The promotion of withdrawable share capital in a society is exempt from regulation (see Section 7), but this does not release a society from its responsibilities to apply best practice to its promotional activities. There are a number of considerations to take into account when promoting withdrawable share capital.
An investment in a society is primarily made for mutual, community, or charitable benefit, rather than private financial gain, so it is important that these benefits are prominent in all promotional materials and take precedence over any financial rewards offered to investors. This matter is dealt with in more detail in Section 7. Community share offers are aimed at people with little or no knowledge of equity investment, or the risks associated with such investment. Most potential investors are unlikely to understand complex financial or legal explanations, or have ready access to expert professional advice. This means that all promotions must be simple, transparent and not overly long.
Offer documents should be the centrepiece of any promotional campaign. Section 4 provides guidance on the contents of offer documents and application forms. The promotional campaign and associated application processes should be designed to encourage potential investors to read the offer document before investing. All promotional activities and materials form part of the contract with the investor and member, so it is important that these activities and materials present consistent information about the offer.
The success of a community share offer is strongly influenced by the quality of the promotional campaign. The campaign should engage the intended community and involve them in the affairs of the society, above and beyond the act of investment. People should be seen not just as potential investors, but also as potential customers, suppliers, employees, volunteers, supporters, and most importantly as active members who will participate in the business and ensure its success.
The use of electronic media and communications is central to most promotional campaigns. Any society planning to use this form of communication must understand their obligations under the Data Protection Act and the Privacy and Electronic Communications Regulations. This is particularly important if a society plans to use more than one form of electronic media to promote its community share offer.
A society making a share offer needs to plan how the shares will be sold, including the application process and the method of payment. Online methods, including crowdfunding, are becoming increasingly prevalent, and are subject to distinct forms of regulation. Other matters, such as the purchase of shares by non-UK residents, shares as gifts, and the use of incentives, need to be carefully considered before the share offer is launched.
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