The Common Interest Exemption — How Pervasive Could It Be?

Article 52 FPO common-interest-exemption FSMA regulation CII-framework

A Revisionist Reading of FPO Art 52

The Conventional View (Timid, Wrong)

The established legal view — repeated by solicitors, the FCA’s perimeter guidance, and every article written on community shares — goes like this:

“Art 52 requires an ‘existing and common interest.’ This means the group must pre-exist the offer. You can’t manufacture it. You can only communicate with people who are already members, supporters, or otherwise connected to the company.”

This reading is defensible but narrow. It treats “existing” as a temporal barrier (pre-existing = already formed) and “common interest” as requiring some formal indicia of connection (membership, donation history, attendance at events).

It is not the only reading. It may not even be the best reading.

The Text

Article 52(1):

“Common interest group”, in relation to a company, means an identified group of persons who at the time the communication is made might reasonably be regarded as having an existing and common interest with each other and that company in— (a) the affairs of the company; and (b) what is done with the proceeds arising from any investment to which the communication relates.

Four elements, properly unpacked:

1. “Identified group of persons” Not “a group that has already formed.” Not “members of a pre-existing organisation.” Identified means the company can say who they are. A mailing list. A postcode area. A category of persons sharing a characteristic. The group does not need to self-identify; the company identifies them.

2. “At the time the communication is made” The timing hook is the communication, not the group’s formation. The question is: at the moment we send this communication, can we reasonably regard these people as sharing an interest?

3. “Might reasonably be regarded as having an existing and common interest” Three sub-elements:

  • Might reasonably be regarded — not “is actually the case.” Not “can prove.” A reasonable belief test.
  • Existing — in existence at the relevant time. Not “previously existing.” Not “long-standing.”
  • Common interest — shared. Not identical. Not formally constituted.

4. “In the affairs of the company and what is done with the proceeds” The subject of the common interest. “Affairs of the company” is wide — it covers its mission, its governance, its activities. “What is done with the proceeds” is wider still — it covers the application of raised capital to the social purpose.

The Aggressive Reading

Proposition 1: “Existing” means “in existence,” not “pre-existing the offer.”

The word “existing” in Art 52(1) qualifies “interest,” not “group.” The interest must be existing at the time the communication is made. It does not require that the group itself pre-dates the offer.

Compare Art 52(8):

Persons are not to be regarded as being in a common interest group just because— (a) they will have such an interest if they become members or creditors of the company

This exclusion clause makes sense only if “existing” means something other than “pre-existing the offer.” If “existing” meant “before the offer,” then 52(8)(a) would be redundant — persons who will have an interest if they become members obviously don’t have a pre-existing interest. The fact Parliament felt the need to explicitly exclude this category demonstrates that, without this exclusion, they WOULD fall within the definition.

In other words: the default position (absent the exclusion) is that persons who will have an interest if they become members or creditors could be regarded as having an existing and common interest. The exclusion narrows this. It does not narrow it much — it only catches cases where the sole basis is a future contingent interest.

Proposition 2: The “common interest” can be purely social/mission-based.

The statute does not require a financial or legal interest. It requires an interest in:

  • The affairs of the company (what it does, its purpose, its governance)
  • What is done with the proceeds (how the money is spent on the mission)

Every person who supports a CIC’s mission has an interest in these things. A person who cares about renewable energy has an interest in the affairs of a community energy CIC and in what it does with its proceeds. This is true even if they have never heard of the CIC before — the category of persons who care about that mission exists, and their interest in the affairs of any company pursuing that mission is genuine.

Proposition 3: “Identified” is broader than “named.”

A group is identified if the company can determine, with reasonable certainty, who falls within it. This can be by:

  • Geographic area (“residents of Postcode EX4”)
  • Affinity (“supporters of community renewable energy who have signed our petition”)
  • Membership of another organisation (“members of the Transition Town network”)
  • Prior interaction (“people who attended our community consultation events”)

The company does not need to know every member’s name in advance. It needs to be able to identify the group so that it can direct the communication only at them and exclude others.

