Kennerleigh Community Shop Share Offer

KENNERLEIGH COMMUNITY SHOP SHARE OFFER

Launch date: 1st August 2014 - Closing date: 30th September 2014

Kennerleigh and District Community Stores Limited: a Community Benefit Society to be registered in England

Registered address: Kennerleigh Post Office, Kennerleigh, Crediton, Devon EX17 4RS

You are invited to invest in your community with this share offer to secure the long-term future of your local Shop and Post Office.

By buying the freehold premises and business and creating a community- owned enterprise everyone in the area will benefit both now and for many years to come.

Introduction:

This document:

• Describes an opportunity to secure the long-term future of the Shop and Post Office as an essential asset and social hub of the local communities in Kennerleigh, Black Dog, Woolfardisworthy, Washford Pyne, Puddington and surrounding areas. • Outlines the project and its benefits. • Explains how the share offer works. • Invites you to be involved in bringing this exciting opportunity to fruition.

Please read this document carefully in full before making a decision to subscribe for shares.

This offer for shares opens on 1 st August 2014 and closes on 30 th September 2014 unless closed earlier or extended by the Interim Management Committee.

How to contact us:

Write to us at our registered office:

Kennerleigh Post Office, Kennerleigh, Crediton Devon EX17 4RS

Telephone : Sheila Kirby (Interim Treasurer) 01363-866137

E-mail : [email protected]

Visit our website : Look out for details of an up and coming website

ABOUT KENNERLEIGH COMMUNITY SHOP

The property was originally a Blacksmiths shop, strategically located in the centre of Kennerleigh Village at the junction of the main Crediton to Witheridge turnpike road with Langham Lane linking farmstead communities to the West. The road is still a principal North-South route, capturing the passing trade from a wide area of about ten parishes in this otherwise rural and isolated part of Mid Devon.

After the last war a shop was opened on the site and run by a succession of owners; and for the last 25 years by Sonia Andrews. Sonia has consistently invested time and skill in developing the business, building up an ever-expanding loyal customer base and establishing contracts with local and national suppliers.

Sonia has created a unique and special place that has put her and the Shop at the heart of this wide community. She has gained deserved success with the Shop not only as a Village Store and Post office but also as an essential hub of the community that would be a tragedy to lose.

Gwen Lancaster and an enthusiastic and loyal team of volunteers from the Kennerleigh and District Community Association (“KaDCA”) have been instrumental in working with Sonia in recent years both in the business of the Shop and the wider community outreach that it affords. Without their dedication the Shop would not have survived, let alone thrived.

And thrive it has done. Sonia has run the Shop on a growing sound financial footing. It makes an annual operating profit, albeit modest, as well as creating a vital centre regularly available to us all. The Shop stocks a remarkably wide range of goods, including fresh bread, vegetables, dairy products, juices and meat all from excellent local suppliers, together with cigarettes, wine, spirits and beers, frozen and tinned foods, and does so at prices which often undercut local supermarkets. It also sells newspapers and magazines, domestic products and stationery, as well as offers a busy Post office service.

The decision by Sonia to retire after so many years has given us an exciting opportunity to secure this vital community asset for the long-term. We have been very fortunate that Kate Povey, with local business experience, has offered to manage the shop for us. Kate is already working closely with Sonia in both the Shop and Post Office towards a planned handover in October this year.

In addition we have had a healthy response to our request for volunteers from all around to help Kate and the enterprise.

We have canvassed support from the community. Everyone who came to our meetings and who has completed our survey believes it is a good idea to continue this special community asset. Many people, by far the majority, have also expressed an interest in contributing generously to the enterprise if we raised a share issue. In fact we have already received pledges totalling almost half of the total sums needed to acquire and equip the business as well as have a prudent running reserve for the costs of employing a manager for the first three years.

INCORPORATION

The enterprise is in the process of being set up by the Steering Committee as a Community Benefit Society. This and other activities have been much facilitated by help from the Plunkett Foundation, a charity that has been instrumental in helping communities across Britain take over and run several hundred successful shops and pubs . There are currently 319 community owned shops. They are profitable and operate with a 96% success rate.

We have adopted the Plunkett Foundation’s model Rules. Our Community Benefit Society will be registered with the Financial Conduct Authority. The structure gives its members limited liability and provides a guarantee that the assets and net profits of the Society can only be used for the benefit of the community and cannot be sold for private profit.

