INVESTING IN FUTURE ROOTS
Our initial finance to buy the land will come in the form of 'loanstock' from individual investors and groups.
'Loanstock' comes from people investing money for a set period at a fixed rate of interest. This is then repaid once members are paying rent for the land. Small investors are welcome, as well as those who would like to invest larger sums. In this way individuals can financially support the project and it's aims whilst receiving a return on their investment: a very tangible way to put your savings to good use.
If you are interested in helping Future Roots achieve their objective and would like more information, then please contact us at:
futureroots@cooptel.net
or by phone on:
07773156294 or 07855638779
Future Roots Housing Co-operative Ltd
Reg. No. 30085R
Ethical Investment Opportunity
Future Roots is a fully mutual housing co-operative, a limited company run by it's members. Our aim is to create an eco-friendly park home site providing high quality, affordable housing.
LOANSTOCK
'Loanstock' is the term we use to describe a system operated by the co-op to enable outside people and members to invest their money in the co-op and thus help it raise the finance it needs. Other forms of loans from supporters are possible, such as a private mortgage, but as we explain below the 'loanstock' system is convenient and has its advantages.
How loanstock works - the basics
The system is one of 'fixed-term' loans. In other words people lend money to the co-op for a set period - we usually recommend five years to ten years. The co-op pays interest to the investor ['loanstock holder']. Usually this is either paid direct to the investor at the end of each year, or an extra loanstock certificate is issued to cover this interest. At the end of the set period, the investor is paid back in full.
Advertising
The major reason this system was developed was because of a need for co-ops to be able to publicly advertise that they are seeking financial support - for instance on leaflets, or within articles in magazines, etc. The Financial Services Act [and other legislation] governs such affairs to protect the public from unscrupulous con-merchants. Usually this means that bodies seeking to advertise for investment must draw up a complicated and expensive prospectus, but loanstock overcomes this. In short:
"Housing co-operatives are exempt from both advertising and prospectus requirements for loanstock issues since they are housing associations registered as industrial and provident societies. The co-op must use the money for its objectives [housing members]. The rules must contain a power to issue loanstock, and care must be taken to ensure that no misleading statements are made in any literature or advertisements."
Stuart Field, Radical Routes, Sept 1995
references: The Financial Services Act 1986 [Investment Advertisements] [Exemptions] Order 1995 [S.I. 1995 No. 1266]The Financial Services Act 1986 [Investment Advertisements] [Exemptions] [No. 2] Order 1995 [S.I. 1995 No. 1536
The Public Offers of Securities Regulations 1995 [S.I. 1995 No. 1537]
Administration
Using the loanstock system for all or most of our investors means that its all a lot easier to administer - all loans are subject to similar conditions, earn interest at the same time, and use the same paperwork. So it's less workload to deal with than a whole collection of individually negotiated loans.
How loanstock works
The co-op has to 'make an issue of loanstock' which has an opening date and a closing date. Only in between these dates can the co-op accept money and issue the loanstock. We will set the opening and closing dates, agree the possible rates of interest, etc. Application forms will be sent to those who made pledges and we will continue to advertise the existence of the loanstock. When the issue opens, we will bank the cheques and issue loanstock certificates. When the closing date for the loan nears, we will contact the investors, and arrange to return the money, and any interest earned.
Should the first issue not raise sufficient money, or should we need more money at some time in the future, it is possible to make further issues.
Lenders do not have rights to attend meetings, or participate in the management of the co-op, unless they are residents.
Interest
Interest will be paid annually, at a negotiated rate, between 0% and 4%. Any interest will be credited with cash, or the allocation of additional loanstock certificates to be repaid at the end of the loan.
The co-op does not deduct tax from this interest, and it is the loanstock holders responsibility to declare the interest earned in their tax return.
Repayment of the loanstock
The loan will be returned in full on the repayment day, including any interest earned. Future Roots Housing Co-operative Ltd may, at its discretion, repay a loan early. Proper notice of repayment should be given, and a new loanstock certificate for any remaining investment issued. Loanstock can also be transfered by the lender, with the consent of the co-op.