There has been quite a bit of talk about new regulation of Industrial and Provident Societies (IPS) but what is actually happening and is much really changing?
The Co-operative and Community Benefit Societies Bill (Bill) was introduced into the House of Lords in December and has already had its second reading. The Bill’s purpose is to consolidate existing law relating to co-operative societies, community benefit societies and other societies registered or treated as registered under the Industrial and Provident Societies Act 1965 (1965 Act), that is, industrial and provident societies or IPSs. It is intended to make legislation more user friendly.
The project to consolidate the legislation was first announced by the Government in early 2012 and has been taken forward by HM Treasury, The Law Commission and The Scottish Law Commission. Following a consultation, the Law Commission published a report of recommendations which have been included in the Bill. These are aimed at tidying up and simplifying the existing legislation and include the following:
- Current legislation requires an IPS or community benefit society (CBS) to show it has a “special reason” to register as an IPS or CBS as opposed to a company. What constituted a “special reason” has caused some confusion and this requirement will be removed by the Bill. The equivalent requirement reflects FCA practice and is to show, in the case of registration as a co-operative society, that the society is a bona fide co-operative society, or in the case of a CBS, that the business of the society is being, or is intended to be, conducted for the benefit of the community;
- The offence of making a false statutory declaration (relating to instruments of dissolution) has been removed. As making a false statutory declaration already exists as an offence it was thought the section in the 1965 Act did not add anything.
HM Treasury also issued a consultation that looked at the consolidation and modernisation of the law including restructuring and insolvency matters. This has resulted in legislation that applies the provisions of the Insolvency Act 1986 for company voluntary arrangements and administration and provisions of the Companies Act 2006 for schemes of arrangement to IPSs (other than social housing societies).
In addition to the Bill, there are bits and pieces of legislation (much of it under The Co-operative and Community Benefit Societies and Credit Unions Act 2010 and the 1965 Act) that have or will make changes, including the following:
- From 1 August 2014 all existing IPSs will be allowed to change their name to be a CBS or co-operative society. In addition, all newly registered societies will either be CBS or co-operative societies, rather than IPSs. The name change was seen as more appropriate and up-to-date;
- Also from 1 August, those found guilty of the mismanagement of an IPS can be barred from holding office in another IPS, just as individuals can be barred from acting as company directors;
- HM Treasury will be able to issue regulations applying certain provisions of companies legislation on investigations, names and dissolution to IPSs;
- The Credit Unions Act 1979 ( CUA) has been amended to make provisions for credit unions corresponding to building societies legislation. The Bill does not include the CUA within the consolidating exercise;
- The maximum amount of interest in the withdrawable shares of an IPS which may be held by a member is to be increased from £20,000 to £100,000; and
- Electronic submission of registration documents will be allowed.
As you can see, there is a real mixed bag of changes taking place, however there are not a lot of significant amendments occurring. Most of the changes are a tidying up exercise making the legislation easier to navigate and many of them have been in the pipeline for some time and are being pushed through as part of the consolidation exercise. By consolidating existing legislation into one place, the Bill is intended to reduce legal complexity for IPSs.