6.2.2. Community shares and loanstock
'Community Shares' & 'Loanstock' are well aligned to fund CCLH as both also have a social aim, that being said there are fewer of these schemes around and there's typically less capital available.
See this page in: Cymraeg
Some CCLH schemes raise additional finance through Community Shares or Loanstock from private individuals or organisations. Through such means, investors can provide small to large capital to the CCLH scheme.
How to raise capital
How CCLH schemes raise such capital differs dependent on whether the scheme is legally registered as a society or a company. If a society issues community shares, the capital raised is withdrawable share capital and investors become members of the scheme. If a society issues loanstock, investors are making a loan which is repayable on a set date and they have no membership rights. If a company wishes to issue shares or loans, their investment materials need to be approved by the Financial Conduct Authority which can be quite expensive. It is advised that CCLH schemes get appropriate advice if they are issuing community shares or loanstock.
Developing a prospectus
CCLH schemes wishing to raise finance through these means would need to develop a prospectus setting out:
- key points in their business plan to show scheme viability. It is unlikely that investments will be protected (ie. they will not have a charge on the properties) and so investors need to know that the CCLH scheme will be able to repay investments
- what interest will be offered to investors and the frequency and how it will be paid
- whether the investor will have a vote within the CCLH scheme