The Surplus in a FairShares Enterprise is calculated as follows (see Clause 37):
Profit, less Pay including their Associated Costs, less Corporation Tax
For example, if Profit is £100,000, and Pay is £60,000, and Associated Costs are £8,000:
- Nett Profit would be £100,000 less £60,000 less £8,000 = £32,000
- UK corporation tax would be £32,000 x 20% = £6,400
Surplus is £32,000 less £6,400 = £25,600
In a FairShares Company or Co-operative, this Surplus would then be allocated to Reserves, Labour Share Dividends, User Share Dividends and Investor Share Dividends as defined in the FairShares Articles of Association.
In a FairShares Assocation, the Surplus is allocated to Investor Accounts where they cannot be withdrawn from the association. Members can allocate their share of surplus to projects created by executive and/or board members.
In the above example, using the default values set in v2.0 of the FairShares Model.
£10,000 would be allocated to reserves, leaving £15,600 for dividends.
- 35% (the Labour Share Fraction) would be allocated as Labour Share Dividends (£15,600 x 35%) = £5,460
- 35% (the User Share Fraction) would be allocated as User Share Dividends = £5,460
- 0.5 of 30% (1 - Capital Gain Fraction x Investor Share Fraction) would be paid as dividends / credits to existing Investor Shareholders / Investor Accounts = £2,340.
(under IPS versions the FairShares Model, 2,340 Investor Shares would be issued to existing Investor Shareholders in proportion to their existing holdings. This would be a much smaller amount than the Member Shares issued to Labour and User Shareholders.
Return to the FairShares Glossary.