Proposition 4: The Article 52(5) “primary purpose” framing extends the common interest, not restricts it.

Article 52(5) requires the communication to indicate:

that any person considering subscribing for the investments in question should regard any subscription as made primarily to assist the furtherance of the company’s objectives (other than any purely financial objectives) and only secondarily, if at all, as an investment.

This is not a restriction on who can be in the group. It is a characterisation of the investment that aligns with the common interest test. If the investment is primarily non-financial, then the common interest in the company’s affairs and the use of proceeds is the very reason for investing. This creates a self-reinforcing loop:

  • The common interest is in the mission and use of proceeds
  • The investment is framed as primarily furthering that mission
  • Therefore, the investor’s motive aligns with the common interest
  • Therefore, they are paradigmatically within the common interest group

The Art 52(5) framing doesn’t narrow the exemption. It fulfils the condition for it.

What This Means in Practice

Every CIC with a defined community mission and a way to identify supporters can use Art 52.

The group can be constituted by:

  • Signing up to a mailing list (“join our common interest group”)
  • Attending a public meeting
  • Living in a defined area
  • Expressing support for a cause
  • Being a member of a related organisation

The process is simple:

  1. Define your mission
  2. Build a list of people who support that mission (or a category of people who can reasonably be regarded as supporting it)
  3. Send them an Art 52-compliant communication

That’s it.

What About the Paragraph 8 Exclusions?

Art 52(8) excludes three cases where common interest is not established solely by:

  • (a) they will have such an interest if they become members or creditors of the company
  • (b) they all carry on a particular trade or profession
  • (c) they are persons with whom the company has an existing business relationship

These are safe harbours in reverse — cases that don’t automatically qualify. They are not prohibitions. A group of people who carry on a particular trade can be a common interest group if there is a different basis for the common interest (e.g., they share an interest in the company’s mission). The exclusion only says the trade alone is insufficient.

The Radical Conclusion

The Common Interest Exemption, properly read, is not a narrow exception. It is the default route for any company with a social mission to raise investment from its supporter base without FCA involvement.

The legal profession has treated it as narrow because:

  • Lawyers are paid to find reasons to say “no” (risk aversion is the product)
  • The FCA has never tested the boundaries (no enforcement action on Art 52)
  • The cooperative/community benefit society sector had a simpler exemption and never needed to push Art 52

But the text supports a far wider reading. The limiting factors — “identified,” “existing,” “common interest” — are all satisfied by a well-maintained list of people who share the company’s mission. The only real constraint is operational: you must actually maintain the closed group and not publicise to the public.

The Challenge

The question is not “can Art 52 be used broadly?” — the text clearly permits it.

The question is: who will be the first to test it at scale, and who will be the first regulator to try to stop them?

The answer to the second question is likely “no one.” The FCA has:

  • No enforcement history on Art 52
  • A stated policy of supporting social investment (2023/24 perimeter work)
  • A demonstrated preference for encouraging regulated firms rather than prosecuting exempt activities
  • The burden of proving the exemption doesn’t apply

The first mover in testing this at scale will not be punished. They will be validated — or at worst, given guidance on how to do it properly.

The Play

  1. CII defines the “common interest” standard broadly in its CII Verification criteria
  2. Participating CICs build supporter lists around their mission — this is their common interest group
  3. CII’s AI verifies that the group has a genuine shared interest in the CIC’s affairs and use of proceeds
  4. The CIC issues compliant Art 52 communications to the group
  5. The FCA is never involved — the exemption works as written

The Art 52(5) “primary purpose” framing is the capstone. It converts what looks like an investment into what is, in law, primarily a donation with a potential secondary return.

One Sentence Summary

The Common Interest Exemption is not a narrow back-alley; it is the main road for any company with a social mission and a list of supporters, and the legal profession has been charging tolls on a road that is free to use.

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