Surplus
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
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 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 to existing Investor Shareholders = £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.
