What Are Community Shares?

Why should I invest?
This is not only about buying a pub. It’s about helping to sustain our community. A village without a pub is like a cart without a horse.
Invest for community
Community pubs are the heart of any village society, bringing together people of all ages, backgrounds and interests to share interests and enthusiasms. They promote social inclusion and help to counteract isolation and loneliness. They offer a venue for meetings and services to the community. They enrich local culture, art and sport. They provide employment and training and support for the local economy.

Invest for value
Community pubs are thriving where private enterprise has failed. They provide a way to invest your money in your local economy, giving you a financial stake in the future of your own community. There are over 120 community pubs in the UK and no community pub has ceased trading. Most operate as Community Benefit Societies owned by member shareholders and typically employ a paid manager to run the pub. Community Benefit Societies are able to pay dividends to shareholders if the pub is profitable. And shareholders are entitled to 30% income tax relief on their investment under HMRC’s Social Investment Tax Relief (SITR) scheme.

What’s a Community pub?
A community pub is owned by the community, for the community.
Shareholders will jointly own the White Hart Community Inn, which is the trading name of a legal entity WHCI Community Inn (St Dogmaels) Ltd, a Community Benefit Society (number 8153) registered under the Co-operative and Community Benefit Societies Act 2014 and approved by the Financial Conduct Authority on 4 July 2019. We adopted the Plunkett Model Rules for community pubs and are registered members of Plunkett and their community pub network covering over 120 community pubs across the UK.
The purpose of a community benefit society is to serve the broader interests of the community and profits must be used for the benefit of the community. If a community benefit society is sold, converted, or amalgamated with another legal entity, its assets must be used for the benefit of the community and must not be distributed to members.
A community benefit society is an independent legal entity owned and controlled by its member shareholders who all have democratic voting rights, usually on the basis of one-member one-vote. Each member has the right to stand for election as a director. Member shareholders elect a management committee to run the business on their behalf.
We intend to employ a bar manager and a chef who will be responsible for the day-to-day running of the business. They will be supervised by the management committee, which will set the overall direction and standards for the White Hart Community Inn. The society will employ other staff from the local community to help deliver a quality service. Volunteers will assist at special events.
We decided not to lease the pub to a tenant so that we can remain in control of our destiny and have influence over how the pub is run and what activities are delivered there.

What are community shares?
There is no legal definition of community shares. The term is used here to refer to a unique form of share capital called ‘withdrawable shares’ which can only be issued by co-operatives or community benefit societies registered with the Financial Conduct Authority (FCA). Co-operative societies are for the mutual benefit of their members, whereas community benefit societies are for the broader benefit of the whole community. Both types of society can issue withdrawable shares, and they work to similar principles. A withdrawable share can be withdrawn from investment, subject to the terms and conditions of the society concerned. This provides a straight forward way of getting your money back when you want to cash-in your shares. Withdrawable shares are very different from ‘transferable shares’, which are the type of shares normally issued by companies. To cash-in transferable shares you must first find a buyer to whom you can ‘transfer’ (i.e. sell) your shares, at an agreed price. Shares in larger companies are bought and sold through stock markets, but these markets do not cater for smaller companies where there are very few buyers or sellers. Finding someone willing to buy shares in a small venture can be very difficult. Co-operative and community benefit societies can issue transferable shares, or shares that are both withdrawable and transferable.

What are the risks?
The Society wants to be fully open and transparent to its potential investors about the risks as well as the benefits of investment in community shares. Please read the following carefully:
  •  As a member and shareholder you will own the Society and The White Hart pub. If the Society cannot meet its debts and other liabilities, you could lose some or all of your share investment.
  • The Financial Services Compensation Scheme, which applies to bank accounts, does not apply to your investment, which is exempt from regulation and does not need authorisation from the Financial Conduct Authority.
  • Your investment in your share account is withdrawable without penalty at the discretion of the management committee under the Society’s rules.
  •  Your investment in your share account may receive interest but does not enjoy any capital growth.
  • The Financial Ombudsman Service does not apply to your share account or your relationship with the Society, but any dispute may be the subject of arbitration as set out in the Society’s rules.
There you will find a number of downloadable documents associated with this project including: the Society Registration and Rules; the Business Plan;
Please note that, although we have taken all possible care in preparing these documents, only this Share Offer prospectus and the Society Rules are intended to be legally binding. The other documents are for information only and neither they nor their contents should be relied upon in reaching your decision to invest. We suggest that you get in touch with a financial advisor in making your decision.

