You cannot issue community shares unless your organisation is incorporated as a Society.
Community shares is a term used to describe withdrawable share capital; a form of equity unique to registered societies. Shareholders have the right to withdraw their share capital, subject to the terms and conditions stated in the society’s rules and share offer document. For a detailed introduction to community shares, please see http://communityshares.org.uk/find-out-more/what-are-community-shares
Unlike companies, societies are registered with the Financial Conduct Authority (FCA), and generally use model rules pre-approved by the FCA which have been developed by and are available to purchase from one of several sponsoring bodies. There are currently five sponsors that produce rules that are suitable for community investment:
- Co-operatives UK www.uk.coop
- Plunkett Foundation www.plunkett.co.uk
- Somerset Co-operative Services http://www.somerset.coop/p/somerset-rules-registrations.html
- Supporters Direct http://www.supporters-direct.org/
- Wessex Community Assets. http://www.wessexca.co.uk/
These sponsoring bodies offer a full registration service, which includes offering advice on amendments to their model rules, and will submit applications to the FCA on behalf of their clients.
The alternative to using model rules is to employ the services of a legal professional with knowledge and experience of formulating co-operative and community benefit society rules, or to write rules without professional support. The FCA does not require applications to be made by a professional person, although it does charge more for examining applications that are not based on model rules, and these fees are non-refundable, even if the application is rejected.
A company can, by special resolution, convert into a registered society. Additional requirements apply to community interest companies. A company can re-register either as a co-operative or a community benefit society, unless the company is a registered charity, in which case it can only convert into a community benefit society, and only then with the express permission of the Charity Commission.
For further advice on converting to a society, please contact the Community Shares Unit, Cooperatives UK Advice Team or one of the sponsoring bodies listed above.