Community shares investment

Should my group offer community shares?

For some groups, offering shares is hugely beneficial. Pictured above are three young people at Manchester's skatepark, Projekts MCR, which has raised money this way. You can read more about them later in this section. 

However selling community shares, regardless of the benefits, is a big decision.

It’s important to take time to research the process of converting to an eligible legal structure (if you need to).

Discuss the issues with your committee/board and members so they understand the benefits and challenges. Together, you can then make an informed decision.

Before deciding, ask yourselves: 

• 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?

The main pros and cons are outlined in the next section...  

Advantages of the community shares model

The potential advantages include:

• Returns and interest are paid to shareholders when the organisation feels it is justified and at a level needed for people to still be interested in investing (this is unlike shares sold by incorporated companies). 
• 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. 

Disadvantages of the community shares model

The potential disadvantages include:

• It's only possible if you're a co-operative society or community benefit society. Other types of organisations 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. 

Case study: Jubilee Pool in Cornwall

The Jubilee Pool in Penzance is widely considered to be one of the world's finest pre-war, art deco Lidos. It attracts 40,000 people a year. 

The organisers turned to Crowdfunder so that they could provide warm water swimming using geothermal heat technology. 

The also wanted to undertake a major facilities upgrade.

Offering shares was a great success. They raised £528,680 from 1,380 supporters to turn their ideas into reality. 

Case study: Projekts MCR

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, giving them £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 and so on.

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. 

Case study: Lewes Community FC

Lewes Community Football Club, a semi-professional club, had faced a number of financial issues over the years. This eventually led to them deciding to restructure as a community benefit society.

They invited people to become owners of the club through buying community shares. 

This proved hugely popular, not just with locals, but supporters all over the world. They also bought into the club's vision of using football to create social change. 

The money raised meant they could update their facilities, including constructing a new 3G pitch.

Thanks to: 

Jubilee Pool

Lewes Community Football Club

Projekts MCR & Owen Peters Photography