A copy of the Community Benefit Society rules will be available on the website once launched. In the meantime a hardcopy of the Rules are available for you to see in the Shop or can be obtained on request by e-mailing us at [email protected] or by telephoning the Committee Secretary Steph Warren on 01363 860004

GOVERNANCE -

Following our first public meeting this year a Steering Committee of volunteers has been working towards setting up the Society, using a donation from KaDCA, along with their own and other local talents and funds, to get us this far.

This is an informal group with no legal authority, so they must hand over to a properly constituted body, chosen by the Members, as soon as the project is viable to confirm the arrangements currently in place and complete the formalities of transfer of the business and premises and the terms of engagement for Kate as Manager.

Ahead of the issue of shares and to comply with the Community Benefit Society Rules we therefore need to have a formal body in place. Accordingly an Interim Management Board, comprising Adrian Miller (Chair), Laura Hammond (Vice-Chair) Sheila Kirby (Treasurer) and Steph Warren (Secretary), has been made up from the Steering Committee members, all of whom are remaining fully involved in helping the process through.

Following the closing date of the share issue there will be an early meeting for all the successful applicant shareholders to attend in their capacity as Members of the Community Benefit Society and appoint a replacement Management Committee that will then continue to progress and complete all the necessary formalities for the issue of shares and the purchase of the business and to go on and manage the affairs of the Community Benefit Society.

The Management Committee will be unpaid and will work on your behalf to ensure a successful business that benefits the needs of the community. They will follow a Code of Conduct which aims to ensure good management of the business.

THE SHARE OFFER

The share offer has been designed to provide local people and the organisations that we work with the opportunity to contribute financially on a long-term basis to the success of the enterprise and to become its part owners.

We are aiming to raise an initial £50,000 needed for the purchase and initial outgoings, and a further £25,000 to underwrite the first three years’ trading of the Shop and Post Office.

By raising as much as possible for this target from our own resources through share capital, donations and fundraising, we can demonstrate the commitment of the community to project funders to support us in reaching our target. This should also help establish a vital capital reserve to assure security and success to the enterprise in the initial years, and hopefully enable Kate and the Management Committee to develop and improve the facilities for customers and staff.

Shares are priced at £50.00 per share. There is no minimum amount for this share offer but we hope that supporters can invest as much as possible to help us all reach the target.

As the enterprise is owned equally by the Members, regardless of the size of their individual shareholdings no application in joint names can be accepted: i.e. one application per individual or organisation.

As the number of Members supporting the enterprise is important to some of the grant-making organisations, and in any event to reflect a wide spectrum of support for the community, we would like to encourage separate applications from all members of a household rather than from just one person where possible.

Whilst by law the members of the Management Committee have to be aged over 16, there is no age limit for Members. The application form for shares attached to this therefore makes provision for a Custodian to apply and act as a bare trustee or nominee (usually a parent) to hold shares and vote on behalf of any Child Member aged under 16. On attaining majority the Child Member and Custodian can apply to the Treasurer for the shareholding and membership rights to be transferred to the Child Member in his \ her own right.

Under present legislation the maximum investment is £100,000 per person or organisation. However, it is recommended that no one person or organisation holds in excess of 30% of the shares in a Community Benefit Society and therefore we consider it to be prudent to cap an individual’s investment at £25,000.

The purchase of shares gives Members a right to vote in decisions regarding the management of the enterprise.

An essential aspect of a Community Benefit Society is that each Member will have one vote, irrespective of how many shares are held. A single vote by a Custodian shareholder is also available on behalf of each Child Member for whom shares are held, in addition to any vote the Custodian may have personally.

• Shares are not transferable except on death or bankruptcy and cannot be sold (other than back to the Society).

• Shares in a Community Benefit Society cannot go up in value. • As a Member you will have Limited Liability. This means you can never lose more than the value you invested in your shares if the venture was to fail, nor be held accountable for any trading or other liability.

Shares must be held for a minimum of three years. After that period, you can apply to the Management Committee, giving three months’ notice to withdraw your shares. Withdrawal will be at the discretion of the Management Committee who will judge if the business is trading sufficiently profitably and has adequate surpluses to fund withdrawals in whole or part. Total withdrawals in any year may be limited to a maximum of 10% of the total share capital.

If the freehold or business of the enterprise is ever sold then, after the repayment of liabilities and expenses, the net proceeds will be paid to Members up to the value of their shareholding. Any surplus would be paid to a charitable or community body in the local area . Any shortfall would be apportioned across the shareholding as a whole and the net balance paid pro rata.

