COMMUNITY SHARES
How to raise share capital for a
community enterprise
Legal structures
Several different structures used by community shops:
• Company limited by guarantee
• Community Interest Company (CIC)
• Bona fide cooperative (IPS)
• Community Benefit Society (IPS)
(IPS = Industrial & Provident Society)
• Plunkett is a sponsoring body for IPS Community
Benefit Society rules.
• Over 60% of community shops use this structure.
Plunkett model rules for
Community Benefit Society
Plunkett Model Rules:
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Provide a template
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Bespoke for the needs of community enterprises
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Democratic principles: one member, one vote
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Allow for community shares
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Profits reinvested in the enterprise or allocated for community
purpose
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Approved by FCA (Financial Conduct Authority)
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Registered with Companies House/DETI in NI
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Compliant with up-to-date legislation
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Include automatic updates
The Plunkett model
Why does Plunkett favour the Community Benefit Society?
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Shareholder democracy (one member, one vote)
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Withdrawable share capital (“community shares”) - works
in situations where ordinary transferable shares wouldn’t
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Limits on shareholdings (£20k per individual)
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Limit on share interest (should only be paid at a rate
necessary to raise enough capital to run the business)
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Distribution of profits to community
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Open membership (not even any age limit)
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Asset lock (on dissolution, the assets must go to another
similar community or charitable enterprise)
What are “community shares”?
Unique to IPS structure. They differ from company shares.
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Withdrawable only from the business itself
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Cannot increase in value
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Non-transferable
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Interest payable
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Can raise significant funds in small amounts from large
numbers of shareholders
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Max £20k investment per individual (currently)
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Eligible for tax relief (Enterprise Investment Scheme – EIS)
Only one vote, no matter if shareholding is £1 or £20,000
How to present the idea to a
community
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Different economic model – needs explaining
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Be realistic about how much needs to be raised
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Emphasise the “social return”
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Tax relief is a great draw-card
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Emphasise limited liability
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A good prospectus can make a great difference – make it look
professional
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Keep it simple - the detail should be in a Business Plan
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Distribute as widely as possible – there is strength in
numbers!
Frequently Asked Questions
If someone was asking you to buy shares, what
questions would YOU ask before investing?
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Who are the people organising this? Do they have a personal
interest?
Is it a good business proposition?
Who will run it?
Is there a business plan?
What is my liability should I invest?
Will my investment increase in value?
How can I get my money back if and when I need it?
What redress do I have if the business fails?
The key to success
Community share offers are successful •
Investors become your customers/volunteers/champions
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Share investment gives a VOTE and a voice
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The project becomes a shared venture
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People can invest as much or as little as they can afford
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They attract good publicity
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Share investment can be used as leverage – attracts
investment from lenders and grant-givers
Return on investment
Interest can be paid on shares although few community
shops offer this (pubs do)
Proposed by committee, after assessing business health
Cap on interest in rules (to keep it prudent)
Another financial benefit:
EIS/SEIS (Enterprise Investment Scheme) – government
tax incentive scheme to encourage investment in new
enterprise – and Seed EIS for the smaller enterprises
Tax relief on community shares of 30% (EIS) or 50%
(SEIS)
Not just a financial investment
Having a substantial group of members behind you
- moves the project on from being an IDEA to being a
PROPOSITION
- Gives other investors confidence
- Improves the likelihood of lasting success
- Improves social cohesion
- Volunteering is a sign of a healthy society
Aim to include a large proportion of households in the project
RESULTS!
Recent community share offers
THE LARGE ONES:
• Dunsfold, Surrey raised £208,000 in community shares to
buy village shop and flat above.
• Hinton St George, Somerset raised £140,000 to buy their
shop & flat.
• Neatishead in Norfolk raised £55,000 to purchase a shop to
serve three villages.
• Ide, Devon raised £70,000 to convert an old garage to a
shop/cafe.
• Wrabness, Essex (pop. 400) raised £100,000 to purchase &
convert a bungalow into a village shop and licensed cafe.
Latest: COMMUNITY SHARES FOR PUBS
Following the community shop model, cooperative pubs are
regularly raising amounts in excess of £100,000. The Bell Inn
in Bath raised a whopping £810,000 in shares
RESULTS!
Small can be beautiful
SMALLER AMOUNTS - SAME ACHIEVEMENT
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Hurst Green, East Sussex (area of deprivation) raised
£22,000 to renovate unused church for a community hub
Buckland Brewer, North Devon raised £4000 to help towards
converting their church vestry into a shop
Aston on Clun, Shropshire raised £6000 towards the
purchase of a portacabin shop
Chiddingly, East Sussex raised £4500 to convert a farm
building into a tiny shop
And an urban pub project:
• The Bevy pub, Brighton (area of deprivation, first coop pub on
a housing estate) raised £44,250 from 546 shareholders
Contact…
The Plunkett Foundation
Woodstock
info@plunkett.co.uk
01993 810730