4.1 Guiding principles
An offer document is any form of promotional literature that encourages the public to invest in a society. Even though a society is exempt from regulation when offering non-transferable withdrawable share capital to the public, there is an obligation on the society and its representatives to be truthful and responsible and to honour the terms and conditions set out in the offer document. This obligation is reinforced by the Misrepresentation Act 1967 (see Section 7.4). It is vital that all information provided in documentation, on videos or websites, at public meetings, and in any other communications with potential investors is accurate, is not misleading, and is the result of careful consideration.
The Community Shares Unit has introduced a Community Shares Standard Mark for offer documents that meet its good practice standards. Further details of the Mark are available in Section 7.6.2. All societies making a public offer of community shares are encouraged to apply for the Mark.
This section of the Handbook provides guidance on four different types of share offer document: membership offers, pioneer offers, time-bound offers, and open offers. It also provides guidance on the application forms that accompany an offer document. This classification of offers is based on commercial practice and not on legal definitions.
The guidance in this section applies to the offer of withdrawable and non-transferable share capital by societies. Offering this type of share capital is not a regulated activity and is exempt from financial promotion regulations and prospectus directives. The bases of these exemptions, and other regulatory matters, are addressed in Section 7.
The first step in planning a share offer is to identify which of the four types of offer is most appropriate for the society at that time. This will change as the society develops, and it is helpful to prepare a longer-term strategy for how the society will move from one type of offer to another over time. Some societies may start out with a membership offer to engage the community in the enterprise and demonstrate how much support there is for their objectives. It is usual to follow up a pioneer offer, designed to raise risk capital to get investment-ready, with a time-bound offer, to implement the investment plan. And most time-bound offers are eventually followed by open offers, in order to generate liquidity for existing members and to ensure the sustainability of the society.
An offer document aimed at the general public should explain the reasons why they are being invited to invest in the society, the risks associated with this investment, and the terms and conditions that apply to the offer. It is important to use simple, non-technical language that is engaging to read from beginning to end. Offer documents should be brief, but they should also address the matters identified in the relevant parts of this guidance. More detailed information supporting the offer document should be made available wherever this is indicated in this guidance. Section 4.2 outlines the basic information to be presented in all offer documents, regardless of type. The Community Shares Unit has produced a guide for the general public called Investing in Community Shares, which explains what community shares are, and is free to download and distribute. The Money Advice Service also provides guidance on withdrawable share capital. The Community Shares Standard Mark is a form of public recognition that a community share offer embodies the principles and guidance set out in this Section of the Handbook.
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