FAQ
and our answers

If you don't find the answer you're looking for, please do get in touch.

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Supporters

What are community shares?

Why should I buy shares?

Why should I use Microgenius?

How do I buy shares?

Who can buy shares?

What are the risks?

How many shares can I buy?

How do I increase the amount of shares following my initial purchase? 

How do I buy shares as gifts?

Are there transaction costs?

Can I claim Enterprise Investment Scheme (EIS) tax relief?

What level of financial return can I expect on my community shares? 

Are these shares regulated by the Financial Services Authority (FSA)?

What's the difference between an ordinary share and a community share?

What's the difference between a community benefit society and a co-operative?

How do I pay?

Can I get a refund?

Communities

Why should we use Microgenius?

How much does it cost?

How does Microgenius collect and transfer payments?

When does my society receive payments for shares?

Can I extend my share offer after it has begun?

How can we form a co-operative or community benefit society?

We're not ready for a share offer yet, but we're interested to know more...

We're developing a community project, and have some questions about using Microgenius...

Our project is not in the UK, can we use Microgenius?

 

Supporters

 

What are community shares?

There is no legal definition of community shares. The term is used here to refer to a unique form of share capital called ‘withdrawable shares’ which can only be issued by co-operatives or community benefit societies registered with the Financial Services Authority. Co-operative societies are for the mutual benefit of their members, whereas community benefit societies are for the broader benefit of the whole community. Both types of society can issue withdrawable shares, and they work to similar principles. A withdrawable share can be withdrawn from investment, subject to the terms and conditions of the society concerned. This provides a straight forward way of getting your money back when you want to cash-in your shares.

Withdrawable shares are very different from ‘transferable shares’, which are the type of shares normally issued by companies. To cash-in transferable shares you must first find a buyer to whom you can ‘transfer’ (i.e. sell) your shares, at an agreed price. Shares in larger companies are bought and sold through stock markets, but these markets do not cater for smaller companies where there are very few buyers or sellers. Finding someone willing to buy shares in a small venture can be very difficult. Co-operative and community benefit societies can issue transferable shares, or shares that are both withdrawable and transferable

 

Why should I buy shares?

You may want to buy shares because:

  • you want to do something good for the community in which you live or work
  • you want to be part of a democratic organisation 
  • you want to have more control over where money you invest goes to
  • you are looking for alternative investment options.

 

Why should I use Microgenius?

Microgenius offers an easy, secure electronic way of finding and buying community shares, and keeping track of them. By buying shares using Microgenius, you are saving time and reducing the workload for your chosen society.

Over time we aim to have lots of share offers here, saving both you and your community enterprise a lot of time and effort. Microgenius is run by the Community Shares Unit, a government-backed programme delivered by Co-operatives UK and Locality to support and grow the community shares market. 

 

How do I buy shares?

Select the project in which you'd like to buy shares and simply enter the amount of money in the £ box and click on the ‘Buy shares’ button. £1 usually buys you 1 share (unless the share offer document says otherwise). Payment is taken via direct debit when the share offer closes successfully. You will need to register with Microgenius before you can complete the purchase so we know who you are. Please make sure you fill out both private and public profiles, so your society can get in touch with you and issue your share certificate. Your private profile cannot be seen publicly on the website, it's just for Microgenius and the society to use.

 

Who can buy shares?

Anyone who has a valid UK bank account and is eligible according to the share offer document for the society can buy shares using Microgenius. It is then up to the society to accept them as a member. Some societies allow people to buy shares on behalf of other people (e.g. children and grandchildren): they'll ask you if you want to nominate someone else as the shareholder.

 

What are the risks?

The sale of community shares is not regulated by the Financial Conduct Authority, because investors are deemed to be investing for social returns, not financial gain. This is good news for community ventures, which would otherwise face prohibitively expensive regulations when marketing community shares. But it comes at a cost to community investors, who have no right  of complaint to the Financial Ombudsman Service and cannot apply to the Financial Services Compensation Scheme.

Community shares are far more risky than keeping your money in a savings account with a bank or building society, where currently the first £50,000 is fully protected. You can lose everything you invest in a community shares offer. This is why it is important to look carefully at a community share offer before deciding to invest.

 

How many shares can I buy?

The minimum number you can buy is determined by the society. The maximum you can buy by law on one society is £100,000. However, we can only process investments of up to £20,000 per account. if you wish to invest more than this, please get in touch.

 

How do I increase the amount of shares following my initial purchase? 

It's easy to increase the amount of shares you wish to buy following your initial purchase on Microgenius. All you need to do is login into your existing Microgenius account and go through the same process you went through when purchasing shares the first time.

When you are transferred to GoCardless, select the option: "I have a GoCardless Account" and enter email address and password you used when making your first share purchase. This will allow you to set up another direct debit for the additional amount you wish to invest using your existing GoCardless account. Once completed, you will receive an email confirming the additional investment and you will be able to see your increased investment on your profile: http://www.microgenius.org.uk/my-shares 

 

How do I buy shares as gifts?

