Investor Shares in Cooperative Financing – A Comparative Legal Analysis

This article focuses on cooperative financing and more precisely on so-called investor shares that are, in one form or another, permitted in many legal systems. Utilizing a comparative legal approach, this article seeks to explain what investor shares are and how they differ from ‘traditional’ cooperative shares, why domestic policymakers have introduced such instruments and what are the main problems related to them. The findings of this article suggest that the primary issue with investor shares is that they render a seemingly inevitable conflict of interest between their subscribers and cooperative members. First, since cooperatives are ultimately member-oriented ser vice providers, generating profits for shareholders compromises the fundamental values and principles of cooperation. Second, due to the principles of democratic member control and autonomy, cooperatives are often reluctant to grant governance rights to external parties. Therefore, investor shares have never been widely utilized in cooperative financing and to determine if there are ways to overcome issues related to them, more empirical and doctrinal research is needed.