Social Investment Mechanism 12 03 09

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Everyone was on the same side 08/06/09

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

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

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

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

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

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

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

Energy Pool Turbine Investor Community Custodian Energy Energy Energy Manager

Managers receive %age of production

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

Investors provide development Capital by purchasing redeemable Units

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

Example: a mapping company 08/06/09

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Social Investment Mechanism 12 03 09

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