John Mulkerrin argues that co-operative CICs present a largely undiscovered opportunity.
It is still widely unknown that CICs can already be Co-operative and I suggest investment into fully understanding the relevance and potential of a suite of Co-operative CICs worthy of inclusion in that development.
Much like the wider Co-operative movement, CIC harnesses within it a number of different legal structures. The two meet at the little known or understood Co-operative CIC.
My own knowledge of Co-operatives is limited to being a member of four and an increasing understanding picked up along the way conducting my role at the CIC Association CIC, so please forgive my naivete about the finer details and context within which these discussions will take place.
That being said, I feel the ‘future proofing’ elements of what a Co-operative CIC might give the wider movement should be discussed rigorously as I believe it offers much of what is being sought, and would be a new engine of growth for the Co-operative movement.
The first part is easy
There are already over 12000 CICs on the public register, of which (approximately) 9000 are Limited By Guarantee, 1650 Not for Profit Limited by Share (schedule 2) and 1450 For Profit Limited by Share (schedule 3). We don’t have an official figure but it is safe to say that relatively there are only a handful of Co-operative CICs.
We feel that there could and should be more growth within the traditional Co-operative CIC Limited by Guarantee legal structure, such as is described in the Co-operative UK templates already available.
A great example of such an organisation is Barford Village Shop CIC. After losing the village shop in 2006 the community set about bringing it back to life. Over 500 shareholders joined and between them raised £370,000 (debt finance) to make the dream a reality. It also set up a Charity to donate any surplus profit to community projects. It has over 80 volunteers, 1400 people use the shop every week and it has donated £80,000 to community projects so far.
Barford village shop (image from http://www.barfordvillageshop.org.uk/)
Easy, more awareness needed! This is a fantastic case of Co-operative action and very familiar to all as a Co-operative. But this discussion is WhatIf
The Co-operative CIC also has an asset lock, what if it is a useful ingredient in the discussion whether there should be a voluntary asset lock for the IPS?
The Co-operative CIC is also registered with Companies House rather than with the FCA. What if that is the most suitable ‘for profit’ co-operative strategy moving forward?
What if we develop a schedule 3 Co-operative CIC?
(A schedule 2 CIC Limited by Share does not permit any dividend to be paid to shareholders, unless they are asset locked bodies. A schedule 3 CIC Limited by Shares allows for payment of dividend to be paid to all external investors)
No doubt there is a discussion to be had on a Schedule 2 Co-operative CIC model, for example we already have 1650 CIC Share companies that do not issue dividends and it could be that many would already describe themselves as Co-operative.
But we are here to innovate and to an extent that work would happen under a wider umbrella, that which includes defining an acceptable (to Co-ops UK?) form of Schedule 3 Co-operative CIC.
A Co-operative that have can have different classes of share. A simple example is the CIC Association itself. We are strongly considering becoming a Co-operative and have been for a long time, we have grown to over 5000 online network members now and we think it time to progress to the next stage of development. At the moment it’s a few volunteers and some shoestring trying to make an impact and we now want to harness our own ‘crowd’ to help shape our common future.
We want to offer every CIC a single member share which carries the voting/election rights, and to also offer a second class of share without voting/election rights which enables external investment into the Co-operative. This will allow us to seek investment from our community or externally whilst maintaining the dignity of democratic control. It would also allow us to reward those investors who support any initiative with a share of profits. Under CIC legislation, we can pay up to a maximum of 35% of distributable profit.
Would this be regarded as a Co-operative?
WhatIf this helps reduce the domination of private providers?
If it would, then it quickly follows that this has the potential to be a very dynamic structure around which new types of co-operation could organise, and particularly new ways of attracting external investment could be sought. Cultural, social, technical and economic change are altering how individuals gather around a common cause and we must be here to enable it, not to judge it.
What if investors gathered around themes, foodies investing in farmers etc etc. It is perhaps stretching many peoples ideas of what a Co-operative is, but is that so bad?
Would it be so bad if there was an investment fund that allowed you to co-invest with a group of patients who ‘spin out’ their mental health service? You can do it with a private company, why not a Co-operative?
Surely these would be regarded as co-operative aims? Surely we should give social investors the chance to further help transformation and innovation?
The village shop mentioned above could have perhaps raised the £370k in equity instead of loans? Wouldn’t that have been better for the cashflow?
One of the originators of CIC was the late, great Stephen Lloyd, often referred to as the father of CIC and he once said that debt and equity are morally equal. Is that the case with Co-operatives?
The Co-operative movement started after steam engines and before airplanes whereas CIC came into being after google and before twitter so it is perhaps too new a twist for some, but I contend that the investor could be (subject to appropriate controls and measures being put in place) seen as vital part of some Co-operatives. Why not let those who have an empathy for your work support it?
WhatIf we disrupt the system positively?
Many have discussed these ideas before and elsewhere, but with the Co-operative CIC included as an ingredient I contend this idea carries the biggest potential bang for the collective co-operative buck.
In the Co-operative Party publication Taking Care we can see that social care is in permanent crisis, with a massive funding gap that will hit at least £2.8 billion by 2020 . It says part of the solution is to reduce the domination of private providers in the market and encourage smaller social and co-operative providers to deliver the care.
These ideas could help underpin strategies for meeting these key objectives, it is clear whatever we do the future has many challenges in maintaining a fair and decent society for all. That’s politics, and there are plenty better at it than me.
Govt standardising reliefs such as the SITR to Charity, Co-ops and CIC mean that any further development in these areas should be harmonised to deliver solutions for all, we have ourselves gone some way to developing the theory for social investment more widely and would welcome collaborating.
WhatIf the Co-operative CIC could be designed to make a new millennial Co-operative fit for the next 150 years?
Oh WhatIf indeed!
John Mulkerrin is founder and managing director of the CIC Association CIC.