Questions and Answers

Some of these answers describe scenarios that are made clear in the Society Rules for Community Ownership document, for which those rules are the definitive answer.

Why are you not taking our money? Why pledges?

  • The company we have formed, Littlebury Community Pub Limited is a company limited by guarantee (CLG) without share capital, to cover our early marketing efforts and qualify to trigger the Asset of Community Value sale moratorium. It is not able to issue shares.
  • There are several established ways to sell shares in a community enterprise (CIC, CBS and others)
  • after careful considered review, we have opted for a Community Benefit Society (CBS), governed by the Plunkett Foundation model rules, which is very much the usual way that community pubs form.
  • Our registration documents to convert are submitted and we expect to be converted by late October (2-3 week delay).
  • Pledges give us some indication that collecting money is worthwhile, and if our bid is be viable.

Is there tax relief available for people buying shares?

  • It would be unusual for a community pub share offer, like ours and without a tenant, to not qualify for HMRC’s advance approval for the (S)EIS tax relief schemes.
  • We will seek HMRC’s advance approval, and intend to take all the actions required to make our share offer eligible. The Ickleton Lion share offer received HMRC advance approval.
  • HMRC’s guidance suggests that groups do not suggest tax relief is certain, and the best reason to invest in a community pub remains to help secure the futures of the pub.
  • The business must trade for at least three years, or the tax relief may be reclaimed by HMRC. Share sales after the initial offering are unlikely to qualify.
  • For tax advice appropriate for your personal circumstances, please consult the services of an independent, professional financial advisor.

Why do shares cost £50 ?

  • Our chairperson felt that this was an amount that balanced our chances of attracting as many investors as possible, with the paperwork required to administer the members/shareholder’s registrar.
  • Similar campaigns have used £200.
  • Having more members slightly raises the required turnout to secure a ‘Special Resolution’ at a Member’s Meeting.

What happens if the pub does not make a trading profit?

  • If the society is unable, despite best efforts, to cover the costs of running the pub, then it is up to the membership to decide the next course of action.
  • If you buy £100 of shares, you are not required to contribute anything beyond the share capital of £100 that you originally paid. If you wish to buy further shares, in a future share raise that is up to you.
  • If we have unpaid debts to e.g. HMRC or the council, they may petition to wind up the society, eventually calling in an administrator.
  • If the management committee secured a Special Resolution from Members to sell the freehold on the open market, without change of use, it is unlikely to sell for more than we paid for it, given the recent trend of pub freeholds de-valuing by ~8% per year. For recent information on pub price trends, see Fleurets Survey of Pub Prices, Jan 2024
  • If the pub is sold, and the society is dissolved (section 7.9) then, after repaying debts, the members share capital can be repaid up to the price paid for the shares (excluding any interest payments). Any surplus left over must be used for the stated community objects of the society.
  • Littlebury Village Hall is a Registered Charity 10158860 so would be eligeble.
  • The final beneficiaries must be voted on by Members, and must be Charities or Community Benefit Societies.
  • Obtaining a change of use would maximise the sale price, however it may take many years to obtain, be expensive and might not ultimately be something we can afford to complete.

Can the Society pay interest?

  • The rules allow for the payment of interest on shareholder’s share capital. This however requires the pub to be making a trading surplus (profit), and for it to be prudent to do so.
  • We do not believe that paying interest in the first few years would be prudent, until a surplus is held for property maintenance, and to be able to meet any redemption.
  • The maximum that can be paid each year is capped at 5%, or 2% above the Bank of England base rate.

What is Community Ownership, and Model Rules?

  • Set of rules to allow a group of people to own an asset (the pub) and operate it for the good of the community. Written by the Plunkett Society, who have many years of advising such groups on how best to govern themselves, and mediate disputes.
  • Protects the assets from disposal unless in the overwhelming interest of the community.
  • Buying any number of shares makes you a Member, with the same vote as any other when matters arise that are put to vote.
  • Management Committee positions are time limited, and limited without a special resolution with what they can do with the asset(s).

Can I sell or transfer my shares to another person?

  • You can only sell back (“share redemption”) to the society.
  • The society will only buy back shares if it has enough reserves to do so, and it is prudent to do so.
  • If more sellers than can be afforded, the management committee can buy back some of what is offered, on a pro rata basis, among all sellers in a given year.
  • The Society must continue to offer shares for sale after the initial offering.
  • If you have shares left, you are no longer a Member.
  • Shares of a deceased Member can be transferred (Rule 9.18).

What rewards are there for shareholders?

Like many other community pubs, it is not planned for shareholders to receive a direct discount on what they spend in the pub. The list of rewards is quite consistent:

  • We get the pub secure, trading, and work towards developing a nice relaxing spot for the village to go for a drink, which helps keep Littlebury a great place to live - the primary reason to invest.
  • Your investment may qualify for SEIS tax reliefs, depending on your circumstances.
  • Your name added to the commemorative board, celebrating the purchase with all the other shareholders.
  • Entry to a monthly or quarterly meal voucher draw
  • One free drink after the annual members meeting

Direct discounts are not viable because everything is costed on a certain margin, and that relies on the sale price being the same for everyone. It is important that rewards are retrospective, ie. we can see how trading is doing to see if sustainable to offer the incentive. It is better for the pub to do well, and pay shareholders interest on their shares once the accounts are done, than to discount at the point of sale then find ourselves in an unsustainable position later on.

Generally community pubs strive to (and genuinely deliver) a value-for-money operation, so we hope that the prices will be quite reasonable.