COMMUNITY SHARE OFFERS
Community share issues enable members of a community to buy shares in an enterprise which serves their community. Members receive a fair return on their investment but each member has one vote, no matter what number of shares they hold.
From energy generation to pubs from football clubs to shops community share issues have been key to raising the finance to save important community services across the UK.
CMS is an expert in using the Industrial and Provident Society form which allows communities to raise money through community share issues. We have supported over 30 share issues nation wide. CMS was a member of the Expert Reference Group for The Community Shares Project .
WHAT DRIVES A COMMUNITY SHARE ISSUE?
Community share issues happen when a community faces the loss of an important local service or wants to secure an important community asset. Finance is needed – grants may not be available or large enough, loans need repaying from day one and investment from the community is vital to save the asset.
In 2011, 103 Industrial and Provident Societies were registered to carry out a community share issue. Community share offers are becoming a common way of raising finance.
The benefits of choosing a community share offer
Community owned businesses tend to be more sustainable and are able to take a longer term view as there are no external shareholders requiring short term returns. Of the 280 community shops taken over in the last decade, only 3 have failed As Julian Ross, chair of The Old Crown Pub Co-operative says: ‘This village has a pub until the next meteor strikes, because the community aren’t ever selling.’
Other community share offers advised by CMS include: Alston Cybermoor a community owned broadband service; Scalpay Community Shop where all the advice and support was provided remotely by e-mail, telephone and Skype; and Community Energy Warwickshire a solar power community co-operative.
The interest of the community is maintaining the business, not just making a return on investment. Most community share offers give a return between 3-5%.
Communities understand best the purchase of an asset – a turbine, a building, a piece of land. Most successful community share offers have been focused on purchasing an asset.
Community share issues make use of exemptions in the Financial Services and Markets Act 2000 for the offer of shares to the public. These exemptions only apply to withdrawable shares in Industrial and Provident Societies (they do not apply to shares in Community Interest Companies). It is therefore important that advice is taken on the correct legal form to use.
These exemptions do not exempt the promoters of community share offers from their general legal duties, so it is important that a share offer document is based on a viable, well researched/prepared business plan setting out any risks involved.
CMS can advise on all technical issues in a community share offer: legal form, business plan/modelling and the share offer document.
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