• Lack of share market liquidity and funds shortfall to blame • Initiative in 2010 aimed to give supporters stake in team

Arsenal’s pioneering Fanshare scheme, lauded by the government as an example to other Premier League sides as a means of giving supporters a stake in their team, is set to close after the club withdrew its backing.

The scheme was launched in August 2010 by the Arsenal Supporters’ Trust with the vocal backing of the club’s chief executive, Ivan Gazidis, as a vehicle for fans to buy part shares in Arsenal.

More than 1,800 members have invested almost £2m in the scheme, which gave fans the rights that came with share ownership, including the ability to attend the Arsenal annual meeting, pose questions on club finances and vote on policy.

But, as explained in a letter to members who have bought a total of 116 shares, it has struck two insurmountable issues that the majority owner, Stan Kroenke, has been unwilling to explore solutions to.

“The scheme has faced two major problems: a lack of liquidity in the share market and a shortfall in funding,” it said.

When the scheme was set up, it was assumed that shares would be readily available to buy and that Fanshare could be widely promoted and marketed. During the first year of operation Arsenal ran adverts in the Emirates and promoted the scheme in its annual membership pack.

The idea was that the scheme would become self-sufficient through a 2% fee levied on contributions. But after the takeover of the club by the American Kroenke in a £731m deal in 2011, almost all of Arsenal’s shares were concentrated in the hands of two shareholders. Kroenke holds 67% and Alisher Usmanov’s Red & White Holdings has 30%.

“As a result of both the takeover by KSE, and the subsequent buying of shares by Red & White, it has not been possible to develop the scheme in the way that was initially envisaged,” says the letter.

“The Fanshare board has on several occasions asked the Arsenal board to consider options for the placement of new shares to the scheme (including the idea of a specific offer of 125 shares on Arsenal’s 125th anniversary). While this was initially favourably received it has subsequently been ruled out.”

With hardly any shares available on the open market and Kroenke unwilling to consider a placement of new shares, the original idea of funding it through a levy on new purchases has hit the buffers.

In the absence of other options, the Fanshare board is reluctantly looking into how the scheme might be wound down.

Fanshare was launched against the backdrop of a loud debate about the role of fans in running their clubs in the wake of the Portsmouth meltdown, the Liverpool high court case and the green and gold protests at Old Trafford.

All the political parties made commitments in their 2010 general election manifestos to exploring new ways to give fans more of a voice and specific ways of allowing them to take a stake.

The Fanshare model was seized upon by government as a potential way forward, because it allowed fans to invest as little as £10 a month and yet enabled them to effectively have the same basic rights as other shareholders.

“It is part of the coalition agreement to encourage supporters to have more representation at their clubs,” said Hugh Robertson, the sports minister at the time.

“Arsenal’s proposal is an enlightened and forward looking way of doing this and makes it affordable for their fans to own a part of their club. Clearly it is for individual clubs to decide, but this is a model I’d like to see other teams explore.”

During a subsequent select committee inquiry into football governance, it was held aloft as a beacon for other Premier League clubs to follow.

When the scheme was launched Gazidis was effusive in his backing for it. “We believe it is fundamentally helpful to the club to have supporters who are active and engaged,” he said at the time. “The important thing is that supporters are valued and nurtured, not exploited. That is good for the club’s soul, and for its all-round health.”

Some Arsenal supporters’ groups fear that the move is symptomatic of Kroenke’s wider attitude to fan engagement. In his offer letter he said he “fully expects himself, the Arsenal directors and club executives to continue to engage with supporters for the long-term good of the club”.

At the time of the takeover the then culture secretary, Jeremy Hunt, said of Kroenke that he “had heard very positive noises that he is very supportive of fan involvement,” and urged him to run the club as a “community asset”.

But although Gazidis has continued to be proactive in meeting fans’ groups, fans say that no meeting with Kroenke has ever been arranged.

An Arsenal spokesman said that when they launched the scheme the Fanshare board had asked for financial support for a three-year period and the club had subsequently extended that for another year.

“It has always been the understanding that the scheme would need to become self-sufficient at some point and in the absence of indefinite outside funding the Fanshare board has made the decision to consider closing down the scheme,” he said.

“We will continue to maintain ongoing dialogue with our supporters through numerous forums. It is an important part of how we run the club.”

Kevin Rye of Supporters Direct, the body that helps and advises supporters on setting up trusts, said of the decision: “As has happened before, the potential positive effects of supporter involvement in the ownership of a football club have been sacrificed because of the particular circumstances at the club in question.

“The type of positive role that fans have played at clubs like Swansea City is something that we believe must become the norm, and we are convinced that this can only happen through proper rules enforced by a proper regulator.”

The government has promised to convene an “expert group” with Supporters Direct by the end of the month, looking into removing practical obstacles and setting up supporters trusts.