Investors – read this first

What are Community Shares?

Community Shares are shares in Community Benefit Societies and Co-operative Societies (the two types of Registered Society). These are limited liability organisations which have a social purpose as the driving force of their organisation. They are not companies and are registered and regulated by the Financial Conduct Authority rather than Companies House.
They were originally defined by the Industrial and Provident Societies Partnership Act of 1852. Legislation has been updated over the years and they are now subject to The Co-operative and Community Benefit Societies Act 2014.
They are divided into two types, and since 2014 are clearly indicated in the Register as to which type they are. Earlier registered IPSs are generally not identified as to which type they are, unless the word co-operative is in their name, in which case the are a Bona-fide Co-op:-

Community Benefit Societies which are intrinsically “not for profit”, but are able to pay a regulated interest on any money invested in them, typically no more than 7% per year.

Cooperatives. These are allowed to pay a dividend to members in addition to the regulated interest on shares. The dividend must be based on some “equitable formula”. Typical examples are returns based on the amount of business the member does with them (e.g. Co-operatives stores, farmers co-ops) or the amount of volunteer effort put in (community shops & pubs, community assisted agriculture). Dividends may be paid in cash or vouchers (e.g. Beer Tokens)

How many shares can I buy?

Community Shares have a nominal value of £1. The law permits a private individual to buy shares up to a maximum of £100,000 (although other Registered Societies can buy any number of shares). The issuing Society will often set a minimum number of shares it wishes to sell to any individual, as the administration of a small number of shares could cost them more than the value of the shares over time. This mimimum usually varies between £50 and £500.

Sometimes Societies will also issue Bonds to enable individuals to invest more than the £100,000 limit, although this is very rare. Strictly speaking these are not investments, but are loans. They have no voting rights as they are simply a certificate identifying and defining a debt. They offer a fixed rate of return (sometimes referred to as the “coupon”) and are repaid in full at the end of the specified time period.

Can I re-sell Community Shares?

Shares in Societies are normally “withdrawable”, unlike shares in ordinary companies which are “transferable”. This means they can only be bought direct from the issuing Societies (no brokers making margins! – although some other web based organisations may charge a commission to the Society for handling the transaction) and can only be sold back to them. (The only exception is if the owner passes away, when they can be transferred to a nominated person).

Some Societies are legally able to offer “transferable shares” but the vast majority choose not to. These are not Community Shares, because they could end up in the hands of people who are not part of the community. None of the share offers on this site are “transferable shares”.

Is this different to company shares?

To cash-in “transferable shares” in an ordinary company 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. When no-one wants to buy shares in a company, or only if the price is low, then the company suffers from the loss of confidence, suppliers get nervous, banks and other lenders get nervous and this can lead to the collapse of the company. This doesn’t happen to Community Shares – they cannot be bought and sold. Societies are owned and controlled by their members who have invested for the long-term, not by remote outsiders seeking only to make a profit.

So how do I get my money back?

Community Shares cannot be resold to other people, they can only be sold back to the issuing Society, and repurchase may be delayed if they have insufficient funds at the time to refund your investment. In such cases they are obliged to organise a waiting list and repay shareholders in the order they asked for their investment back.

Will they go up in value?

In a word – No.
Community Shares shares are what is called “par-value”. They always have the same value in £s unless the Society gets into difficulty, and then they might conceivably go down.
They can pay you a reasonable return on your money (more than a Bank, Credit Union or Building Society is currently able to pay) but they will always be worth no more than what you paid for them.
You won’t get rich buying Community Shares, but you might do some good with your money.

The Community Shares Standard Mark

The Standard Mark has been developed by the Community Shares Unit, with the support of the Financial Conduct Authority (FCA). The FCA does not approve or regulate community share offers that are exempt from the Financial Promotions Regulations. If you invest in community shares you have no right of complaint to the Financial Ombudsman or access to the Financial Services Compensation Scheme.

Societies that apply for the Mark are assessed by a practitioner who is licensed by the Community Shares Unit. They assess the offer document, application form, the constitution of the society, and supporting evidence such as the annual accounts and business plan. They decide whether the offer is based on good practice. But they are not required to assess the strength of the business plan or to decide whether it is a safe investment.

The Standard Mark is not a guarantee that the business will be a success. You could still lose some or all of the money you invest. It does not give you any right to financial compensation if things go wrong. The main reason most people buy community shares is to support the business and its community purpose. If you want to buy shares for purely financial reasons you may want to consult a financial adviser.

Societies are asked to sign a Code of Practice requiring them, among other things, to give the public a right of complaint to the Community Shares Unit. The Community Shares Unit will remove the Mark from offers where the society is shown not to be complying with the Code of Practice.

More info at

Caveat Emptor – Buyer Beware

It is important to understand that whilst Societies are regulated by the FSA, the purchase of shares in them is unregulated, the shares are not underwritten by the Government’s Deposit Guarantee Scheme (unlike shares in a Building Society or Credit Union), and any money you invest is technically at risk. The professional organisations involved in supporting these share issues are working to ensure high standards of business planning, financial probity and transparency are maintained, but none of the Community Share issues on this website, or elsewhere, are endorsed, guaranteed or underwritten.

Can I lose my money?

There have been very few Societies which have failed so far as most such schemes are either relatively low risk businesses such as green energy installations, or are supported by volunteers efforts such as community shops and pubs.

It is important that you assess the risks involved in any individual share issue for yourself. Do also bear in mind that money invested should be regarded as a longer term investment as Societies have the right to delay repayment when you want to cash in your shares if they don’t have the cash to hand immediately.

Further information

More details can be found in the following publications:-
Community Investment using IPS legislation
Community Shares Practitioners Guide
Investing in Community Shares

Or from the:-
Community Shares Unit

Or from the:-
Financial Conduct Authority