NCVO and Social Enterprise UK
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Asset Lock

Co-operative societies can pay a dividend to their members based on throughput and they also give a return on investment in the form of interest on share capital. Community benefit societies cannot pay a dividend but they are able to make a return on investment on the form of interest on share capital.

On winding up, members of a community benefit society only have a right to the return of their capital. They do not have a right to a share of the underlying assets (or equity), and the rules normally make alternative provisions for the application of any surplus on a solvent winding up.

The Co-operative and Community Benefit Societies Act 2011 includes protection against demutualising societies by providing that any transfer of engagements or conversion to a company can only proceed if, as well as being passed by a special resolution, a majority of members takes part in the vote.

The Community Benefit Societies (Restriction on use of assets) Regulations 2006 allow societies to provide that their assets are dedicated permanently for that purpose and connected purpose, creating an asset lock. They provide that where a non-charitable community benefit society has a restriction on use of the assets, the assets may only be used in the ways allowed by the restriction.