Lessons to be learned from Hastings

There is some very painful news from Hastings, where the community benefit society running Hastings Pier was forced some months ago to go into Administration.  Funds raised through the high-profile community share issue were lost.

That’s bad enough, but what’s really upsetting is what has just happened now. The community dusted itself down, rallied round, used crowdfunding, and came up with a very strong rescue package for the pier.  New hope for a really good end result, you’d think.  Yet what has transpired is that the Administrator has disregarded the community’s rescue proposal and has made a deal to dispose of the business to an entirely commercial operator. Administrators can, of course, do this.

I would strongly encourage you to read the moving blog which Jess Steele from Hastings has just posted. What I think is particularly important is Jess’s comments about the need for a different process of Administration for community benefit societies.  As she says, “It is wrong to use a commercial administration process for a civic/community asset, applying private property sector ‘solutions’ to a civic problem that the community is capable and willing to solve for itself given half a chance.”

She goes on to propose a Community Administration Act, for use where a community asset is at stake.  Supportive backbench MPs are being sought to try to bring this forward.

Here’s her final thought: “The two Battles for Hastings Pier (2006-13 and 2017-18) stand in deadly stark contrast to each other. In one a very active community was eventually empowered by public funds to achieve the renovation of a derelict structure. In the other, the fully-restored asset was removed secretly from 5,000 shareholder-owners and then subjected to a commercial process that led, unfathomably, to where we are now.”

The road to Hastings Pier

The growth in the number of community shares issues has led more community ventures to decide to incorporate themselves as ‘bencoms’ (societies for the benefit of the community) under the Industrial and Provident Societies Act rather than as companies limited by guarantee (CLGs), traditionally the usual route which many not-for-profits chose.  Bencoms can raise money from supporters as withdrawable member share  capital, something that’s not available for  CLGs.

But there’s lots of quirks about Industrial and Provident Societies regulation, and one is that bencoms cannot at the moment become registered charities with the Charity Commission.  They can be charities, but they can’t be registered charities.  (I’m talking about England and Wales here. Scotland and Northern Ireland have their own regulators for charities, but for the moment I’m trying to keep this simple.)

So charitable bencoms instead apply to HM Revenue and Customs to have their charitable objects recognised and to be able to benefit from all the usual tax concessions.  They’re known as exempt charities.

What happens when a community initiative set up as a company limited by guarantee and already with registered charity status wants to hold a community share issue?   It has to change to be a bencom, of course, but what happens if it does so to its status as a charity?  Well, thanks to Hastings Pier Charity which has just done exactly this, we now know the answer. My article about this issue went up yesterday on the Guardian’s social enterprise webpages.