Community Share Offers
Community Share Offers are a way for UK co-operative societies to raise capital by offering shares to their members and the wider community.
By engaging the community and aligning financial investment with the purpose and goals of the co-operative, Community Share Offers represent a powerful tool for societies to fund start-up phases as well as achieve sustainable growth alongside community development.
Benefits
For the Co-op, community shares provide access to patient (or long-term) capital, which is often more flexible and supportive than traditional finance such as debt or grants. This strengthens the community’s engagement and sense of ownership, adding richness and value to the membership.
For Investors community shares are a chance to support projects and initiatives they are interested in and passionate about, potentially providing a modest financial return and involvement in the governance of the co-op.
How they work
Community Share Offers involve selling shares to members of the community who are interested in supporting the mission and goals of the co-op. The capital raised can be used for a variety of purposes, such as starting a new venture, expanding existing operations, or funding a specific project.
The concept of community does not necessarily mean one that is only local. In the context of a co-operative, a community typically refers to a group of individuals or organisations who share common interests, goals, or values and are collectively involved in the ownership, governance, and benefits of the co-operative.
Process of Offering Community Shares
The society develops a business plan and a share offer document that outlines the share offer's objectives, financial projections, risks, and terms.
Characteristics
Community shares do not operate in the same manner as public or private company shares:
Withdrawable Shares: Unlike ordinary shares in a company, community shares are withdrawable, meaning that investors can get their money back, subject to terms and the society’s ability to do so.
Non-Transferable: Shares cannot be sold or transferred to others, maintaining the investment's local and community-focused nature.
Voting Rights: Shares usually come with voting rights on a one-member-one-vote basis, regardless of the number of shares held.
Interest: Societies may pay interest on the shares, but the primary motivation for investors is usually to support a community cause rather than to seek financial returns.
Risks
As with any financial investment, there is associated risk:
Financial Risk: Like any investment, there is a risk of losing the invested capital, especially if the society faces financial difficulties or ceases trading.
Liquidity Risk: As shares are not transferable and withdrawal is subject to the society’s financial health, investors may be unable to withdraw their money when they want to.
Regulation
Community Share Offers are regulated by the Financial Conduct Authority (see FCA). Societies must comply with relevant legal requirements, including those related to issuing shares and conducting financial promotions.
Equal Care's Community Share Offer
Equal Care successfully completed two community share offers; the first was to fund the start-up phase of the co-op, and the second was to raise capital during difficult financial circumstances during the Covid-19 epidemic.
This below investment prospectus document was produced to promote Equal Care's first offer. It is very comprehensive and illustrates the amount of work required to produce a high-quality proposal that is appealing to investors.
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