East Boldre Community Shop Community Benefit Society (CBS)
Most shops operate as companies making money for the company owners or shareholders. Community businesses have a different legal structure and, following expert advice from the Plunkett Foundation, our community shop will be set up as a Community Benefit Society (CBS).
The purpose of a CBS is to serve the broader interests of the community rather than make money for its shareholders. Any surplus (profits that are not reinvested in the business) must be distributed to benefit the community. Both the Village Hall and School Playing Fields have recently been struggling financially and these are examples of causes that the members (shareholders) of the community shop could decide to help once the business is profitable.
The CBS structure with a statutory 'asset lock' is more reassuring for grant funders. It means that any surplus can only be used for the benefit of the community and not for the benefit of its members.
CBSs are run by a management committee, typically 5 - 10 unpaid volunteers, who oversee the shop manager(s) and staff and steer the business in line with local needs.
Before trading starts the shop will need to raise capital for:
Fitting out the shop
Reserves from which to pay staff wages and operating costs
A community benefit society can raise money by issuing community shares. The term is applied to societies with at least £10,000 in share capital and at least 20 members, to focus on genuinely community owned ventures.
People (aged 16 or over) can buy 1 or more shares to become members of the Community Shop whether they will use it or not. Investing in community shares engages communities in a virtuous circle where it is in their interests as members to also be active as customers, employees, local suppliers, and volunteers.
Community shares would be issued with a nominal value (£10-£20) so that cost is not a barrier to membership. Members get one vote regardless of how many shares they own and have a say in key decisions affecting the shop and how its profits are distributed.
The money we raise from these shares shows the project has backing of the community and enables us to apply for grants from public and private bodies to match the funds we've raised.
Shares are withdrawable - they can be sold back to the CBS for their nominal value, subject to the rules of the CBS. The rules will specify the terms for withdrawal, such as the notice period and the number of shares that can be withdrawn at a time. Typically, the rules will also specify that no shares can be withdrawn for say the first 3 years of trading to allow the business to build enough reserves to cover withdrawal costs.
New customers, suppliers and employees can be encouraged to become members and investors, to replace the share capital being withdrawn by older members when they leave the society.
There is a legal limit on the amount shares that can be held by a person (£100,000). It is likely that we will set a much lower limit in our rules so that the business is not disrupted significantly if any member wanted to withdraw all their shares.
Shares are not transferable - they cannot be given or sold to another person unless a member dies.
The primary aim of a CBS is to run the business for the benefit of the community but the rules allow members to be paid interest on their shares to encourage them to invest. The rules would limit the interest rate as generating a financial return for investors is not the primary purpose of the CBS. The cost of this is included in the operating costs and is not part of the shop's profit as legally it is regarded as compensation not a reward.
Before any issue of shares in East Boldre Community shop a share offer document would be published including a copy of the rules so that people fully understand the investment they would be making. Unlike company shares, CBS shares cannot go up in value but they can go down, meaning that members could lose some or all of the money they invest. Arguably, this encourages members to use the business and get involved in its running.?