A number of questions have been posed following the recent distribution of the Sidbury Community Enterprises’ vision for a future Red Lion business and we thought that it would be helpful to address them. We are pleased that by circulating this vision we have generated some local discussion.
Purchasing the Red Lion – Sidbury Community Enterprises has opened negotiations with Punch Taverns with the intention of purchasing the Red Lion. As anyone who has tried to purchase a property will know this process can potentially be lengthy and until this process reaches a final conclusion, one way or another, we are not going to play out the negotiations in public, and so please bear with us until we reach an outcome. Therefore, just because we are saying nothing publicly about the progress of negotiations, do not make any assumptions one way or another.
What is Sidbury Community Enterprises? – it is an Industrial Provident Society. It is described as a social enterprise. It is not a registered charity. In other words it has been established in order to establish a business, the Red Lion, which aims to be a successful commercial enterprise with an ethos to support the local community. That is why the vision for a future Red Lion business highlights the relationship between the pub and the local community, community organisations and community events.
Sidbury Community Enterprises is also a limited company and will operate, and be governed, by the same company and financial regulations that govern any limited company.
Funding the purchase of the Red Lion – if an agreement can been reached with Punch Taverns to purchase the Red Lion, Sidbury Community Enterprises will need to raise money to fund the purchase of the pub, the work to refurbish the pub and the new business’s set up costs. The money will come from two sources – obtaining a mortgage and a community share offer. Work is in hand to be able to obtain a mortgage.
Purchasing shares in Sidbury Community Enterprises – no shares have yet gone on offer and will not do so until we reach a point whereby an agreed purchase can been reached with Punch Taverns, who own the Red Lion. At that point a share prospectus will be issued. The prospectus will include –
v an explanation about what the funds raised will be spent on
v broad information on what the Sidbury Community Enterprises’ Rules are which apply to the share ownership
v information about how to apply to buy shares
v contact details to allow prospective shareholders to obtain additional information
v some frequently asked questions and their answers
At that point Sidbury Community Enterprises are also planning to hold an “open day” to allow anyone interested in the future Red Lion business to come along to find out what the plans are for the pub, how the pub will be managed, how the company will be managed and any aspect of the share offer.
Currently however, all that is being asked of potential investors is that you register your interest in buying shares. We are doing this so that once the prospectus is produced we can send a copy directly to those who have registered. It also gives us an understanding of how much we are likely to be able to raise through selling the shares.
Liabilities of shareholders – Sidbury Community Enterprises is not intending to create a future Red Lion business with the intention of failing, and much detailed work has gone into producing a Business Plan that demonstrates that a successful and profitable business can be run at the Red Lion. However, we must also consider what might happen in a worst case scenario.
If Sidbury Community Enterprises failed, and it needed to pay creditors, then in the most extreme of circumstances the company would, as with any limited company in the same situation, need to sell its assets to raise the money to pay the creditors. This would lead to the winding up of the company. In this situation its assets would be the pub.
If more money was raised from selling its assets than was required to pay its creditors, then the balance would be shared out amongst shareholders, as determined by either the company’s Management Committee or the insolvency administrator. Potentially, investors might not receive the full value of their investment.
If insufficient funds were raised by the sale of the company’s assets to pay its creditors then the shareholders could only be liable to lose part or all of their investment but no more. These circumstances, as mentioned previously, would be no different to those that would apply if you invested in a high profile large limited company which faced the same difficulties.
Will I get a return on my investment? – investment in Sidbury Community Enterprises is an investment in a community project rather than a more mainstream company. The company’s Rules place a cap on the maximum level of return (a dividend to shareholders) that can be paid out each year of 2% above the prevailing Bank of England base rate. Our Business Plan does not anticipate paying a dividend to shareholders before Year 3 of trading. Our priority has to be, particularly in the short term, reinvesting in, and developing the business. This in turn secures shareholders’ investments.
Sidbury Community Enterprises’ financial plans – the company has created a Business Plan that sets out all aspects of owning and running the Red Lion. Included within the Business Plan are detailed financial assumptions and projections for the first three years of the company’s ownership of the pub. In other words, this fully explains what money we think we can get as income from the Red Lion, what the outgoings will be and what profit it will make.
As a commercial document it is at present confidential. However, once a purchase of the pub is agreed and a share offer issued then key aspects of this can be provided to potential shareholders who will want to understand how profitable the business that they are considering investing in will be.
Refurbishment of the Red Lion – Sidbury Community Enterprises has employed the services of an architect to help us to not only create a set of drawings from which we can accurately further develop our proposals, and associated costs, to refurbish the Red Lion. This will also allow us to show how we envisage the pub looking once the work has been completed. We are trying to get all of this created to allow them to be shown at a future “open day” as referred to above.
If you are uncertain of any aspect of Sidbury Community Enterprises’ proposals for a future Red Lion business you can contact us at thepubinthevillage@gmail.com.
