Pioneering Community Share Offer Launched for Youth Services
25 September 2015
A new technique for raising capital and building engagement with local citizens has been applied to youth services in Staffordshire. Biddulph Youth & Community Zone Limited is a new social enterprise established as a charitable community benefit society. The enterprise secured a contract to take over the running of youth services from the County Council in April 2015 following a competitive bid process, along with substantial grant funding from the Big Lottery Fund. In planning for future growth, the enterprise is now launching an innovative community share offer to raise £20,000 to invest in improving facilities and services, including a live performance space, professional recording studio and soft play area. The enterprise plans to run a range of traded and commissioned services for both young and old from its premises in the town.
Mark Johnson of Elderflower Legal & Secretarial, advisor to the enterprise explained: “Community share offers are based on the issue of withdrawable share capital by community benefit societies. This is a very flexible financing instrument which can be used to raise ‘patient capital’ from local people and businesses. We are building a virtuous circle here by encouraging service users and customers to become investors in the new enterprise. Strong engagement with the local community will help to build a successful enterprise, by encouraging residents to use our services and facilities and giving them a real stake in the future plans.”
The enterprise plans to pay a 2% dividend on the money invested from Year 3 onwards, provided trading surpluses allow. Investors will also qualify for the new Social Investment Tax Relief (SITR). Says Johnson, “We have received advanced assurance from HMRC that the investment will qualify for tax relief, allowing investors to set off 30% of the costs against their tax bill, either through their tax return or PAYE code, provided they hold onto the shares for at least 3 years. This further enhances the attractiveness of the investment and lowers the cost of funds compared to other sources of finance. With depositor interest rates still so low, this is a great way to use surplus cash for community benefit, whilst earning a modest return.”
Share offers by community benefit societies are exempt from much of the FCA regulation which applies to public share offers by limited companies, which means the process is easier and the issuer enjoys lower transaction costs. The share offer has been developed as part of the Community Shares Programme run by Locality and Coops UK, with funding from DCLG. The Offer is also the first to be endorsed with the new Community Shares Standard Mark, which has been created by the Community Shares Unit (CSU) to foster public confidence in this type of investment. The mark is only awarded to share offers which meet exacting standards of best practice, following independent assessment.
Says Johnson, “This is the first time that a statutory service has spun out into a social enterprise, which has gone on to issue shares to local people. This is a technique which could be really powerful for other public services, where a high level of engagement with member service users is beneficial. This is a model which could easily be applied to health and social care services, where co-production of integrated services is a priority, leisure services or community libraries, for example”.
The Share Offer is being run through the CSU’s own crowdfunding platform MicroGenius: http://www.microgenius.org.uk/project/biddulph-youth-community-zone-37
For more information about the mechanics of community share offers see: https://elderflowerlegal.co.uk/funding/community-share-offers/.
Contact: Mark Johnson email@example.com t 07768 645817