5.7 Applications by non-UK residents
There is no legal restriction on non-UK citizens applying for community shares.
With the prevalence of the online investment platforms and international payment systems, it is possible for any society that promotes a share offer online to attract applications from non-UK residents.
Community engagement is central to community share offers. Many societies rely on the active involvement of members, not only as investors but also as customers, volunteers, supporters, employees and suppliers. It may be much harder to maintain the active engagement of members who reside outside the geographic community served by the society. On the other hand, people located anywhere in the world may have strong personal reasons for identifying with the community served by the society.
Unless the rules of a society state otherwise, there is no legal restriction on where a member of a society resides; applications by non-UK residents are allowable. But there may be laws in other countries that restrict or prevent individuals from directly investing in UK registered corporate entities.
The sale of withdrawable share capital in a society is exempt from UK money laundering regulations (see Section 7.2.5). However, a society may still want to satisfy itself that it is not receiving investments that are the proceeds of criminal or terrorist activities by carrying out identity checks on non-UK resident applicants. The identity of UK resident applications is usually secured by the bank, credit or debit card provider.
Applications from US citizens
US citizens, resident in the US, UK or otherwise are still subject to areas of US legislation. This is commonly understood in terms of their obligation to continue to pay US income tax on any foreign income, regardless of where they reside. This may have implications for US citizen investors in community shares, but is ultimately their personal responsibility to declare any interest payments as income.
Societies that have issued withdrawable share capital to US citizens may also be required to inform the US Internal Revenue Service (IRS) of any US investors in their community share offer due to regulations set out in the Foreign Account Tax Compliance Act (FATCA) 2010.
This will not apply to most societies, and is only more likely to affect societies that could be defined as having a majority ‘passive income’, including tenanted community pubs, tenanted farming models and Community Land Trusts.
If a society is in doubt of their obligations in relation to FATCA, they can take a decision not to permit investments from US citizens or take legal advice on their specific case.
Ethex prohibits applications for investment from residents or citizens of the US or Canada. This is based on the requirements of ShareIn, the payment services platform they use.
Crowdfunder does not prohibit applications for investment from residents or citizens of the US. They use Stripe as a payment services platform.