purpose of providing assurance that the introduction of green
shares will not have unintended consequences relating to the matters in
subsection (1).

(4) But regulations under this section may not—

(a) 15impose a new tax;

(b) continue an expiring tax;

(c) increase the rate of an existing tax; or

extend of the incidence of a tax so as to include persons not already
taxpayers.”

(4) 20After section 29 (power to restrict use of assets of a community benefit society)
insert—

29A Capital surpluses: societies with a green share

(1) The Treasury must by regulations make provision—

(a) enabling the rules of a society with a green share to
25permanently prohibit the distribution of a capital surplus; and

(b) for the destination of any capital surplus of a society with a
green share—

(i) on the solvent winding up of a society; or

(ii) on conversion of a society to a company under section
30112.

(2) Regulations under subsection (1)(b) must provide that a capital surplus
may only be distributed to another corporate body which prohibits its
members from receiving anything more than a repayment of the
nominal value of shares they hold.

(3) 35In this section, “capital surplus” means the amount remaining after
deducting a society’s total liabilities, including repayment of members’
capital, from its total assets.”

(5) At the beginning of section 112(1) (conversion of society into a company,
amalgamation with a company etc), insert “Subject to section 114A,”.

(6) 40After section 112(4) insert—

(4A) Section 114A makes provision for restrictions to this section for
societies with a green share.”

(7) After section 114 (conversion of society into a company: supplementary)

BillPage 4

insert—

114A Restrictions to conversion of society with a green share into a company

(1) The Treasury must by regulations make provision for societies with a
green share in accordance with this section.

(2) 5The regulations must permit a society, through rules, to permanently
and irreversibly exempt itself from the provisions of section 112—

(a) on registration of the society; or

(b) by special resolution of the society in accordance with section
113.

(3)
10The regulations must permit a society to remove protection of asset
provisions on establishing rules under subsection (2).

114B Power to restrict acquisition by society with a green share of its own
shares

The Treasury may by regulations make provision applying Part 18 of
15the Companies Act 2006 (acquisition by limited company of its own
shares) to a registered society with a green share.”

(8) In section 147(2)(a) (regulations and orders), for “29” substitute—

“27A to 27C, 29, 29A, 114A, 114B”.

2 Short title, commencement and extent

(1) 20This Act may be cited as the Co-operative and Community Benefit Societies
(Environmentally Sustainable Investment) Act 2020.

(2) This section comes into force come into force on the day on which this Act is
passed.

(3) Section 1 comes into force on such day or days as the Treasury may regulations
25made by statutory instrument appoint, and different days may be appointed
for different purposes.