At present there is no provision for earnings per share to be paid either as we do not anticipate sufficient profits, at least in the early years of the enterprise, to afford this. This will be kept under review by the Management Committee whose primary consideration will be the long-term interest of the business, the need to generate and maintain prudent reserves for future developments and contingencies, and the Society’s overriding commitment to community benefit.

Investors should therefore also consider the social dividend of investing in a community shop such as:

• Having a convenient local shop in the village providing so many every day supplies; • An enhanced local Post Office for postal services and banking and Parcel Force facilities; • Easy access to fresh, top quality food from local suppliers, also thereby strengthening the local economy; • Reducing the cost and impact of car journeys to supermarkets and other shops; • A drop-off facility for Courier deliveries; • A prescription collection service from local pharmacies; • Creating jobs and volunteer opportunities for local people; • Recognised enhancement of property values because there is a local shop and Post Office; • Retaining a community hub where people can obtain information, meet friends and neighbours and improve the sense of belonging in the community; • The opportunity to develop a commercial enterprise into a central community asset which can provide increasing facilities to everyone; and • Surplus profits being reinvested straight back to benefit the community.

BUSINESS PLAN

It is financially unattractive, and anyway unlikely, that we seek to obtain a commercial mortgage to help buy the Shop and business.

Accordingly it is essential that we raise enough money from shares and donations from our own community and supporters to be certain that the purchase can go ahead.

We are now seeking to raise at least £50,000 from community contributions by way of membership shares and some minor grant sources to fund this essential social enterprise.

This amount is to be combined with additional money raised from fundraising activities, further grants and beneficial loans towards our total target of £75,000 to provide assurance both for the initial purchase and also a reserve fund of £25,000 to cover the first three years running costs and contingencies in line with good business practice.

We have produced a comprehensive and prudent business plan with detailed financial information. A copy of this is available at the Shop and will be available to view on our website once it is up and running, or can be obtained on request by e-mailing us at [email protected] or by telephoning the Committee Secretary Steph Warren on 01363 860004

TAX RELIEFS

Tax relief should be available on the purchase of shares under the Enterprise Investment Scheme (“EIS”) or the Social Investment Tax Relief ("SITR") introduced in the Finance Act 2014 that has just received Royal Assent.

An application is therefore being made to HMRC for Advance Assurance in one of these forms or relief, whichever seems most advantageous to Members and to other supporters who may offer interim loans to the Community Benefit Society. Members will be advised of the outcome.

If we are successful, then no more than five months after shares have been issued (and ahead of the end of the tax year) we will supply the appropriate Form or Certificate to each Member who has indicated that they plan to apply for relief to enable them to claim tax relief.

Please indicate your intention to claim relief on your share application so we know to which Members we are to send the Form or Certificate. It is the responsibility of each prospective Member to make their own enquiries to satisfy themselves as to their personal eligibility for tax relief, and to apply to us.

An individual’s tax relief is allowable on up to a 30% shareholding in a Community Benefit Society. This maximum includes shareholdings belonging to "Immediate Family Members" (defined as Grandparents, Parents, Spouses\Civil partners, children and grandchildren).

Income Tax Relief:-The subscription for shares may be available to each eligible member for EIS or SITR offset relief against Income Tax at 30% on the value of their share subscription.

The shares must then be held for at least three years (which is anyway a provision in our Community Benefit Society Rules).

Capital Gains Tax Holdover: - This is only a deferral of tax but can be useful in certain circumstances.

The payment of tax on a Capital Gain on any kind of asset (in excess of the annual CGT allowance for an individual or Trustee) can be deferred where the gain is reinvested in an enterprise which qualifies for EIS or SITR tax relief.

The investment must be made within one year before or three years after the gain is realised. It does not need to have been made to enable the purchase of the investment.

There is no maximum or minimum period to hold shares for this relief, but the gain is brought back into account for tax purposes when shares are disposed of or the enterprise no longer qualifies under current legislation.

WHAT HAPPENS IF WE CANNOT RAISE ENOUGH MONEY?

All monies invested in this community share offer will be held on trust in the Kennerleigh and District Community Stores Ltd account with Lloyds Bank in Crediton.

Nothing will be spent from that until the Management Committee decides that we have received sufficient funds for the enterprise to succeed.

If unfortunately this does not seem to be the case they will call a meeting of Members to discuss any other options.

