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The Community Shares Handbook
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2.2.7.4 Community Shares Scotland Hybrid Model (Community Benefit Society) 

Sponsoring Body: Development Trusts Association Scotland  

Background 

Since its inception, Community Shares Scotland have been consistently approached by existing Development Trusts who wish to use community shares to advance a specific enterprise within their community.  Sometimes these communities are sparsely populated and remote and the scale of investment needed often outweighs the investment potential within the geographic community. 

These DTs are almost all Companies Ltd by Guarantee (CLGs) or Scottish Charitable Incorporated Organisations (SCIOs) and are firmly anchored in their community. Therefore, a hybrid model was developed to enable share capital to be raised through a new linked CBS without the DT/the geographic community losing control of the enterprise and the community benefit.  

Some examples: 

  • Loch Ness Hub
  • Raasay Community Renewables
  • Sleat Hydro 

Key features of the DTAS Hybrid Model 

  1. Development Trust holds an Anchor Share in the new Hybrid CBS (£1) 

This allows DT a power of veto over certain resolutions, e.g. changing the objects, appointing Directors, winding up. These resolutions need 75% of total votes to pass and the DT holds 26% of the voting power in these cases. 

  1. Development Trust entitled to reserved seats on the Hybrid CBS Board 

Usually a third and no more than half of the total seats. The appointed DT Directors perform an important role representing the voice of the wider community. 

  1. Provision for surpluses from Hybrid CBS to be paid out to the Development Trust administered under a separate and a legally binding Deed of Covenant.
  2. Membership constituencies include:
  • Community Members (resident of the geographic community);
  • Contributor Members (live outwith the geographic community) and 
  • the Anchor Share (DT has detailed above) 

Preserving community benefit 

Following the community share issue, the CBS will have a large number of shareholders – and it is reasonable that those shareholders should have a significant involvement in the governance of the new legal entity, given that they have provided risk capital for the business. However, there are a number of considerations which point to the Development Trust having an ongoing role in relation to the offshoot: 

  1. The development trust is likely to have developed the proposals for the project up to implementation stage, and it is reasonable for it to expect some financial return on that investment of time and resources;
  2. The development trust has its own democratic governance structure, which is likely to involve a wider cross-section of the community than the CBS (the CBS will include among its membership only those people and organisations with the financial resources to make an investment);
  3. The development trust is likely to be best placed – given its role in setting overall strategy for community development and regeneration within the area - to determine how any surpluses from the business should be spent for the benefit of the local community.