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The quest for home

Submitted by on September 21, 2010 – 11:16 amOne Comment

Picture by Mick Dean

FC United of Manchester is pioneering a new model in football finance with the launch of a £1.5m community share issue.

The club, formed by Manchester United fans in 2005, is giving supporters and the wider community the chance to invest in its future by buying shares to raise funds for the development of a new £3.5m stadium, close to United’s birthplace in Newton Heath.

The 5,000-capacity ground will be the first permanent home for the club, which currently plays at Bury FC’s Gigg Lane. It will help secure its future by providing it with a sustainable income stream, and allow it to further develop its award-winning community work. It will also provide much needed community sports and social facilities and is intended to act as a catalyst for regeneration in one of the most deprived areas in the UK.

FC United is launching the share issue just days after a planning application for the Newton Heath stadium was submitted to Manchester City Council, with a decision due on Thursday 25th November.

The club hopes the share issue will raise £1.5m of the total cost of the ground, with an equal amount coming from grant funding. The club will also raise £500,000 through donations, with £300,000 of that already raised. The stadium will fall under the club’s ‘asset lock’, a legal agreement that prevents the club’s assets being separated from the club and sold off, and ensures continued community use.

FC United is the first football club to issue community shares, a means by which community enterprises can raise capital funds. The club operates under a one member one vote system, which will remain unaffected by the share issue.

The main aim of the shares is to provide investors with a social return by funding the football and community objectives of FC United, but the club’s business plan also provides for potential financial returns for shareholders.

Supporters, investors and companies can support the club’s development by buying £1 shares from the minimum purchase of £200 up to £20,000.

The offer is open to individuals aged 16 and over, and businesses. All shareholders must be members of FC United but non-members can join at the time of application. The offer closes on 30 November 2010.

There is a moratorium of three years on any withdrawals and interest payments, but the club hopes to pay small amounts of interest on the shares from the third anniversary of occupancy of the completed development onwards, subject to the club fulfilling its community obligations and to board discretion.

Community shares cannot be traded or transferred like normal shares, but shareholders who want to withdraw their investment can apply to have their funds returned from the fourth year onwards. Subject to board agreement, the club will allow not more than 10 per cent of the total share capital to be withdrawn in any one year.

Andy Walsh, FC United general manager, said: “FC United has achieved a great deal in the five years since its foundation, despite not having a permanent home. With our own ground and community facilities we can achieve much more, making the club sustainable and fulfilling our ambition to become a beacon showing a better way for football.

“Through the community share issue we can make that happen. At a time when many clubs are in debt or in the hands of major investors, we aim to demonstrate that there is a real alternative. We want to change the way football is run and financed by putting supporters at the heart of the game.

“We are offering supporters and others the chance to be part of this exciting development and help make football history. This is a landmark opportunity to invest in a club bringing football back to the heart of its communities and leave a lasting legacy for future generations.”

Subject to personal circumstances, Enterprise Investment Scheme (EIS) tax relief may be available to people who buy community shares. EIS is arranged between the investor and HMRC, and the benefit to each individual will depend on their tax position. If eligible, an investor may be able to claim back a proportion of their investment against their tax liability. If unsure, investors should seek professional advice. (Further information on EIS is at: www.hmrc.gov.uk/eis)

For more information about FC United’s community share issue, including the formal prospectus and an application form, please visit: www.fc-utd.co.uk/communityshares.

The club will be holding an open meeting for any supporters or potential investors interested in finding out more about the shares and the Newton Heath plans, at the Manchester Methodist Hall at 7pm on Thursday 23rd September.

One Comment »

  • midjmo says:

    Here’s some answers to supporters’ questions about community shares from FC United bored member Aaron Brown…

    Q1: To whom should the cheque be made payable?

    A: Cheques are payable to Cobbetts. Sorry this is an omission on the form (to be rectified on the pdf). It’s been a long summer Wink .

    Q2: Is it permitted to make multiple applications paying for some now, some later but before the offer closes?

    A: Yes. But on the second application form, please make note of the fact that it is a second form such as: “This is my second application”. We cannot do monthly payments because a) this can be very expensive; b) the offer is only open until the end of November.

    Q3: Are we limited to multiples of £200?

    A: No. Any amount between and including £200-£20,000.

    Q4: Minimum investment is £200. But the minimum investment to get (EIS) tax relief is £500. Is that understanding basically correct?

    A: Yes. One rule is ours (£200) the other is the HMRC (£500). We did discuss having a £500 minimum purchase but thought that would exclude too many people.

    Q5: The Club will have to make a trading surplus before share withdrawal or payment of interest can be paid from year 4. How can we make a surplus when the club is non-profit making?

    A: See Rule 6 of the constitution which explains that as an IPS (Community Benefit Society) we can make a surplus and has options set out in our rules as to what this can be used for (the definition of NFP is a grey area but usually means paying profit to private shareholders).

    However, it should be noted that payment of withdrawals and/or payment of interest is dependent on not just having s surplus but fulfilment of our community benefit obligations. To quote the Offer Document, interest or shares:
    “must be funded from trading surpluses and are at the discretion of the Board having regard to the long term interests of FC United, the need to maintain prudent reserves and the society’s primary commitment to community benefit;”

    Q6: What happens if an investor dies? Will their beneficiaries be able to access funds immediately, or will they also have to wait three years?

    A: Rule 18 (c) of the club says that
    “Shares shall not be transferable except on death or bankruptcy or with the consent of the Board”. That allows transfer of shares if someone dies. Withdrawal would still need to be after 3 years.

    Q7: Is the 5% administration charge that will be imposed on returned monies (if the scheme does not go ahead) likely to be a major disincentive?

    A: Not likely as it’s a standard charge and reflects the fact that we have to pay for the scheme to be administered.

    Q8: What would happen to someone’s share (and associated funds) if they were not to renew their membership?

    A: They would keep them but lose member benefits.

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