Reserves, Corporation Tax and Investor Dividends

The system for generating reserves follows practice at Suma WholeFoods / Mondragon – a fixed amount is allocated to reserves as working capital and then the balance is distributed according to an agreed formula. At Suma, the first £100k is retained, then the balance split 50/50 between co-operative capital and staff dividends. Following discussion of co-operative accounting in Europe (and the Mondragon Model), the default rules recommend 30% of profits (or a minimum amount of working capital needed) is transferred to reserves each year and deducted from Surplus before dividend payments are calculated.

In effect, this means that 70% of surplus above a fixed amount is paid out as dividends or allocated as additional Investor Shares to existing members. By default benefits are split 35/35/30 (in a Social Enterprise / Social Co-operative) and 50/50 (in User/Worker Co-operative or User-Owned/Employee-Owned Social Enterprise).

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