Social Investment - Capital Partnerships and other animals....

1. “ Not for Loss” Social Business Finance Capital Partnerships and other Animals Social Investment Mechanism Workshop Chris Cook , Bristol 12 March 2009

2. There are two ways of raising finance...... 08/06/09

3. ....Credit and Investment 08/06/09

4. Investment is either through a Limited Company.... 08/06/09

5. ....a 19 th Century legal dinosaur 08/06/09

6. ...or loans secured by legal claims eg mortgages 08/06/09

7. But there’s a new furry animal out there.... 08/06/09

8. ...the 21 st Century Limited Liability Partnership (LLP) 08/06/09

9. An LLP is a corporate body with limited liability.... 08/06/09

10. ...and...errrr...that’s it!... 08/06/09

11. As far as the Tax Man is concerned it is a Partnership 08/06/09

12. It’s an “Open” Corporate where we can work with each other 08/06/09

13. ... even without a written agreement 08/06/09

14. It enables “Peer to Peer” Finance: P2P Credit and P2P Investment 08/06/09

15. Peer to Peer Credit – the Guarantee Society Buyers 08/06/09 Pool Service Provider Services Fee Fee Guarantee Guarantee Fee Value Credit Sellers

16. A mutual guarantee of P2P “trade” credit backed by payment into a Default Pool 08/06/09

17. A Credit Clearing Union alternative to unsecured bank credit 08/06/09

18. P2P Investment - Capital Partnership Capital Partnership Investors Customers Custodian % % £ 08/06/09 Managers

19. Capital Partnership – direct Peer to Peer investment in productive assets 08/06/09

20. “ Equity Shares” - % age shares in revenues or production... 08/06/09

21. ...or Units - redeemable in production 08/06/09

22. Example: “The Art of Flirting” – a film incorporated as an LLP 08/06/09

23. The actors received “nth’s” of the gross revenues... 08/06/09

24. ...I got 5%...and the producer the rest... 08/06/09

25. ...except that we needed lights, cameras, pizza, coffee...... 08/06/09

26. Two Capital Partners invested £10k for 20% of revenues.... 08/06/09

27. ...if there are any 08/06/09

28. Art of Flirting LLP Art of Flirting Partnership Financial Capital (Investors) Viewers Custodian % % £ 08/06/09 Human Capital (Actors, Producer, Me)

29. Everyone was on the same side 08/06/09

30. Example: Albion Trust...a charity 08/06/09

31. ..who provides affordable office space for social enterprises 08/06/09

32. ...due to demand they bought a disused church next door 08/06/09

33. ...and plan a £4m development 08/06/09

34. But if they borrow, the rents will be unaffordable 08/06/09

35. Solution? An Albion Partnership? Albion Partnership Investors Tenants Custodian % % £ 08/06/09 Managers

36. Example: a community wishes to build a wind turbine...

37. Energy Pool Turbine Investor Community Custodian Energy Energy Energy Manager

38. Managers receive %age of production

39. Suppliers may invest equipment & materials: must invest agreed % profit

40. Investors provide development Capital by purchasing redeemable Units

41. Outcome: turbine financed by selling <40% of production. 08/06/09

42. Example: a mapping company 08/06/09

43. ...converted to a mapping LLP... 08/06/09

44. ...to bring in marketing and development partners.. 08/06/09

45. ...unfortunately, the partners fell out... 08/06/09

46. ...and it all went Pear-shaped 08/06/09

47. The Capital Partnership aligns stakeholder interests.... 08/06/09

48. ...but it’s not a magic bullet 08/06/09

49. Conventional Finance requires binding contracts.... 08/06/09

50. ....partnership finance requires consensual agreement... 08/06/09

51. ...but there may be no magnetism.. 08/06/09

52. A Capital Partnership is not an Organisation ... 08/06/09

53. ...it does not own anything, do anything, employ anyone, or contract with anyone... 08/06/09

54. ...it is simply a framework within which the stakeholders self organise ... 08/06/09

55. There is no Profit and no Loss within a Capital Partnership 08/06/09

56. I believe it achieves Yunus’ Not for Loss Social Business ideal 08/06/09

57. Thank You 08/06/09