What are Community Shares and “Bencoms”?
CCIS is a Community Benefit Society (sometimes abbreviated to “Bencom”) which is offering the chance to purchase Community Shares. A “Bencom” is a type of Industrial and Provident Society (IPS), one of a number of “mutual societies” which also include Credit Unions, Building Societies and Friendly Societies. IPSs can either be “Bencoms” or “bonafide co-operatives”. In fact, the term IPS will probably start to appear less frequently, as the Act which defined these has now been superseded by the Co-operative and Community Benefit Societies Act 2014. (The Bill is available here and the Act is available here).
HMRC have a useful summary of co-operatives and “Bencoms” within their Corporation Tax section here. Amongst other things, this states that a society ‘for the benefit of the community’ must principally show that:
- the business must be run primarily for the benefit of people who are not members of the society and must be in the interests of the community at large,
- the rules of the society must not allow distribution of profits or assets to the members: profits should be ploughed back into the business,
- the organisation has special reasons for registering under this part of the industrial and provident society legislation rather than as a company,
- on dissolution the assets of the society must pass to some other body with similar objects, not to the members.
The HMRC website also states that for both co-operatives and “bencoms”, the interest on capital will not exceed a rate necessary to obtain and retain sufficient capital to carry out the society’s objects.
There is no legal definition of Community Shares, but shares purchased in a “Bencom” are very different to most other shares. Normally, shares are transferable, meaning that the owner is free to sell those shares to someone else, for whatever price that person is willing to pay. Usually the person selling the shares hopes to receive more per share than the price they paid originally!
Community Shares are what are known as “withdrawable” shares. These cannot be traded; they can only be sold back to the issuing Society. And neither can the value of the shares go up, which sounds like bad news! What’s even worse is that the share value CAN go down!! All this emphasises that fact that Community Shares are intended to benefit the community served by the issuing Society (in our case – coalfield communities), and that they are not about financial gain for the investor.
Having said all that, CCIS Directors firmly believe that the projects we will be investing in, starting with New Crofton Co-op Colliery, will be successful and therefore able to meet their loan repayments and repay the loan in full at the end of the term. This should enable CCIS Directors to meet their target interest payments to investors, and to maintain the value of the shares, should an investor want to withdraw them at a point permitted by the share offer. In other words, it is expected that the value of the shares will remain the same. But, we cannot make any guarantees.
Co-op UK’s website (http://communityshares.org.uk/) has a number of useful resources. Particularly helpful is a section called Community Shares for Investors which has a 28-page document on Investing in Community Shares available for download. The FAQs on the website are up to date and relevant.
For an idea of the range of Community Share offers which are available, take a look at http://www.shares.coop/, and particularly their list of current and past offers here. Targets where specified, range from £10,000 to £4.8M plus.