What are community shares?

What are community shares?

Watch: What are Community Shares? An animated guide

 

Key Messages

  1. Community shares is a funding mechanism which helps create sustainable enterprises serving a community purpose.
  2. Community shareholders buy shares in local enterprises providing goods and services that meet local needs.
  3. This community enterprise must be sustainable with a viable business proposition at its heart.
  4. Each shareholder has an equal say in major decisions and the enterprise is therefore controlled and governed by the community it serves.
  5. This type of investment has been used to finance shops and pubs, community buildings, media and sports initiatives, community renewable energy, local food schemes along with a host of other community based ventures.

Key Principles

  1. Member based and democratic – Each community shareholder has an equal say in major decisions, irrespective of the size of their shareholding, be it £25 or £25,000.
  2. Limited return on investment – Investment should be seen as primarily for social return. Interest on investment is not a guarantee and if offered is fair and modest.
  3. Withdrawable and non-transferable – Community shares cannot increase in value or be sold on to anyone else. However they can be withdrawn within the set rules of the society.
  4. Light touch regulation – Community shares are exempt from regulation under FSMA 2000 but carry a responsibility for stringent self-regulation.

Key Benefits 

  1. Patient capital – Unlike loans and bonds community shares have no set repayment date. Repayment to shareholders is linked to the performance of the enterprise and interest is at discretion of directors.
  2. Governance and operation – Community shares inspire meaningful shareholder involvement in the operation of the enterprise.
  3. Leverage – Community shares can lever further funding based on the ‘first move’ of the community. They are almost always part of a larger funding package.