Community benefit society investments, often referred to as "bencoms", are a type of not-for-profit business that operates for the benefit of a community.

Community benefit societies have a social purpose enshrined in their constitution and the organisation has to be governed primarily to deliver this purpose, rather than maximising returns to shareholders. Shareholders of a community benefit society become members, with each member having one vote. A community benefit society has to register with the Financial Conduct Authority.

A community benefit society can raise funding for its social purpose through shares or through debt. The community benefit society investments on Abundance are debt investments (bonds and debentures).

When investing on Abundance you can choose to invest in companies, community benefit societies or councils.

If you invest in a community benefit society on Abundance, you are lending money to that bencom for a fixed period of time in exchange for a return on your investment.

Each investment will have its own return structure and repayment timings so it’s important to review each investment individually. Some investments will repay your original investment in instalments over the life of the investment while others will repay in one lump sum at the end (maturity) of the investment.

You can review the structure of the payment terms for the investment in the Key Terms and Payments sections. The Offer Document for an open investment will also contain all the details.

As you are making an investment your capital is at risk. This means you may not get back some or all of the money you invest and in the worst case you could lose all of the money you invest.

You are lending money to a community benefit society who will be putting your money to work for the community, typically spending the money to develop a particular project(s) the bencom is working on. The bencom's ability to repay your investment plus your return will depend on the overall success of its business. If the bencom runs in to difficulties, whether that’s cost increases, delays, lower revenues than forecasted or any other business disruption, it may not be able to repay you and the bencom could be forced to close.

The risks of the bencom being unable to repay you will depend on the particular bencom and the industry it operates in so it’s important to consider the specific risks of each bencom you choose to invest in.

As the investor, it is your responsibility to consider each investment and make your own assessment or ‘due diligence’ and consider all of the risks in the context of your own financial needs. When Abundance offers an investment on our platform it is not making a recommendation of that investment because we do not provide financial advice. If you are unsure about whether a particular investment is suitable to your needs you should consult a financial advisor.

When making an investment on Abundance you can choose to invest through a General portfolio (a general investment account which is taxable) or through an innovative finance ISA (IF ISA), which is a type of ISA offered by Abundance.

If you choose to invest through an IF ISA with us, the returns on your investments will be tax free. However, the IF ISA is just a tax-free wrapper or pot, and investing through your IF ISA does not change the terms of the investment you are making. The choice to invest in specific investments is solely yours to make and the risks of that investment are the same as investing outside of an IF ISA, which means there is a risk that you could lose all the money you invest.

It is important to only invest an amount that is right for you. A good rule of thumb is to only invest 10% or less of your net assets (your total savings and investments, not including your pension or your primary residence) into this type of investment.

Spreading your money across a number of different investments and sectors will help diversify your risk and limits your overall loss if one of your investments is unable to repay you.

Community benefit society investments are fixed term investments, which means you are lending money to the bencom for a fixed period of time and therefore you won’t be able to access your money until the repayment date. In some cases the investment repays you in instalments so you will get back some of your money over time, but in other cases you will only be repaid in one lump sum at the maturity date.

When you invest in an open investment that is currently raising money, you have a 14 day refund period during which you can request a full refund. After this period your money is committed to that investment and your money is effectively lent out to the bencom and cannot be withdrawn. You should therefore only invest if you are prepared to hold the investment for the full period of the investment.

Some bencom investments may require you to give notice that you want your investment repaid at the end of the minimum investment term - if you don't give notice, your investment will automatically extend for another year. The bencom will contact you ahead of the maturity date to provide instructions on how to request repayment. See the terms of the investment for full details.

While you can’t withdraw your investment, your investment is fully transferable, which means it is possible to sell your investment to another investor if you need to get back some of your money before it is repaid.

Abundance has a marketplace when you can put your investment up for sale and see if another investor is interested in buying it. However if there is no buyer interested on Abundance, or if the trading of that investment on the marketplace has been suspended, you may not be able to sell your investment through the marketplace and may have to continue to hold it.

It is up to you to choose the price you want to sell your investment for and you can try to sell your investment for more or less than you originally invested. However if there are no interested buyers at your chosen price, you may need to sell your investment for less than you originally invested and therefore you won’t get back all of your money.

It is important to understand that there is no guarantee you can sell your investment, so you should invest on the basis that you are willing to hold the investment for the full life of the investment.

By investing in a community benefit society, you become a creditor of that bencom and the terms of your investment (in the Bond Deed) set out the bencom's obligations to you and what they are due to pay you back and when. However, repayment is not guaranteed and it depends on the bencom's ability to meet the terms of your investment and make the payments owed to you.

If a community benefit society is unable to pay you as agreed, they will be “in default” of the terms of your investment. There are a number of options on what would happen next, for example the bencom could request more time or ask for a change of the terms of the investment (and there would be a formal voting process for that). However, If a bencom is unable to provide investors with a suitable proposal, or if the bencom is unable to continue and is in default of the terms of the investment, investors have the option to call an ‘Event of Default’ (this would also require a vote by investors). This would typically lead to an administrator being appointed to wind up the bencom, with the aim of maximising as much value as possible for creditors, including Abundance investors.

As an investment, there is a risk you could lose some or all of your money. The Financial Services Compensation Scheme (FSCS) or Financial Ombudsman Service (FOS) do not cover poor investment performance so if you make a loss due to a bencom's inability to pay you back, you cannot make a claim to the FSCS or FOS.

As a regulated investment platform, it is possible to make a complaint against Abundance, however this must be in relation to the services we provide rather than due to poor investment performance. You can find out more here.

Abundance has a role across the life of your investment but it is important to understand that when you are making a community benefit society investment, you are lending money to that particular bencom and it is that bencom that must make the payments due to you under the terms of your investment. You are not lending money to Abundance and Abundance doesn’t manage your investments for you.

Abundance acts as the arranger, agent and, in some cases, security trustee for your investment. Once an investment has been successfully funded our role is largely an administrative one, including:

You can find out more about our role here.

If Abundance were to go out of business, the community benefit society you have lent money to will still be obligated to meet the terms of your investment, so there would be no direct impact on your investment.

However the administration of your investment could be impacted, which could cause delays to the payment of your returns or your ability to view and manage your investments held on Abundance. As it is Abundance that provides the marketplace service, you may no longer be able to use the marketplace to look for a buyer which would significantly reduce your options to try and sell your investment if needed.

As a regulated company, Abundance is required to have a plan in place to allow for the orderly wind down of our business if we were no longer able to continue.