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Different types of community ownership

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A community buyout sees the community buying a business from its present owner or owners. Find out how this works in practice

Types of community ownership 

Direct ownership without shares

  • The community become owners of the business but do not provide any investment via shares. The capital to buy the business in this case would be raised by a combination of grants and loans. The community enterprise runs the business directly.

Direct ownership via community share issue

  • Members of the community become individual shareholders in the business through purchasing community shares. The community enterprise runs the business directly. Read more about community shares.

Indirect ownership

  • The community takes over the asset, either through community shares or other forms finance, and holds it for community benefit, but does not run the business themselves. In many co-operatively owned pubs, the community does not directly run the business but leases out the operation to a licensee who is selected by the community.

Challenges and solutions

Communities engaged in acquisitions and buy-outs face all the same challenges as new-start initiatives, but often with the extra features of:

  1. Having to act quickly, especially if there is competition to buy the business or its principal assets
  2. Having to commit to development costs with the risk of substantial losses as there is no certainty that it will be successful in acquiring the business, 
  3. The difficulty of agreeing a fair valuation for the business, especially when the principal assets are worth more as non-business assets.

 

Communities can overcome these challenges
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