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“Not for Loss” Social Business Finance Social Investment Mechanism Workshop Chris Cook , Bristol 12 March 2009 Capital Partnerships and other Animals
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“Not for Loss” Social Business Finance
Social Investment Mechanism Workshop
Chris Cook , Bristol
12 March 2009
Capital Partnerships and other Animals
There are two ways of raising finance......
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....Credit and Investment
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Investment is either through a Limited Company....
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....a 19th Century legal dinosaur
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...or loans secured by legal claims eg mortgages
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But there’s a new furry animal out there....
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...the 21st Century Limited Liability Partnership (LLP)
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An LLP is a corporate body with limited liability....
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...and...errrr...that’s it!...
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As far as the Tax Man is concerned it is a Partnership
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It’s an “Open” Corporate where we can work with each other
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... even without a written agreement
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It enables “Peer to Peer” Finance: P2P Credit and P2P
Investment
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Peer to Peer Credit – the Guarantee Society
Sellers BuyersBuyers
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Pool
ServiceProviderServiceProvider
Services Fee
Fee
Guarantee Guarantee
Fee
Value
Credit
A mutual guarantee of P2P “trade” credit backed by payment into a Default
Pool
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A Credit Clearing Union alternative to unsecured bank
credit
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P2P Investment - Capital Partnership
Capital PartnershipCapital Partnership
InvestorsInvestors
CustomersCustomers
Managers
CustodianCustodian
% %
£
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Capital Partnership – direct Peer to Peer investment in productive assets
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“Equity Shares” - % age shares in revenues or production...
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...or Units - redeemable in production
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Example: “The Art of Flirting” – a film incorporated as an LLP
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The actors received “nth’s” of the gross revenues...
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...I got 5%...and the producer the rest...
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...except that we needed lights, cameras, pizza, coffee......
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Two Capital Partners invested £10k for 20% of revenues....
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...if there are any
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Art of Flirting LLP
Art of Flirting PartnershipArt of Flirting Partnership
Financial Capital(Investors)
Financial Capital(Investors)
ViewersViewers
Human Capital(Actors, Producer, Me)
CustodianCustodian
% %
£
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Everyone was on the same side
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Example: Albion Trust...a charity
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..who provides affordable office space for social enterprises
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...due to demand they bought a disused church next door
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...and plan a £4m development
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But if they borrow, the rents will be unaffordable
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Solution? An Albion Partnership?
Albion PartnershipAlbion Partnership
InvestorsInvestors
TenantsTenants
Managers
CustodianCustodian
% %
£
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Example: a community wishes to build a wind turbine...
Energy Pool
TurbineTurbine
InvestorInvestor
CommunityCommunity
Manager
CustodianCustodian
Energy Energy
Energy
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.
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Example: a mapping company
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...converted to a mapping LLP...
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...to bring in marketing and development partners..
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...unfortunately, the partners fell out...
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...and it all went Pear-shaped
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The Capital Partnership aligns stakeholder interests....
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...but it’s not a magic bullet
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Conventional Finance requires binding contracts....
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....partnership finance requires consensual agreement...
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...but there may be no magnetism..
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A Capital Partnership is not an Organisation...
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...it does not own anything, do anything, employ anyone, or contract with anyone...
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...it is simply a framework within which the stakeholders self organise ...
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There is no Profit and no Loss within a Capital Partnership
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I believe it achieves Yunus’ Not for Loss Social Business ideal
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Thank You
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