Buying shares (and becoming a member) of a community benefit society (CBS) is a different type of investment from buying a bond. Learn more about the key differences below.
Membership
You can become a member of a CBS by purchasing shares of a minimum value of £100 (in addition).
However you will not become a member of the CBS by investing in bonds. This means that bond holders do not have voting rights regarding the selection of directors and bigger decisions the society makes.
As a bond holder you can also choose to buy shares separately (and vice versa), if you want to also be a member of the society.
Interest
Payment of interest to bondholders is contractually binding and the community benefit society will be in default if they don't make the interest payments due to bondholders.
However payment of interest on shares is discretionary, which means it is optional and the directors of the CBS can decide whether or not to pay interest.
Repayment
When you invest in bonds, you have the option to redeem your bonds at the end of the five year term, and annually thereafter, and receive your original invested capital back. You will need to give notice of your intention to redeem 6 months in advance of the redemption date.
However for shareholders, their capital remains invested in the community benefit society. Shareholders can apply to withdraw their capital once a year, but because funds are invested in practical projects, any withdrawal is at the discretion of the directors of the CBS.
Selling your investment
As a bondholder, you also have the option to try and sell your investment bond via the Abundance marketplace, if you wish to access your capital prior to the redemption date.
Your ability to sell will depend on their being a willing buyer for your investment. Selling your investment does not guarantee that you will get a price which repays all your capital as that will depend on demand for investments and interest rates in the market at the time you are selling.
ISA
Investment bonds can be held in an Innovative Finance ISA, meaning the returns on your investment are tax free.
As with any investment, there are risks when investing on Abundance. Your invested capital is at risk and you could get back less than you invest. You should look to hold your investment for the long term. Any expected returns or projections shown are not guaranteed and past performance is not a reliable indicator of future results. The value of your investment can go down as well as up. In the case of bonds, they are illiquid and you may not be able to sell them if you need your money back earlier. Specific risks will apply to each type of investment on Abundance and you should carefully read the information provided on each investment. Tax treatment depends on your individual circumstances and may be subject to change in the future.