Community Shares
Sports clubs and community groups need money to grow, in particular, to build better facilities to generate more money. The problem is that clubs are limited in what cash they can raise from fundraising, donations, loans or grants. Too many of us know that relying on loans from individuals or companies can be very risky for the club.
Enter community shares.
Community shares can fund sports clubs, build new facilities and above all, build stronger, more vibrant, and independent communities.
What are community shares?
Community shares are a way of raising finance by offering shares, but in a secure, co-operative legal form. As opposed to ordinary shares in ordinary companies, they seek investment from people that are most interested in the long term success of the Club as a community asset – with the added bonus that it is cost effective way that avoids the red tape that a private Company would face. By giving your supporters and community the chance to invest in the Club it strengthens their connection with it, and as we have seen with FC United it can open you up to significant grant funding opportunities.
It’s the same model that helped Portsmouth supporters take control of their club, Supporter Owned Wrexham build a new shop and offices at the Racecourse Ground, and FC United of Manchester raise almost £2 million towards a new facility in Moston that will cost about £5.5 million. Outside of sport, more than 300 pubs and small shops which are now owned by their customers, many relying on community shares to raise the finance.
Benefits of Community Shares
Community Shares have the potential to do so much more for your Club than just raise money in a one off fashion. Consider the following:
A fairer way to raise money
a share offer may qualify for the Enterprise Investment Scheme, which is set up by HMRC to encourage investment in small and medium enterprises such as sports clubs. If a scheme qualifies it may be able to save individual investors up to 30% off their investment against an individual’s income tax.
It is a less risky and more flexible way for a club to raise finance
Compared with loans that have fixed repayment terms and fixed interest rates, community shares are far more flexible and patient form of equity. The Club has the power to decide when it can afford to pay in interest on community shares and when it can allow members to withdraw some or all of their share capital. Loans are debt, shares are equity
It is a growing trend
Community shares have been used by lots of community groups to finance businesses and services that are important to communities, such as pubs, shops and renewable energy. The government has recognised this trend in 2012 by funding a Community Shares Unit, to help more communities raise finance this way
It can help you become a better run Club
Community shares work to the principle of one-member-one-vote, which means the Club will be equally accountable to all members, who will have a say in choosing the board of directors and approving any major decisions about the future. A CBS structure has the same limited liability status as a company, and protects the assets for community benefit. It is a model of ownership that will appeal more to public funding bodies.
Guidance
The guidance prepared with the support of the Community Shares Unit explains in more detail what community shares are, how they fit and what the benefits are over other finance raising options. It also gives practical advice on the steps required to buy a club using community shares and engage with the community to get the best out of an offer.
Case Study - FC United
FCUM raised a staggering £1.8 million from a community share offer, alongside a development fund which stood at £170,000. Additional money raised by the Development Fund – mostly through donations, collections and fundraising events – totals over £200,000. This has proved vital in paying for development costs, such as professional fees for planning and architects to turn their dream home into a reality. Critically by raising so much through their own members and supporters in football’s first ever community share offer, FC United have been able to leverage large grants from The Football Foundation, Sport England and Manchester City Council for a project with a build cost of £5.5m. The scheme has been successful in securing EIS approval from HMRC, which should provide 30% tax relief for many of those who have bought shares. The Offer Document and business plan provides for 10% of shares to be withdrawn each year and for payment of small levels of interest on shares after three year’s of occupancy, However, the social, sporting and community benefits that the project promises to deliver will take primacy over this. The process has resulted in some new members and has been a way of engaging supporters in the project through volunteering to support the scheme – as ambassadors and a volunteer sales force.