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Community Shares

Community Shares . Jo Bird Co-operative Business Consultants Sept 2013. Raising Finance. Core, project, sponsorship Prepayment, credit, in kind Secured , unsecured, bond Withdrawable , transferable, mutual. Grants Supply chain Loans Equity. History – UK Consumer Co-ops .

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Community Shares

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  1. Community Shares Jo Bird Co-operative Business Consultants Sept 2013

  2. Raising Finance • Core, project, sponsorship • Prepayment, credit, in kind • Secured, unsecured, bond • Withdrawable, transferable, mutual • Grants • Supply chain • Loans • Equity

  3. History – UK Consumer Co-ops • 1844, Rochdale Pioneers set up co-op shop • 28 founder members • £1 each to rent a shop and buy initial stock • £1 worth c£100 today – this was a community share issue • Successful model taken up by thousands • But tradition lost in last century

  4. Rochdale Pioneers, 1844

  5. Co-operative Principles • Voluntary and open membership • Democratic member control • Member economic participation • Autonomy and independence • Education, training and information • Co-operation among co-operatives • Concern for community

  6. The Return of Community Shares

  7. From 2009 onwards • Community shares has mushroomed • 300 Societies registered • 120 share offers completed • Over £20 million raised from 24000 people • Average amount raised £200k • Average 240 members investing £900 • Many share offers offer 3-8% interest

  8. Key Sectors for Community Shares

  9. Four types of share offer • Membership offer: To recruit members Nominal share capital. • Pioneer offer: Small group of founder members raise high risk capital. Ideal for Seed EIS. • Target-bound offer: To raise a target amount. Ideal for S/EIS. • Open offer: To maintain open membership and allow withdrawals, supported by track record.

  10. Community shares: key elements Community Shares

  11. Building a community around the co-op • Regular communication with members – mailing list, newsletters, facebook, website • Maintaining momentum • Public meetings –to introduce the idea, and to launch • Local and national media coverage • Activities, campaigns and working groups

  12. Member engagement Investor Customer Volunteer Service user Activist Members Expert Worker Director Supplier

  13. Enterprise Investment Scheme • HMRC scheme • 30% tax relief with EIS • 50% tax relief with Seed EIS, <2 yrs trading, up to £150,000 share offer • Loss relief • More return than a cash ISA • Cannot withdraw shares for 3 years • Some sectors are excluded inc financial services, on-lending, farming, land, property • www.hmrc.gov.uk/eis/

  14. Underwriting offers: • Appraisal report and due diligence • Community reassurance • Enable asset purchase • Fills shortfall, max a third up to £50,000 • Enables monthly instalments • Arrangement fee 2% and interest 8%

  15. Companies • Not possible for Company Limited by Guarantee to issue shares • Expensive for Company Limited by Shares • Community Interest Companies • Regulated by FCA under FSMA 2000.

  16. Only Co-op and Ben Com Societies • A unique form of capital • One-member-one-vote not one-share-one-vote • £20,000 maximum holding of withdrawable shares • Withdrawable shares cannot increase in value, but can decrease • Withdrawable under certain conditions • Interest can be paid on shares • Mostly outside remit of FSMA 2000

  17. Exemption From Regulation, But ... • But share offers are still covered by the Misrepresentation Act 1967 • The share offer document must offer a fair view of the proposal on which people can rely • The FCA still has an interest – good practice guidelines have been developed with the Community Shares Project

  18. Case Study – Tree Station • Tree work and wood fuel business • Part buy out of sole trader in 2012 • Raised £140,000 from 140 members • Minimum £200 investment • Gained EIS afterwards

  19. FC United of Manchester

  20. Case Study – FC United of Manchester • Football club formed due to rising ticket prices and market failure • 2,000 fans attend non-league matches • 3 teams • Raised £1.7m from 3,000 members • EIS • Share offer still open • Minimum £200 • £5m blended finance inc grants and loans

  21. Case Study - The Old Crown • Pub in village of Hesket Newmarket, Cumbria • Came on the market in 2002 • Concern about future of last pub in village • The community bought the pub a year later • 124 members with an equal stake of £1,500 • Members elect a Board of between 3 and 15 • The co-op appoints a licensee – experienced local pub manager – to run the pub • Turnover increased from £90k to £250k • Now provides 12 local jobs

  22. Case Study – Harlaw Hydro • Set up to install a 65kw water turbine on River Leith in the small town of Balerno near Edinburgh • Will generate electricity, sold to National Grid, income from Feed In Tariff (FIT) • Members elect a Board, but 3 Directors appointed by Balerno Village Trust • Total financial package of £313,000 • Raised over £150k community shares, plus grants and loans • Seed EIS tax releif • £60k a year for community projects

  23. Free grant for advice and support • From the Co-operative Group • To set up or grow co-operative enterprise • Registration as a co-operative • Membership, democracy, decision making • Business and financial planning • Community share issues • Can re-apply after 12 months • www.co-operative.coop/enterprisehub

  24. Further resources Community Shares www.communityshares.org.uk Co-operatives UK www.uk.coop Co-operative and Community Finance www.coopfinance.coop Co-operative Business Consultants www.cbc.coop

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