Community shares can save local shops and pubs, finance renewable energy schemes, transform community facilities, support local food growing, fund new football clubs, restore heritage buildings, and build stronger, more vibrant and independent communities.
We deliver Community Shares Wales, a project funded by the Big Lottery Fund which raises awareness of community shares and provides guidance and advice across Wales.
Why community shares?
The term ‘community shares’ refers to withdrawable share capital; a form of share capital unique to co-operative and community benefit society legislation. This type of share capital can only be issued by co-operative societies, community benefit societies and charitable community benefit societies.
All enterprises need risk capital to start, to grow and to be sustainable. This capital is usually provided by the shareholding owners of the enterprise. Risk capital allows the enterprise to ride the ups and downs of development when pursuing ambitious, business goals.
One of the main reasons why social enterprises can find it difficult to compete with private enterprises is their lack of access to risk capital in the form of equity investment. Traditional equity investment is often considered as being incompatible with social purpose, because shares are directly linked to ownership and control. The more shares you have the greater your control.
Community shares can overcome this problem by removing the link between the amount someone invests and the amount of control they have in the business. Community Shares use co-operative and community benefit society legislation.
Key facts about community shares
- Shares cannot be transferred between people. Instead, the society allows shareholders to withdraw their shares subject to terms and conditions that protect the society’s financial security.
- The value of shares is fixed and not subject to speculation, although some societies have the power to reduce share values if the society is experiencing financial difficulties.
- Shareholders have only one vote, regardless of the size of their shareholding, so the society is democratic. There is also a limit on personal shareholdings, currently up to £100,000.
- There is also a limit on the interest paid on share capital, based on the principle that interest should be no more than is sufficient to attract investment.
- Finally, the majority of societies are subject to an asset lock, which prevents the society being sold and the proceeds of the sale being distributed amongst shareholders.
Community shares are an ideal way for communities to invest in enterprises serving a community purpose. If you are thinking about developing a community share scheme we want to hear from you – get in touch today.
Funding provided by the Big Lottery Fund.