Selling Shares

Many community energy groups installing bigger systems raise the capital needed by producing a share offer.  This is a great way to get a lot of people involved in clean energy and offer them financial returns.

Share offers are regulated and must be done responsibly.

The Financial Services Authority

Offering shares requires that the organisation acts in a professional and responsible manner – people could potentially lose their money! The Financial Services and Markets Act 2000 created a regulatory framework governing the promotion of shares and bonds and the body responsible for overseeing this is the Financial Services Authority (FSA).

This legislation is there to make people aware of the risks and benefits of share issues and to protect them from misleading promotions.

The contents of any promotion of shares to the public must be approved by an FSA authorised person unless it is covered by an exemption. This does not apply not non transferable shares in an IPS.


Publishing a prospectus

Section 85 of the Financial Services and Markets Act 2000 requires organisations making a financial promotion to publish an FSA approved prospectus if they are offering transferable securities. The Act and the FSA’s prospectus rules set out in detail what a prospectus must contain and the approvals required for such a document.

This requirement does not apply to non-transferable securities, such as withdrawable share capital in IPSs. There are also exemptions for the following:

  • Bonds issued by charities. There is also an exemption for non-profit making bodies similar to charities and IPS community benefit societies, which may well describe some CICs.
  • Transferable shares and bonds issued by IPS community benefit societies, as long as the money raised is used solely for the purposes of the issuer’s objectives.
  • Offers of transferable securities where the offer is being made to fewer than 100 people or the total being sought is less than €2,500,000.

However, it is important to remember that although an offer might be exempt from having to issue an approved prospectus, the organisation promoting the investment opportunity may still need an FSA authorised person to approve the contents of any communications about the offer.

Exempt offers

Although exemption from regulation may make community investment a more affordable option, it is still important that the organisation ensures that community investment is promoted in a responsible way. Even though it might not be necessary to publish an approved prospectus, it is still a matter of good practice to produce some form of offer document for prospective investors that fully sets out the risks as well as the potential rewards. It should also make clear that the offer is made by an organisation that is not authorised by the FSA to conduct regulated activities, and that investors have no right of complaint to the Financial Ombudsman or recourse to the Financial Services Compensation Scheme.

For further information

Co-operatives UK is the national membership organisation for co-operatives of all kinds. It provides information and support on a wide variety of topics relating to the operational duties of IPSs, including those of secretaries and directors. It has a number of model rules for bodies wishing to register as IPSs, including community investment models.

The Development Trusts Association (DTA) is the leading network of community enterprise practitioners dedicated to helping people set up development trusts and helping existing development trusts learn from each other and work effectively.

Co-operative & Community Finance (C&CF) – Co-operative & Community Finance provides sympathetic loan finance to help people take control of their economic lives and create social benefit. It exclusively serves the co-operative and social enterprise sector, and has supported hundreds of businesses ranging from small community-run enterprises to large award-winning organisations.

Co-operative and Mutual Solutions Ltd (CMS) Co-operative and Mutual Solutions Ltd is a leading UK consultancy providing business advice to co-operatives and social enterprises. CMS is a worker co-operative. We have a team of specialists with wide ranging skills and knowledge of good practice nationally and internationally.

Energy4All was formed in 2002 by Baywind Energy Co-op to help communities develop renewable energy schemes, normally through the launch of local share issues. The company is owned by the co-ops it creates

Wessex Community Assets Ltd (WCA) Wessex Community Assets (WCA) offers support and advice to organisations wishing to obtain community investment, avoiding reliance on grant

Co-operatives UK also have a useful practitioners guide to community shares

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