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United Kingdom’s Community Shares

Community Shares

Near the end of 2008 the Locality1 (then known as the Development Trust Association) and Co-operatives UK2 established the Community Shares program, an action research partnership funded by the Cabinet Office and the Department of Communities and Local Government (DCLG). Locality is a national network of community-led organizations, and Co-operatives UK is a secondary cooperative comprised of worker and consumer cooperatives. The program set up publicly financed crowdfunding platforms available only to cooperatives, community benefit societies, and charitable community benefit societies. It’s similar to the JOBS Act crowdfunding platforms in the US, except that the platforms are publicly, not privately, financed, which eliminates fees that enterprises need to pay in order to raise capital through the platforms. Since 2009, almost 100,000 people have invested over £100m to support 350 community businesses throughout the UK.

The DCLG also finances the Community Shares Unit,3 the objective of which is to support enterprises with technical assistance, promote good practice and raise awareness of community shares as a sustainable funding mechanism for community enterprises.

Here’s how the program works. Community shares can only be issued by co-operative and community benefit societies, and they are exempt from UK securities laws. Community shares cannot be transferred between people. Instead, the enterprises allow shareholders to withdraw their share capital, 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 enterprises 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 a limit on personal shareholdings, currently up to £100,000 (£20,000 in Northern Ireland). 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 from being sold and the proceeds of the sale being distributed amongst shareholders. This removes the possibility of capital appreciation and the scope for investor speculation. The main reason why people buy community shares is to support a community purpose, not to make a financial gain, which is why this type of share offer is not subject to financial promotion regulations.

This page was written by Geoffrey Gilbert, a Sustainable Economies Law Center Intern.

  1.  http://locality.org.uk. ↩
  2.  http://www.uk.coop/about/about-co-operatives-uk/our-governance . ↩
  3.  http://communityshares.org.uk/find-out-more/about-community-shares-unit. ↩

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Enterprise Blog

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