This is where you will find answers to common questions you might have.
The directors of Exelby Green Dragon Community Pub Ltd have discussed and consulted on the proposals outlined in this prospectus with many villagers and potential investors. There is considerable enthusiasm and support for the proposals and inevitably some questions. Some of the most common are addressed below.
How are you managed and governed?
Exelby Green dragon Community Pub Ltd is a Community Benefit Society (Bencom) which is a form of Co-operative Society. You can find our rules here:
What if we are over-subscribed from people wishing to invest?
If a greater sum than required is offered there are two possible things that can happen:
- There are limits put on how much anyone can invest to match the overall budget requirement. This might mean some preference for smaller investors, say those wishing to invest up to £5000 and a proportional allocation for those above. A figure would be set once we know the overall level of investment, or,
- We might increase the budget requirement so that we can invest in other assets that support the overall viability of the pub and still achieve a return for investors.
Also, a waiting list would be put in operation.
What if we do not attract sufficient interest from investors to complete the purchase of the Green Dragon?
We do not know how much a share offer might raise until we try. If we do not attract the anticipated interest and/or grants and loans there will be insufficient funds to acquire the freehold. In this case the purchase will not go ahead. The cheques will be collected and banked, but no share certificates will be issued. If, at the deadline that we set, insufficient shares have been purchased, the share issue will be halted and all those who have invested will have their investment returned to them. In this way, there is protection.
What if a large number of Shareholders want to withdraw their investment at the same time?
The directors intend to sell shares and attract grant aid and loans that will allow the Society to buy the building and refurbish it. In subsequent years, the Society will aim to build up a reserve from the rent prior to payment of interest to shareholders. By the end of the third year this reserve fund should stand at around £25,000 . The reserve fund will be held in a separate account and will not used to run or develop the business but to cover future liabilities and contingencies.
To allow for this shareholders must agree not to withdraw funds for the first three years, to allow it to establish itself. After that they will be required to give three months’ notice if they wish to withdraw shares.
So, the earliest that any shares can be withdrawn is three years and three months after the business has been launched. As the business grows, each year a proportion of the expected surplus will be added to this reserve fund (up to a maximum of £40,000). This is illustrated in the financial section of this prospectus. If a shareholder gives notice that they wish to withdraw shares then shares of the same value will be marketed and can be acquired by new or existing shareholders. Ideally, new shareholders will be found to replace those shares that are to be withdrawn and there may be a time limit on any pay out to allow this to happen. If they cannot be replaced then the reserve fund can be utilised.
Will the three-year rule be strict?
Whilst the Society asks that every member commits their investment for at least three years, if, for a pressing reason, a member needs to withdraw their shares in advance of these deadlines, then the board has the power to allow this and will make every effort to facilitate it.
What if a lot of shareholders want to withdraw?
Providing that the business is successful and pays interest in line with the financial predictions it is unlikely that large numbers of shareholders will wish to withdraw their shares at the same time. This is the experience of other community owned pubs.
If several shareholders did seek to withdraw their investment the business might have to close and the assets would have to be sold to return the shareholder’s funds. Our business plan demonstrates that this eventuality is unlikely, as the business has every chance of success. Also, an investment in a business that you use regularly and that is run by people that you know and trust is a reasonably safe investment.
Might there be a further share offer?
This may happen to raise funds from:
- Any shareholder who wishes to withdraw, or
- If there is a need to invest additional capital to develop the business further
What if the business is not viable?
If, at any stage, the prevailing market conditions are so unfavourable that, despite best efforts and the support of local users, the business does not develop in the way anticipated, then the directors will be forced to close the pub and offer it for sale. Options for the future use of the site would have to be considered to make the asset saleable at a price that should be more than sufficient to pay back all the shareholders in full and provide a high level of interest for the last year. This is not an outcome that we seek as the priority is the future of the pub. However, this possible course of action should give investors the security they need in the unlikely event of the enterprise being unsuccessful.
What if the costs of improving the building are higher than the allocated budget or more work is needed?
We have undertaken an initial survey of the internal and external condition of the pub with some provisional budget figures. As we progress more detailed estimates will be obtained to refine the costs. We are also hoping to attract volunteers to help. A number of people have already indicated they will help as part of the consultation. Should costs be materially different than the figures used to build up the business plan then the project will be re-assessed and any significant changes revised. Works have been put in a priority order and we are confident that the essential works can be completed within the budget provision.
Can people group together to buy shares?
No, shares must be held by an individual person or a corporate body.
Can members pass on their shares to others?
No, shares can only be sold back to the Society at the price at which they were bought. The only circumstance in which they can be transferred is as part your estate when you die.
How do the directors ensure that the tenant is running the business successfully?
The successful tenant will be expected to have a business plan as part of the recruitment process. This will be monitored periodically to see that it is being delivered or needs changing as the business responds to demand and grows etc. The Board will support the tenant (without interfering in the day to day running of the business) and may offer mentoring to help with the startup nature of the business. The Board will be able to make suggestions and ensure that the tenant positively seeks user feedback and new customers.
Will a prospective tenant be put off by the thought of having 200 members who want a say in how their pub is run?
Shareholders will be investing in the asset which will be let to a suitable tenant. Members and the Board will not be involved in the day to day running of the pub. This will be the tenant’s responsibility as will be reacting to customer feedback and experience. The tenant would be expected to positively respond to customer requirements and demand to support the growth of the business. Also, to attend shareholder meetings to give feedback and respond to points of view.
I want to vist the Exelby Green Dragon or find out what's going on...
You can visit the Exelby Green Dragon website where you can book a table for a meal, find out about forthcoming events, check out the menu or join the mailing list. Check out what's going on here: https://www.exelbygreendragon.co.uk/
Why should someone who does not live in Exelby be interested in investing in EGDCP Ltd?
Why not? British pubs are an ‘institution’ and if not supported will be lost. There are national organisations like CAMRA whose members support what a viable pub can bring to quality of life. A community owned pub is a successful model that have achieved national and international interest elsewhere. We don’t see we will be any different. Uniquely investors will also own a traditional pub and bit of Yorkshire which will always have a premium attached to it!