What’s my share worth?

This is a long-term investment for the benefit of the community. Shares do not increase in value. Should we have to wind up the Society for any reason and the value of the Society’s assets exceed the value of the share capital, the shareholders will still only get back their original investment. Any excess value is transferred to another community organisation having similar community benefit aims. This is known as an asset lock and is to prevent private gain if the Society dissolves.

If the asset value is lower than the share capital, shareholders would receive less than their original investment. However, shareholders have no liabilities beyond the value of the shares they buy as the shares are issued by a corporate body.

When the business is in profit, the Society aims to pay interest on the shares at a rate (up to 3%) to be recommended by the management committee and voted on at the AGM. Interest is paid gross and is taxable. Shareholders will be responsible for declaring this to HMRC.

Shares can only be sold back to the society after a lock-in of 3 years. This assures the business an initial period of financial stability. Three months written notice is required and the management committee have a duty to control withdrawals. If there are insufficient funds or new investors to purchase the shares, withdrawal will be delayed.

What’s the plan?

The White Hart has been trading profitably in recent years. We have seen accounts for the years 2015/16, 2016/17 and 2017/18 and can confirm that a modest profit was achieved in each year. We aspire to pay 3% interest on investments after a 3-year start-up period. Our business plan is based on organic growth and aims to be in a stable position to service interest and withdrawals. For detailed figures and analysis, please read the White Hart Community Inn Business Plan.

We have already raised over £200,000 in local community share pledges, donations, fund-raising events and grants – including a £25,000 grant from the Pembrokeshire County Council Enhancing Pembrokeshire fund.

And we are launching a six-week Crowdfunder campaign to raise £80,000 in share pledges and donations from a wider audience.

We are also investigating eligibility for Capital & Revenue Grants from various organisations including: the Welsh Government, the National Lottery and The Prince’s Countryside Fund.

To encourage investment in new enterprises, HMRC offer various tax relief schemes for the purchase of shares, including community shares. The Society has already received Advanced Assurance from HMRC of our eligibility for tax relief under the Social Investment Tax Relief (SITR). Investors who are UK tax payers can apply for 30% tax relief on their income tax bill for that year or the previous year. For example, purchasing shares to the value of £2,000 would mean the investor’s tax liability would be reduced by £600 (SITR).

If the share offer is oversubscribed, the extra funds would be used to bring forward the refurbishment of the building and/or enable the early repayment of the peer-to-peer loans to reduce interest charges.

The possibility of the share offer being undersubscribed must also be considered. In this situation, the likely response would be to extend the deadline and have a big push to achieve the required total. The Society is also prepared to look at other lenders, including commercial loans, as long as the costs could be safely met from the trading revenue.

Why should I buy community shares?
The main reason for buying community shares is to support the social aims of the venture concerned. Unlike shares in private companies, where personal financial gain is the main motive, community shares are subject to laws that limit financial gain and emphasise social benefit. The following are all possible reasons for purchasing community shares:
• You want to do something good for the community in which you live or work
• You want to be part of a democratic organisation
• You want to have more control over where money you goes and how it is used to
• You are looking for alternative options for how you use your money

What are the benefits of community shares for enterprises?
Community shares can potentially offer a number of benefits to community enterprises seeking to raise start-up finance.
• Capital: Community shares offers can provide long-term risk capital linked to the performance of the society
• Leverage: Community share offers can lever further funding based on the ‘first move’ of the community
• Governance: Community shares can give members meaningful involvement in the running of the society
• Operation: Community share offers can ‘bake in’ the customer base and promote member involvement in the operation of the enterprise
For further details visit: http://communityshares.org.uk