In the event that the project does not proceed then all contributions will be fully repaid.

IS THE INVESTMENT GUARANTEED?

No, but the equity provided by the property itself should be sufficient to repay any trading debts and any balance would offer a very small measure of security for the funds invested. All contributions should be viewed as long-term investments in the community and for its benefit, rather than the usual type of stock investment for yield or personal financial gain.

By law the value of your shares in a Community Benefit Society cannot increase, but may be reduced if liabilities exceed assets. However, because the shares are issued by a corporate body, no further liability can fall on you as a shareholder.

RISKS

We have identified a number of risk factors for the enterprise. These include:

• Failure to reach the required investment to secure premises. • Maintaining the predicted level of turnover. • Dependency on Kate pending appointment of an assistant. • Dependency on volunteers continuing to support the daily business.

This list is not necessarily comprehensive and any trading activity is vulnerable to changing or unanticipated risk. However, please bear in mind that this share offer has been compiled by members of your local community for the benefit of the community. We are all committed to supporting this enterprise and would not consider it if we did not believe in it.

Our share offer is exempt from the Financial Services and Markets Act 2000 and subsidiary regulations; this means you have no right of complaint to an ombudsman. A Community Benefit Society is registered with, but not authorised by the Financial Conduct Authority.

Accordingly we need state that the money you pay for your shares is not safeguarded by any depositor protection scheme or dispute resolution scheme. As the whole of your investment could carry a risk, please consider it carefully, and if needed seek independent financial advice.

TERMS AND CONDITIONS

You cannot withdraw your application for shares after your application form has been received and processed. The Management Committee may decide to allocate fewer shares than you applied for if the offer is over-subscribed, and share applications will be considered in the order in which they are received, so early application is recommended.

Early application will also be very helpful with our other fundraising activities to able us to demonstrate a significant and early financial support from the community itself.

Our Treasurer is sworn to complete confidentiality as to the size of contributions for shareholdings made by each applicant.

Only the names of Members will be publicly available; the shareholdings will not be known even to the Management Committee.

The Treasurer will acknowledge receipt of your subscription and will hold money paid on trust for you until the Management Committee is confident that the purchase of the freehold is going ahead.

It is also a term of the offer that, in order to ensure compliance with the Money Laundering Regulations, the Management Committee may at its absolute discretion require verification of identity from any person seeking to invest.

HOW TO APPLY FOR SHARES

A Share Application Form is attached at the end of this share offer document.

• Please complete a separate Application Form for each Applicant. • Additional forms are also available in the Shop. • Please complete a cheque for your subscription in favour of KENNERLEIGH COMMUNITY SHOP . • Before the closing date of the 30th September 2014 please send both by post 1. to our Interim Treasurer Sheila Kirby , at Woodbere House, Kennerleigh, Crediton, EX17 4RS or hand it to her personally, or 2. post it or hand it in in an envelope to Kennerleigh and District Community Stores Ltd, Kennerleigh, Crediton, EX17 4RS. • If you wish to subscribe by email and pay by Bank Transfer please follow the instructions on the Application Form.

As with all financial commitments, please consider seeking independent advice before deciding to invest.

If you need further information on the project itself, please do not hesitate to contact any member of the Interim Management Committee or Steering Committee. However we are neither able nor qualified to give financial advice.

Please read the answers to frequently asked questions on the following pages; they are intended to help with any query. As such they are informal, but form part of this prospectus.

THANK YOU FOR YOUR SUPPORT!

Frequently Asked Questions about Community Shares

Why should I become a member?

Kennerleigh and District Community Stores Ltd will be a business that is run by the community, for the community. The success of the Shop relies on the support of local people. We encourage as many people as possible to become shareholders and therefore part owners of the business.

Who will benefit from this venture?

The community in our whole of this widespread locality will benefit directly from owning a village shop and Post Office. It will be run for the benefit of the community and all surplus profits will be available for distribution for social, environmental and charitable purposes within the overall community – nominated and voted for by its Members.

Is it a good business proposition?

The community shop model has proved itself to be very robust to date. Out of a total of 319, there is a 96% success rate and it is well proven that communities that work together to set up such a venture will support it in the future.

Who is the Management Committee? Can I trust them, and do they have a personal interest?

