Jo Bird Co-operative Business Consultants Community Shares

The power of engaged equity

Community Shares Programme Two-year action research programme, working with 10 organisations raising community investment including FC United of Manchester – building new stadium Cybermoor – rural broadband services Sheffield Renewables – urban renewable energy schemes Slaithwaite Co-operative – community-owned greengrocers

What are community shares? Defined as co-operative and community benefit societies with more than 20 members and £10,000 in share capital. Currently 193 societies fit this definition, an increase of 150% in the last 30 months 102 societies have combined share capital of £247m and combined membership of over 8.6 million Rochdale Pioneers – “world’s first successful co-op” - started with ‘community shares’

Community shares new societies registered, of which – 107 community benefit societies – 69 co-operative societies 71 community share offers 59 share offers completed £9.5m raised from 10,506 members Average raised £161,000 (median £58,000) Average membership 178 (median 150) Average investment per member £883

Community shares: key elements Business model Community building Offer document Governing document Community Shares

Community share societies Trade sector Post 2009 societies Pre 2009 societies MembersShare capital Renewable energy5913 9,642£17,450,000 Community shops379 4,472£1,103,000 Community regeneration159 3,668£2,086,000 Food & farming234 10,430£1,199,000 Consumer co-operatives-20 8,553,000£191,275,000 Pubs and brewing112 1,265£1,343,000 Community finance £2,114,000 Community land trusts £35,000 Fair trade21 9,222£26,151,000 Other169 38,367£7,260,000 Totals176 (46)78 (75) 8,638,000£255m

Community shares registrations by legal format

Why not companies? Companies typically issue transferable shares Large companies (capitalisation £50m+) with many shareholders are listed on stock markets where shares can be traded Smaller companies tend not to have a large number of small shareholders Company shares are regulated by FSA under FSMA 2000

Why Societies? A unique form of capital One-member-one-vote not one-share-one-vote £20,000 maximum holding of withdrawable shares for individuals Withdrawable shares cannot increase in value, but can decrease Withdrawable under certain conditions Interest can be paid on shares, “sufficient to attract and retain” Co-operative societies can pay dividend on transactions Community benefit societies can have a statutory asset lock Mostly outside remit of FSMA 2000

Re-writing the profit equation Private Companies aim to maximise the wealth of shareholders by attributing them all the profit, either to be taken now in the form of dividends, or later in the form of a capital gain through the sale of shares Community shares work on the principle that all the stakeholders – investors, customers, workers and suppliers – contribute to wealth creation and should decide how wealth is distributed and used

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

Four types of share offer Membership offer: where the amount invested in share capital is restricted to a nominal sum. Pioneer offer: offer to founding members to raise high risk capital to get “investment ready” Time-bound offer: target amount and timescale for investment offer where if it is not successful the money is returned to investors Open offer: to maintain membership and investment liquidity, supported by annual report

Enterprise Investment Scheme 30% tax relief over 3 years More return than a cash ISA At least £500 shares Can not withdraw shares for 3 years Some sectors are excluded inc financial services, farming, land, hotels, care homes

Case Study: One Planet Withdrawable Shares Minimum £25 Offer document June 2010 Raised £15, members inc 11 groups No interest for 3 yrs No EIS Opened shop October 2010

Case Study: Tree Station Tree surgery and wood fuel business Converted from a Company to a Community Benefit Society Withdrawable Shares Minimum £100 Offer document June 2012 Raising £100,000 Interest up to 6% Applying for EIS approval from HMRC

Further resources Community Shares Co-operatives UK Co-operative and Community Finance Co-operative Business Consultants

Free advice and training 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 Co-op loan finance