Introduction
This page outlines key features of the investment offered to members of Freeland Community Hub, and explains how these differ from conventional equity investments. The structure reflects both the Society’s legal obligations and its overriding commitment to community benefit. It is important to understand these principles before you make the decision to pledge, then commit financially.
Asset local and capital protection
Community Benefit Societies are governed by the Co-operative and Community Benefit Societies Act 2014[1] (CCBSA 2014). Under this legislation, the assets of the Society are held for the benefit of the community. The Society is subject to an asset lock, which means:
- Investors cannot sell or transfer their shares on an open market.
- When an investor withdraws their shares (subject to the Society’s discretion and financial position), they receive no more than the original amount invested — there is no scope for capital appreciation.
- In the event that the Society is wound up, any residual assets (after repayment of share capital and liabilities) must be applied for the benefit of the community and specifically awarded to a charity; they cannot be distributed to members.
This asset lock ensures that all capital raised serves the long-term interests of the community and prevents the private accumulation of capital gains by investors.
Withdrawable shares
- Shares may be withdrawn by members who have held them for a minimum period of three years.
- The Board will specify a maximum total withdrawal for each financial year.
- Withdrawals will be made in the order in which they were received up to a maximum total withdrawal specified by the Board for the financial year.
- All withdrawals must be funded from trading profits, reserves or new share capital raised from members and are at the discretion of the Board having regard to the need to maintain prudent reserves and the Society’s commitment to community benefit.
- The Board may suspend the right to withdraw shares (wholly or partially), indefinitely or for a fixed period.
Interest payments
While community benefit societies may pay interest on share capital, any such payments are strictly limited both by law and by the Society’s governing rules:
- Interest on share capital is not a reward for investment risk or capital growth, but a modest compensation for the use of capital.
- FCH may (but is under no obligation to) pay interest to shareholders subject to the following: Payment of interest must be from trading profits and is at the discretion of the Board having regard to the long-term interest of the Society, the need to maintain prudent reserves, and the Society’s commitment to community benefit.
- In practice, this means that any interest offered is likely to be modest and typically aligned with rates offered by ethical or social investment schemes.
- The primary obligation of FCH is to apply its profits to community benefit, and only after fulfilling this duty may it make interest payments to investors.
- The society’s rules govern the specific provisions for interest payments, including the Board’s discretion to declare or withhold interest based on the financial position of the society in any given year.
[1] Co-operative and Community Benefit Societies Act 2014 (CCBSA 2014)