Our full gifting policy can be read here. But the key steps are as follows: 

  1. Register for a user account with the details of the gift recipient (including email address)
  2. Select the check box which confirms that the account details you have entered are for a gift recipient
  3. Select the project in which you'd like to buy shares and simply enter the amount of money in the £ box and click on the ‘Buy shares’ button
  4. Payment will be taken via direct debit when the share offer reaches its target. This is through our direct debit provider GoCardless – simply enter your own bank details into the secure service when prompted at our checkout and GoCardless will take care of the rest.
  5. The gift recipient will then receive an email to confirm that shares have been purchased on their behalf (so unfortunately it cannot be a surprise!). You will also receive an email from GoCardless to confirm the direct debit has been setup.
  6. The society will contact the gift recipient prior to the share offer deadline to confirm that they are eligible and agree to become a member before the shares are issued. If confirmation is not received by that date, or if the recipient is not eligible or willing to become a member, then the direct debit authorisation will be cancelled by the society.
  7. If the gift recipient is eligible and willing then the direct debit will be collected when the share offer closes successfully and both the gift recipient and the giver will be notified. 

 

Are there transaction costs?

No. For projects listing on Microgenius from February 2014, supporters are no longer charged on ther share purchase for payment processing on successful share offers. However, the exact amount will be made clear on the payment screen before you commit to buying. 

 

Can I claim Enterprise Investment Scheme (EIS) or Seed Enterprise Investment Scheme (SEIS) tax relief?

For some projects. Many community projects are registering for EIS tax relief which is currently 30% the cost of the shares. For example if you spend £1000 on shares tax relief would be £300, making the net cost only £700. Claiming EIS relief does not affect the annual amount received, so if the anticipated annual return to members was 3%, EIS tax relief increases the return on net cost of investment to 4.3%.

If a project is registering it will be indicated in the project profile and associated share prospectus so you know whether to expect tax relief or not. If you buy shares in those projects that are registering you may be able to claim this tax relief against your income tax bill. It will also depend on your personal tax arrangements. The society will send you the relevant HMRC form to claim the relief.

More information can be found at http://www.hmrc.gov.uk/eis/. For all tax arrangements, please ask an accountant or HMRC to make sure you understand.

Similarly, some community enterprises can register for SEIS which offers up to 50% relief on the cost of the shares. 

 

What level of financial return can I expect on my shares? 

You may be offered a financial return on your investment, together with the scope to cash-in your shares at some point in the future. Some enterprises state in their share offer document how much interest will be paid on shares, This is a generally a target return per year listed as a percentage of your share capital. The share offer document will also tell you if there are any other conditions surrounding your share capital and returns, as well as any ability to claim Enterprise Investment Scheme (EIS) or Seed Enterprise Investment Scheme (SEIS).

However, you should be aware that, unlike companies, there are legal limits to financial returns on shares in co-operative and community benefit societies. Also, unlike company shares,co-operative and community benefit society shares cannot go up in value but they can go down, meaning that you could lose some or all of the money you invest. 

 

Are these shares regulated by the Financial Conduct Authority (FCA)?

No. Co-operative and community benefit societies are registered by the FCA, but societies are not required to be authorised by it for the issue of withdrawable shares. 

This means that community investors have no right of complaint to the Financial Ombudsman Service and cannot apply to the Financial Services Compensation Scheme.

 

What's the difference between an ordinary share and a community share?

Community shares refers to a distinct type of share capital called Withdrawable Shares which behave differently to conventional share capital, also known as ordinary or transferable shares. Each form is set out below: 

Transferable Shares

Most companies use a form of share capital known as transferable or ordinary shares, which can be transferred or sold by shareholders to a third party at a mutually agreed price based on their personal valuations. Investors buy shares in the expectation of two types of financial return: a regular dividend on shares, and the possibility of capital appreciation, in which case they would expect to sell the shares at a higher price than they paid for them.

If these shareholders want to cash in their shares, they will usually find a buyer who will purchase all the shares in the company. Larger companies that decide to go public will normally be listed on a stock market, which provides a mechanism for buying and selling shares. Market forces and speculation on the future value of those shares determine share prices.

Withdrawable Shares

Withdrawable share capital is completely different. This type of share capital cannot be transferred between people. Instead, the society allows shareholders to withdraw their share capital, subject to terms and conditions that protect the society’s financial security. This means that a shareholder can cash in their shares with relative ease. Shareholders have a share account, and can increase or decrease their shareholding, or close the account altogether by withdrawing all their share capital. The value of shares is fixed and not subject to speculation, although some societies have the power to reduce share values if the society is experiencing financial difficulties.

