Community shares refer to a distinct type of share capital called “Withdrawable Shares” which provide capital for a community project and behave differently to conventional share capital, (which are known as ordinary or transferable shares). The difference is explained below:

Transferable or Ordinary Shares

Most companies, such as BT, use a form of share capital known as transferable or ordinary shares, which can be transferred or sold by shareholders to a third party at a mutually agreed price based on their personal valuations. Investors buy shares in the expectation of two types of financial return:

  • Regular dividend on shares
  • The possibility of capital appreciation, in which case they would expect to sell the shares at a higher price than they paid for them.

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.

Withdrawable Shares

Withdrawable share capital is completely different. This type of share capital cannot be transferred between people. Instead Members wishing to withdraw their share capital will have to apply to the LCE Board after the third year of operation giving three months’ notice. Withdrawal of share capital is at the discretion of the Board, although will not be unreasonable refused as long as there are sufficient funds available.

Members of LCE will be allowed to withdraw their share capital, subject to the rules of the Society and, therefore, it provides a straight forward way of getting your money back when you want to cash in your shares if the Society has sufficient funds available at the time.

The value of shares is fixed and not subject to speculation. LCE has the power to reduce share values or suspend repayment of share capital if the Society is experiencing financial difficulties.

Shareholders have only one vote, regardless of the size of their shareholding, so the Society is democratic. There is a limit on personal shareholdings of up to £100,000 and there is also a limit on the interest paid on share capital. This is based on the principle that interest should be no more than is sufficient to attract and retain the investment.

LCE Community Benefit Society has adopted a statutory asset lock, which prevents the Society being sold and the proceeds of the sale being distributed amongst shareholders. This removes the possibility of capital appreciation and the scope for investor speculation.

The asset lock ensures that the solar schemes and any other LCE projects belong to the local community and if it is closed in the future any assets it has will be passed to a local charity or community organisation.