Community shares are a great example of how people can come together to support local organisations and their future.
They help to raise money and some types of sports clubs and groups can sell shares to the community. These are known as community shares. Community members can become shareholders for as little as £20, with organisations able to set minimum share prices up to a maximum investment of £100,000 per shareholder. The shares cannot be sold off or transferred, they can only be withdrawn by investors under terms that protect the organisation’s finances.
Offering community shares to your members and local people can be a great way to place yourselves at the heart of the community as well as generate money to invest in your organisation’s development at the same time. However, the model isn’t suitable for everyone.
Who can use a community shares model?
To offer Community Shares, you must be either a Co-operative Society (CS) or a Community Benefit Society (CBS). If you were registered before 2014 as an Industrial and Provident Society, you are also eligible.
Community Shares can’t be sold by clubs/organisations with other structures like Companies Limited by Guarantee, Companies Limited by Shares or Community Interest Companies.
It can be possible for organisations already incorporated as something else to become a CS or CBS. The process may require a special resolution by members / shareholders to convert to the new structure. Click this link for more information on converting into a society.
- Unlike shares sold by incorporated companies, returns and interest on Community Shares are paid to shareholders when the organisation feels it is justified and at a level needed for people to still be interested in investing.
- Shares won’t be subject to high expectations from shareholders. Investors must be committed to the organisation’s sustainability and overall success.
- Shares can’t be transferred to anyone else. The investment can be returned, but only in a way that protects the organisation’s finances.
- There is a ‘one member one vote’ system, rather than votes being distributed based on the number of shares someone owns, so views of larger investors are not favoured in decision-making.
- HMRC views Community Shares as ‘risk capital’ which is eligible for tax relief. Investors can claim up to 30% back through the Social Investment Tax Relief scheme, making it an appealing opportunity.
- It is only possible for CSs and CBSs to offer community shares. Other types of organisations wishing to use a community shares model must convert to one of these legal structures first.
- Return on people’s investment isn’t a key priority under the community shares model. While this may put some people off, it does ensure that all investors get involved for the right reasons.
- Your organisation must be happy for investors to be involved in making decisions. They might not require much input, but you need to be prepared to give up some level of control.
- Offering community shares may be more difficult for organisations without strong, existing links with the local community
- For some grant programmes, a community shares model could make your organisation ineligible for funding.
Selling community shares, regardless of the benefits, is a big decision. It’s important to take some time to research the process of both converting to an eligible legal structure (if your organisation is not one already) and selling community shares. Discuss this with your committee/board and members so they understand the benefits and challenges of the model and can make an informed decision. Before deciding, make sure you consider things like:
- How strong are your community links?
- How could you market your club/group to potential investors?
- How would you engage shareholders in your decision making and operations going forward?
Projekts MCR is a Community Benefit Society in Manchester that works to make skateboarding more accessible to people from under-represented groups. They needed to raise money to redevelop their existing skatepark and decided to do this by selling community shares.
Using the Crowdfunder platform, the organisation raised £67,194 from 70 investors in less than 10 weeks. This was then doubled by the Community Shares Booster Programme, meaning the organisation in fact raised £134,338. Each investor now owns a share in the park, all of which are equally weighted.
The minimum investment was £100. Investors automatically became members of Projekts MCR and were given voting rights at AGMs etc. Subject to the Board’s discretion, investors will receive 4% interest annually after 3 years. Their investors could be eligible for up to 30% Social Investment Tax Relief. Investors are aware that withdrawing their funds is subject to the financial success of the project, but this can be done after 3 years.
The Jubilee Pool in Cornwall is widely considered to be the best example of a pre-war Lido in the world and turned to Crowdfunder to harness geothermal heat and provide warm water swimming as well as to undertake a major facilities upgrade for their 40,000 visitors each year. They raised £528,680 from 1,380 supporters to make it a reality.
Lewes Community Football Club
Semi-professional club Lewes Community FC had faced a number of financial issues over the years, which eventually led to them deciding to restructure as a Community Benefit Society. This allowed them to use the community shares investment model, inviting people to become owners of the club. This meant they could update their facilities, including constructing a new 3G pitch. A key draw to becoming a member of Lewes Community FC is the club’s vision of using football to create social change, and they have attracted owners from all over the world as a result. Find out more about what the club offers investors here.
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