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The Power of Engaged Equity: Community Shares Programme

Explore the Community Shares Programme, a two-year research initiative by Jo Bird Co-operative Business Consultants and Locality, working with 10 organizations raising community investment. Discover the impact of community shares and how it rewrites the profit equation. Learn about the key elements of community shares and the different types of share offers. Find resources and free advice to set up or grow your own co-operative enterprise.

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The Power of Engaged Equity: Community Shares Programme

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  1. Jo Bird Co-operative Business Consultants www.cbc.coop Community Shares

  2. www.locality.org.uk/communitysharesseminar The power of engaged equity

  3. 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

  4. 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’

  5. Community shares 2009-11 • 176 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

  6. Community shares: key elements Community Shares

  7. Community share societies

  8. Community shares registrations by legal format

  9. 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

  10. 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

  11. 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

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

  13. 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

  14. 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 • www.hmrc.gov.uk/eis/

  15. Case Study: One Planet Withdrawable Shares Minimum £25 Offer document June 2010 Raised £15,075 109 members inc 11 groups No interest for 3 yrs No EIS Opened shop October 2010

  16. 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

  17. 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

  18. 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 www.co-operative.coop/enterprisehub

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