Ed Russell

One of the things that has been difficult during the two years of Co-operative Web is allowing another company to have a stake in the business because of our status as a Worker Co-operative. It’s not a massive problem as the business model we have adopted is to only spend what we have made to try and grow slowly and organically to avoid getting ourselves into any sticky positions – I guess from a purely personal perspective I’m keen not to have it all go wrong and have to go and work for someone else so cautious progress seems to be the best way forward! However there has been one incident of this; and it has proven to be a little bit of a headache.

The history of this is that we used to be part of a much larger company – this was the retail Co-operative called the Midcounties Co-operative”. When they formed from the merger between Oxford, Swindon & Gloucester and West Midlands they made the decision to concentrate on core business; this meant that the team I ran which provided IT development services to outside companies was no longer required. Due to the fact that they are nice people and that they didn’t want to cause the relationships with the client base that we had built up to turn sour we hatched a plan for us to take the business and form it into something on its own. Co-operative Web was born.

During the discussion process when we were setting up two key facts to this story emerge. Firstly, us (the workers) were keen on the Co-operative model and the principles behind it so we setup as a Worker Co-operative, and secondly Midcounties very reasonably wanted to keep a stake in the business so that if we did make our millions from it then they would have the reward of helping start the whole thing. We agreed a 20% stake, drew up the relevant contracts, registered the company and I thought that was that. Unfortunately it wasn’t to be that simple.

According to our first set of Memorandums and Articles of Association (the documents that get lodged with companies house to register yourself as a company) that are the standard issue from Co-operatives UK we had two different sets of shares: investment and worker. Worker shares are designed only to be issued to workers, a maximum of one per worker in accordance with the basic principles of Worker Co-operatives, the investment shares are there to help you get money in. But if you read them carefully investment shares in the way they are defined don’t really equate to a stake in the company, and can be bought back out at face value by the Co-operative at any time. On recommendations from Co-operatives UK we are actually writing the 20% stake directly into our Memorandum and Articles...  Which while it may be fine for our friends at the Midcounties I wouldn't consider it as a solution for a less known or unknown investor...

The history involved in the worker co-operative movement has shaped this as a problem - the whole idea is that it is self-financing sustainable business for the workers by the workers. I, however, think there must be a better way out there as raising capital investment is key in so many businesses for success and I personally hate the thought that the good ideals of Co-operative principles would need to get abandoned in order to build a business (though it has to said at this point that there might be other ways I haven’t yet found as it has not been so much of a problem with Co-operative Web).

If anyone has any solutions then please get in touch as I’d love to hear about them! 

Posted by Ed Russell