Even when a new enterprise has got through the pre-start stage and is able to prove that it is investment-ready, there is still a lot to do before it can launch a community share offer. There are four main documents it needs to have in place:
- a governing document that sets out the rules of the society, defining its purpose, objectives, membership, management and form of share capital
- an offer document aimed at the target community promoting the sale of share capital; community share offers are normally exempt from financial promotions regulations, but are nevertheless bound by contract law to observe good practice and follow guidance on these matters
- a business plan that provides the evidence to support the assumptions and assertions made in the offer document
- a community engagement plan for recruiting members to the society, involving them in the business model, and securing their investment.
Community share offers are markedly different to share offers made by private enterprise, in the following ways:
- Private enterprises usually only make public offers at a relatively late stage in their development, typically as part of an exit strategy for private equity. In contrast, community share offers tend to be made by new enterprises with no proven record of success.
- New private enterprises usually raise share capital from family, friends, business angels and other types of sophisticated investor, whereas community share offers are aimed at people who are unlikely to have had any prior experience, knowledge or competencies in investing in enterprise.
- Start-up private enterprises tend to raise share capital through private placements, which might lead to a handful of investors purchasing stakes in lots of £50,000 to £100,000. In contrast, the average number of investors in a community share offer is 200 and the average amount invested is £1,000 per investor.
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