The Interim Management Committee making this share offer is a group of volunteers who believe passionately in preserving the Shop and Post Office. They do not have a personal financial interest in this project beyond the amount they and their families are themselves investing. Kate Povey has been an invited member to meetings of the Steering Committee. She will be employed and receive a modest wage for her services under a formal contract of employment with the IPSBenCom. This will properly provide an incentive bonus for her.

Who will run the shop and the Society?

The shop will continue to be run by Kate and volunteers. We are actively seeking someone else to be formally engaged to back-up and support Kate. The Society is run by a Management Committee which is elected on a revolving basis at Annual Members Meetings.

What voting rights do I have as a Member?

In a Community Benefit Society, the rule is one member, one vote. So no matter how large or small your shareholding, you have an equal voice.

Are there any restrictions to becoming a Member?

There is no age limit, nor any requirement to be resident in the community. However, as previously stated, where a Member is under 16 years of age (i.e. a Child Member) than their shareholding will be controlled by a Custodian until they reach their 16 th birthday.

How much should I invest? What is the minimum and maximum I can invest?

The minimum amount for a member is £50.00. The maximum amount of share capital that can be invested by an individual or organisation is to be capped at £25,000.

Can I invest in instalments?

No. This is a closed offer, but it is possible that other share issues may be made in the future. Anyone will be able to apply to become a Member at any time.

What is my liability should I invest?

Your liability is limited to the amount you have paid over for shares.

Will my investment increase in value?

Shares can go down in value but by law shares in a Community Benefit Society cannot increase in value above their original price.

Will my investment remain confidential?

The Share Register will be held separately in a password-controlled, confidential environment by the Treasurer. We anticipate that the great majority of shareholders will appreciate that others may not wish their shareholding to be general knowledge. As in a private company, shareholders are by law entitled to request to view the Share Register; however this will be discouraged by the Management Committee and resisted save as to enquiries concerning the holding of the Member by the Member or Custodian for a Child Member or the Legal Representative of a Member.

We will also keep a separate Members’ Register from which the list of supporting members (but not their shareholdings) are available; and on which we should be proud to be included.

Can I sell my shares?

No, these shares cannot be sold in the open market. They are a special type of share known as a Community Share. The only way to recover their value is to apply to withdraw your shares from the community venture itself.

How can I get my money back if and when I need it?

You can apply to the Management Committee to withdraw your shares, giving three months’ notice. Withdrawals are at the discretion of the Management Committee who will judge if the business is trading profitably enough to allow withdrawals in whole or in part. Withdrawals will be paid from trading surpluses or from a new share offer. No application can be made until the shares have been held for three years.

Can I transfer my shares to the person who buys my house?

Not as such.

We would be delighted if Members are happy to stay with us, even if they move, in continuing support of the Community.

We would anyway encourage Members to propose to the purchasers of their home to invest in the community and contact the Treasurer to apply to buy shares for themselves.

If you do decide that you don’t want to continue to hold your shares once you have sold your property then it would be helpful if the purchasers subscribe to at least the same amount as the Member who is selling. This will make it easier for the Management Committee to agree to pay your money back in full from the new share proceeds offered to the purchaser.

Will I have a dividend return on my investment?

Not for the foreseeable future. With a comparatively small enterprise such as this we do not anticipate making any distributable surplus for some while. However the position can be kept under review by the Management Committee and is capable of change if the enterprise is really successful.

Is my money safe?

Your money will be cared for prudently by the Management Committee, but there is no absolute guarantee of safety. Annual accounts of the business and regular reports on the state of the business will be available on request at any time and submitted to Members at the Annual Members Meeting. The purchase of the freehold of the property offers added security to investors.

What redress do I have if the business fails and I lose the value of my shares?

The sale of community shares is not regulated and therefore there is no right of complaint to the Financial Ombudsman, nor can you apply to the Financial Services Compensation Scheme.

Can I lose some or all of this investment?

Potentially all shareholders could lose everything invested in a community share offer - it cannot be viewed in the same way as an investment in a Unit Trust, Stock Exchange portfolio, Building Society or Bank. As we will own the freehold, there is a small level of protection, not afforded to a retail business required to lease its premises. However the real security will be effected by diligent management of the enterprise by the Management Committee that Members elect and who account to them annually; and, most importantly, by the active and continuing support for the shop by the local community.

What happens to my share if I die?

Membership of the Society ceases on death. The value of shares of a deceased member may be transferred to another person in accordance with his/ her wishes. As with any form of withdrawal the Management Committee can agree to repay the shares of a deceased person to their personal representatives if they have been given notice in writing.