Our community share offer for the Hare and Hounds Inn will hopefully go live in mid-July. This is part of our campaign to take the pub into community ownership.
Got a question about how it works? Hopefully, you’ll find an answer in this community share offer FAQ. It’s compiled from real questions people asked at our community share offer info session in May.
Your investment and membership
Q: If I invest, is my money going into WACA or the Hare & Hounds?
A: You become a member of WACA, but your investment is ring-fenced specifically to the Hare & Hounds Inn project.
Q: Say you don’t raise enough money through the share offer, grants, and loans. What happens to the money I’ve invested?
A: Your investment will be held in a separate bank account and will be returned to you in its entirety.
Q: If I invest £100 or £1,000, do I get more votes?
A: No. WACA operates on a one member, one vote basis, regardless of the value of your shareholding.
Q: Is it correct that the value of shares can go up as well as down?
A: The value of your share investment cannot go up but can go down. However, you may receive interest on that investment in the meantime, which you can choose to withdraw or reinvest to increase your shareholding. It is best to think of this as an investment in a community pub rather than a financial investment that will grow significantly in value. Compared with bank or building society savings, this will not generate large returns. But it will help secure a great community pub. The choice is yours.
Q: Can we incentivise investment by offering discounts to members?
A: No. As a Community Benefit Society (CBS), we cannot offer benefits exclusively to members. Any benefits must be available to the wider community. We chose to register as a CBS because it makes us significantly more likely to be eligible for grants, which is vital to our financial viability at this stage.
Tax relief
Q: How does tax relief work for investors?
A: Full details will be set out in our share offer documentation, and we encourage you to investigate the SEIS and EIS schemes for yourself. In brief: SEIS offers 50% tax relief and EIS offers 30%. This is for UK tax payers, and there are some other conditions which you need to meet. We are currently investigating both schemes and will let you know as soon as we know which (if any) we have been awarded for this project. If you wish to claim tax relief, you will need a certificate from the Board confirming your share value. You then claim back the tax relief through your Self-Assessment tax return or via PAYE.
Interest on your investment
Q: What is the difference between interest and a dividend?
A: “Interest” is the correct term for a Community Benefit Society and applies to our situation. “Dividend” is a co-operative society term and is not relevant here. As a society set up to benefit the community, our rules do not permit us to offer special discounts or arrangements to individual members.
Q: If we take out a loan, does that debt need to be cleared before interest is paid to members?
A: Any interest payable to members will be built into our business plan and will appear in our annual profit and loss accounts. Once the business is in profit and the initial non-interest-paying phase has passed, the question of interest will be considered by the Board, which will make recommendations based on the state of the finances.
Q: If the business makes a profit, will I receive interest on my investment?
A: Interest paid on investments is not paid out of profit. It is an expense. Our share offer will specify a lockdown period — likely three to five years — during which time no interest is paid and no withdrawals are permitted. This is to give the business a stable start. After that period, interest may be paid and withdrawals may become possible, subject to the Board’s recommendation.
Q: Once interest begins to be paid after the lockdown period, does it have to be paid every year?
A: No. At each AGM, the Board presents the annual budget which will include any interest payments as an expense and members can comment on this during the AGM.
Q: Who sets the interest rate?
A: The Board sets the interest rate based on the current financial position of the Society. There are upper limits on the interest rate set within our governing rules (must not exceed 5% or 3% above the Bank of England base rate, whichever is the greater).
Funding strategy and grants
Q: How can we secure grants before exchanging contracts on the property?
A: This is a classic chicken-and-egg situation, but there are ways forward. The Co-op UK Booster Equity grant is available before exchange of contracts. We can also obtain an agreement in principle for a loan before committing to a specific amount. Getting an early Community Shares Standard Mark assessment of the potential share offer sends a strong positive signal to grant-making bodies and lenders, and allows WACA to plan our overall funding strategy more effectively.
Q: If we agreed to pay more than the valuation, would that jeopardise the community shares standard mark?
A: It is a fine balance. We can include an “over and above” amount in our offer, which allows some flexibility to pay above the evidenced valuation and other associated costs. However, this “over and above” amount must appear in our accounts as a cost, which will affect the ongoing viability of the business. This will delay the Society moving to making trading profits and generating reserves, thus delaying payment of share interest and share withdrawals to shareholder members.
In the unlikely event that we had to close the business and sell the pub in order to pay back creditors and shareholder members, it is likely that shareholder members would not be paid back the full value of their shares because the buyer will only pay the valuation price.
Q: If more investment is needed in the future, what happens?
A: We could run a second share offer if further investment were needed for additional projects, building works, or other purposes.
Got a question that hasn’t been answered?
Don’t be shy. We want you to have all the information you need to make an informed decision about investing in the Hare and Hounds community share offer.
Send us your questions, concerns and ideas via email and we’ll get back to you as soon as we can.