​Community Shares and Credit Unions

1. Introduction
Community shares are an innovative and increasingly valuable way to start, expand and run businesses run for community benefit, rather than private profit.
Since 2009, almost a 100,000 people have bought over £100m of community shares to support 350 democratic businesses throughout the UK. Community shares is the most important financial tool for revitalising the co-operative

Credit unions could significantly increase economic and social benefits to their members and build resilient communities, by raising awareness of the benefits of co-operative enterprise, incubating democratic co-operatives, and providing member loans for community shares.

2. What are community shares?
Community shares are a unique type of share capital that is withdrawable (UK) or redeemable (RoI). This type of share capital is only available to co-operative and community benefit societies.
Like credit unions, community shares are based on the principle of one member, one vote – unlike shares in companies which are one share, one vote. In co-operatives and credit unions, the term member = investor = co-owner = shareholder.
The Community Shares Unit states “Community shares can save local shops and pubs, finance renewable energy schemes, transform community facilities, support local food growing, fund football clubs, restore heritage buildings, and above all, build stronger, more vibrant, and independent communities.”1

Model Rules used in the UK and Ireland allow shares to be exchanged for goods and services provided by the Society. In certain circumstances, a member may sell their shares back to the Society, or transfer them – at par value. Interest is usually paid on shares. However, there can be no speculation with community shares as they can not be sold on a stock market.

3. Regulation in UK and Ireland
Co-operative or community benefit societies must be careful not to stray into regulated activity, such as taking money on deposit, like a bank or credit union. Unlike shares in companies and credit unions, community shares are not regulated in the same onerous way, thus making them very affordable. Shares in credit unions are regulated and guaranteed by the regulator eg the Financial Services Compensation Scheme.

Community shares are fully at risk, so there are some regulatory limits. The maximum shares an individual member may hold is £100,000 or €150,000 in UK and RoI respectively . There is no limit on shares held by another Society. In the Republic of Ireland, community share offers for more than €30,000 must gain approval from the Registry of Friendly Societies (apart from agricultural societies).
Much transferable best practice is available at http://communityshares.org.uk/resources/handbook. For example, Societies should provide potential members with reasonable information.

4. Examples of community shares in action
Northern Ireland Community Energy
NICE raised £150,000 from 86 members in their first community share offer in 2015. NICE installed solar panels on the roofs of 13 community buildings. The Rath Mor centre in Derry saved 66% on their electricity bills. Individual members of NICE benefited from a whopping 50% tax relief on shares, as NICE was approved by HMRC for Seed Enterprise Investment (Seed EIS) tax relief.

Down to Earth
The Society raised £40,000 from 50 members to pay for development work on Northern Ireland’s first (and Ireland’s second) green burial enterprise.

Boundary Brewing
Boundary Brewing in Belfast raised £100,000 raised in ten days in 2015 to start their brewery. They raised a similar amount in their second share offer a year later to buy bottling equipment to meet increasing demand for their beer.

Third Space Co-operative
Third Space cafe raised community shares to expand their Dublin cafe chain. They were the first Society to secure consent from the Registry of Friendly Societies, in 2015 – thus blazing a trail for others to follow. The Society is eligible for Employment and Investment Incentive (EII) which would benefit members with 40% tax relief on their shares 2.

Slemish n tha Braid Credit Union and the Raglan
Ballymena’s communities are being hit hard by heavy job losses in manufacturing companies. In response to the needs of its members, this credit union is seeking to provide business units by renovating unused parts of its premises. The credit union has worked with others to create and develop a new community benefit society. The Raglan Society aims to raise almost £1m finance through community shares, loans and grants.

5. Conclusion: How credit unions could benefit from community shares
Co-operatives and community shares enable communities to create or grow a service, democratically owned by its members. Co-operatives help build resilient communities and provide economic and social benefits to their members. Credit Unions share the same values and could assist by:

  1. Raising awareness within credit union members, of the benefits of co-operative enterprise, and credit unions’ valued role within the broader co-operative movement.
  2. Incubating democratic co-operatives, as Slemish n tha Braid credit union are doing in Ballymena.
  3. Proving loans to members to buy community shares. Many members would gain more from tax relief than they would pay in loan interest.

Jo Bird
Co-operative Business Consultants
8 August 2016

About the Author: Jo Bird has over 20 years experience as a practitioner, champion and consultant with co-operatives and credit unions. She is based in Derry, working freelance across the island of Ireland and North West England. This article is based on a presentation given to students enrolled on University College Cork’s BSc degree in Credit Union Business. www.cbc.coop/about/jo-bird

Jo is licensed to award the Community Shares Standard Mark. In addition to the case studies above, her community shares experience includes: Hayfield Sustainable Transport (£50,000), Village Greens (£100,000 from 400 members), Greater Manchester Tree Station (£140,000 raised from 200 members), FC United (£2m from 2,000 members), and Shared Interest Society (£29m raised from 9,000 members).

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