What are Community Shares? - Your questions answered:
You'll be buying shares in a Community Benefit Society called “Broadbottom Community Pub Ltd” which will own the Harewood businesses and develop the community hub. A CBS is slightly different to a publicly listed company and the clue is in the name – the company rules are designed to benefit the community. It's the go-to structure for community pubs. Our plan is to buy The Harewood with a blend of community shares, grant funding, equity funding and donations. If these aren't enough, we might need a loan to top-up the fund.
We need pledges now to convince funders to invest in the project. Grants are often “matched” against the community shares, in other words if we have £100k in pledges, we could apply for £100k grant funding. So, the more we get pledged, the more we can bid for in grants, and the less we need to cover by loans! Also, matched funding doesn't always mean 50:50 – Government Funds can offer up to 80% grant vs 20% shares.
Once we have everything organized, we'll issue a Business Plan and Share Prospectus with all the T&Cs and the dates for payment. You can then decide whether to proceed with your pledged investment. Once the Business plan is ready, and we have enough funds pledged, we can apply for grants. In terms of timing, buying The Harewood is much like buying a house, it can take anything from two to six months. There's the added complexity because of the shares and grants, and because we're buying the business, including the Brewery, not just the building.
- You help save the Harewood
- You own a share in the businesses and the planned community hub
- You have a vote at the AGM. It doesn't matter how much you invest, it is one member one vote
- Potential for 50% Tax Relief from HMRC on your investment using the Government's SEIS Scheme
- As the new business thrives we aim to pay interest on your investment
- We want to use the success of the hub to invest in our community
The final two options are at the discretion of the management committee. Profit is likely to be split between developing the business and projects in the community. Staff employed by the businesses will be paid at full commercial rates. All committee members are 100% volunteers.
Yes, you can sell your shares back to Broadbottom Community Pub Ltd, but not to anyone else. Also, you get back what you put in, the value is fixed. However, there are rules to protect the stability of the business and to protect everyone's investments: We need everyone to remain invested for the first three years, and there'll be a limit on how much can be released in any year. These are fairly standard for a CBS and will be detailed in the share prospectus.
If the business fails, the business would have to be sold. If it was sold for less than we paid, then the loss would be spread between investors in proportion to their investment. With respect to any grant funding, there is usually an “asset lock” to protect the investment. That means the grant funding must be reinvested into the local community or another local CBS. After a fashion an asset locked grant is a win-win for the community.
We’ll only receive the pledge money when the sale is confirmed. Right now, we need £6-8k to cover pre-purchase costs like an independent business evaluation. The committee have already chipped in £1000, and we’re planning events and a crowd-funding page to raise this cash. Also, some people may want to donate rather than buy shares - you can even do both!!
If a shareholder dies, their shareholding is converted into a loan payable to the shareholder's estate.