4.5.9 Offers made by existing societies
When an existing society seeks to raise additional share capital through a time-bound offer, it should first seek the approval of its existing member-shareholders, especially if the offer will be made to non-members and/or the amount to be raised will mean that the total share capital will exceed the maximum amount targeted by any previous time-bound offer (see Section 4.5.3).
In addition to a business plan, an existing society should ensure that its annual accounts and reports for the previous three years or more are available to the public. Where a society is raising share capital that will be invested in a wholly owned trading subsidiary, the society should publish group or consolidated accounts, showing how capital flows between the different entities. The offer document should contain a link to a summary of the society’s financial performance, the financial returns on share capital, and its history of share capital liquidity. The Community Shares Unit has designed a finance summary template that societies can use to communicate this information, as part of the Community Shares Standard Mark.
There are several other matters that all existing societies making a time-bound offer need to address. If the society has previously made a time-bound offer, sufficient time should have elapsed for that investment to have become operational and the trading performance known, before the new offer is made. Under normal circumstances at least one year should elapse between offers. If a new offer is being made to raise additional capital for the same investment project as the previous offer then the reasons for this must be given. This includes reasons such as cost overruns, delays or unforeseen expenses. The offer document should explain how the additional capital will affect the financial prospects of existing members and investors.
If the proposed terms and conditions of the new offer are different from those that apply to existing members, then either a new class of membership needs to be created if the differences are permanent, or administrative arrangements need to be put in place to manage any temporary differences. Temporary differences may include the suspension of share withdrawal rights and/or the receipt of interest on share capital.
A time-bound offer should not be made by an insolvent society, unless the stated purpose of the offer is to address this insolvency, and the risks associated with the offer are made very clear. In such circumstances a society should seek to raise additional share capital from existing members before inviting applications from new members.
During the offer period measures should be taken to protect the funds of applicants from the current liabilities of the society. This can usually be done by holding the applicants’ funds in a third-party escrow account until the offer closes and the fundraising targets are met.
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