Brought to you in partnership with Locality and Plunkett UK
Community Shares Finance Guide
Jump to table of contents

4. Policies and processes

This guide does not provide template policies or processes as every society and business is unique but instead lists important considerations for each policy in relation to managing share capital.

Withdrawals policy

Any withdrawals policy must be consistent with:

  • the society’s rules;
  • Any share offer documentation or public information (website etc.);
  • and the FCA guidance and conditions for allowing share withdrawals. 

The FCA’s registration guidance, says that a society should only allow the withdrawal of shares if “it has trading surpluses that match or exceed the value of shares involved, and the directors believe that the society can afford to pay its debts taking into account all of its liabilities (including whether it will be able to pay its debts at the date of withdrawal, and for a year after that, any contingent or prospective liabilities,) and the society’s situation at the date of the transaction”.

The withdrawals policy should include:

  • The amount able to be withdrawn on an annual basis and/or basis for calculating the amount available (as related to the liquidity and retained earning reserves policy)
  • Any notice period required to request withdrawals
  • The order and application process for allocating withdrawals (is it first come first served, or is there a window to apply and decisions made at the directors' discretion a specific date)
  • Intentions with regards to growth and use of capital

Liquidity policy

A liquidity policy should lay out the society’s approach to:

  • Maintaining liquidity for share withdrawal
  • Calculating working capital requirements
  • Dealing with shocks (3-6 months overheads)
  • A time period to building up liquidity (if applicable)

Retained Earnings reserves policy

A retained earning reserves policy should lay out the society’s approach to:

  • Intentions and plans with respect to growth (should reflect share offer document and business plan)
  • Any internal investment and capital replacement policy
  • How to cushion against future losses (not the same as potential shocks)
  • Application of retained earnings through interest and community benefit payments
  • Ability to cover share withdrawals

Interest rate policy

An interest rate policy should be consistent with the society’s rules and share offer document and should cover:

  • The maximum rate of interest payable (either fixed figure or % above base rate)
  • A budget and method to calculate the annual proposed interest payments
  • A method to ensure affordability of interest rate payments
  • Methods for paying interest, such as via bank transfer, registry service, vouchers, additional share capital etc.
  • Approach to communicating this policy to members for transparency of interest rates offered at AGMs