Shareholders have only one vote, regardless of the size of their shareholding, so the society is democratic. There is a limit on personal shareholdings, currently up to £100,000, and there is also a limit on the interest paid on share capital, based on the principle that interest should be no more than is sufficient to attract and retain the investment. Community benefit societies can adopt a statutory asset lock, which prevents the society being sold and the proceeds of the sale being distributed amongst shareholders. This removes the possibility of capital appreciation and the scope for investor speculation. 

 

What's the difference between a co-operative and a community benefit society?

A co-operative is run for the mutual benefit of members who use its services. This is based upon the common economic, social and cultural needs or interests of the members. Typically, the common need or interest will define their relationship with the co-operative as a service user, customer, employee or supplier. A co-operative has open membership; there should be no artificial restrictions on membership, and membership should be open to anyone who meets the criteria. Recent guidance from the FCA says that a co-operative can have investor-members who are not otherwise users of the society’s services, however the majority of members should have a direct and tangible relationship with the co-operative. A co-operative can pay interest on member share capital and a share of the surplus, or dividend, based on the level of transactions (customer-purchases, supplier-sales or employee-wages) with the society.

A community benefit society is run primarily for the benefit of the community at large, rather than just for members of the society. This means that it must have an overarching community purpose that reaches beyond its membership. An applicant enterprise must also have a special reason for being a community benefit society rather than a company, such as wanting to have democratic decision-making built into its structure. Although a community benefit society has the power to pay interest on members’ share capital, it cannot distribute surpluses to members in the form of dividends. A community benefit society can opt to have a statutory asset lock, which has the same strength as the asset lock for a charity and for a community interest company. This type of asset lock is not currently available for co-operatives. 

 

How do I pay?

We use GoCardless, a low-cost direct debit service. When you have decided what shares you would like to buy, enter your bank details into their secure service when prompted at our checkout and GoCardless takes care of the rest. GoCardless accesses the direct debit network through its sponsor, the Royal Bank of Scotland and is registered as a Small Payments Institution with the Financial Services Authority.

 

Can I get a refund?

If the minimum number of shares are not sold, no money will be debited at all. Once the share offer has closed there is a seven-day cooling off period in case you change your mind. After that we instruct the direct debit to go ahead. After the money has been transferred, you will need to ask the society if you can have your money back. 

 

   

 

Communities

Why should we use Microgenius? 

In essence because it means less work for both you and your supporters. 

Microgenius is here to make it easier for you to find and manage your members. With Microgenius you can collect money and data securely and electronically. No more collecting hundreds of cheques and paper forms in the post, puzzling over how to set up efficient, secure online payments by yourself, or worrying about how to keep data secure. 

You will benefit from our national profile and you and your supporters will have ready-made social media buttons and embeddable promotion code, making it easier to get the word out to people online quickly and professionally.

We also have plans to provide you with other useful tools too, watch this space and tell us what you need next!

 

How much does it cost?

The platform is currently free as part of a pilot programme being run by the Community Shares Unit. However, enterprises are subject to a charge levied by GoCardless, currently 0.5% of the overall investment raised. Microgenius does not make any money on these transaction fees. 

 

How does Microgenius collect and transfer payments?

We use GoCardless, a low-cost direct debit service. GoCardless accesses the direct debit network through its sponsor, the Royal Bank of Scotland and is registered as a Small Payments Institution with the Financial Services Authority.

Enterprises, when completing their project profile, will be prompted to register for a GoCardless merchant account, submitting their society bank details. This enables GoCardless to initiate the payments and transfer the overall amount to the society on successful completion of the offer.

The terms and conditions are set out here: 
 

When does my society receive payments for shares?

Payments are initiated once the share offer has closed and the investors' seven day cooling off period has ended. Funds are normally deposited in the society's account three working days after investors have been debited.

A share offer closes either at the end of the share offer period or at the maximum value of shares you intend to sell if this occurs before the end of the share offer period. This date and maximum value should both be stated in your share offer document.

Can I extend my share offer after it has begun?

Yes. However, you must ensure that your share offer document states that this is a possibility (often after approval from the founding board) and you must notify all investors of the change. You can easily notify Microgenius investors of a change by using the updates functionality of the platform and they will receive an email notification.

We're not ready for a share offer yet, but we're interested to know more...

Please visit the Community Shares Unit website to find lots of information on the possibilities of community shares. There are a number of resources on the site and you can also contact a member of the Community Shares Unit advice team. 

 

Where can we get more information on setting up a co-operative or community benefit society?

Co-operatives UK has plenty of information on starting a co-operative, as well as in house specialist team which provides an affordable registration service for new co-operatives. We also provide assistance to co-operative business advisors supporting co-operatives and offer comprehensive support on registration, governance advice and model rules.

 

We're developing a project, and have some questions about using Microgenius...

Great, please us our Contact us form and we will get in touch. 

 

Our project is not in the UK, can we use Microgenius? 

Sorry, not at the moment, but do drop us a line anyway as we're always thinking about new ideas: Contact us.

 

 

 

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