The Government further strengthens its commitment to Industrial and Provident SocietiesPrint publication
The UK Government maintains its drive to promote Industrial and Provident Societies (IPSs) and staff mutuals with the publication of a recent consultation on IPS reforms.
IPSs were introduced as a legal form by the Industrial and Provident Societies Act 1965. This created two types of co-operatively owned societies: co-operative societies (businesses owned and run by and for their own members) and community benefit societies (businesses operating for the benefit of their community, e.g. housing associations). The IPS structure, currently regulated by the Financial Conduct Authority, remains popular in the UK, with more than 7,600 IPSs currently active and a membership of over 15 million. They cover a wide range of businesses and industries, from public service mutuals to wind farms, football clubs to credit unions. The Government wants to keep the unique features of the traditional IPS form so that the sector stays focused on serving its members and can contribute further to the success of the UK economy.
The proposed reforms include:
- The Co-operatives and Community Benefit Societies Consolidation Bill (the Consolidation Bill), originally announced in January 2012,which will consolidate and streamline the existing IPS legislation in one place;
- Implementing a number of provisions in the Co-operative and Community Benefit Societies and Credit Unions Act 2010 (the CBSA). The proposed sections include:
- Section 1 – provides the option to register as ‘Co-operative and Community Benefit Societies’ instead of Industrial and Provident Societies
- Section 3 – the Company Directors Disqualification Act 1986 will become applicable to IPSs
- Section 4 – provides the power to apply certain legal provisions relating to companies (see below for what changes the Treasury intends to make under this section)
- Section 5 – provides the power to establish a framework for credit unions similar to those applicable to building societies;
- Through the use of the CBSA the Government consultation proposes to deliver six primary changes to IPS legislation:
- A raising of the limit on withdrawable share capital in an IPS – this proposal indicates an acknowledgement that the current limits have remained static for a significant period of time, during which the UK economy has changed
- Providing insolvency procedures for IPSs – the consultation intends to introduce arrangements under the Companies Act 2006, company voluntary arrangements and administration procedures under the Insolvency Act 1986 for the benefit of IPSs (these proposals, however, will not apply to private registered providers of social housing)
- Through amendments to the Banking Act 2009 the consultation proposes the introduction of insolvency procedures for Credit Unions along a similar model to that applied currently to building societies
- IPS officers will be liable to investigation by the FCA in respect of improper or unlawful behaviour in IPSs. This is intended to create a level of equality between the regulation of IPSs and companies, with the rationale that this will increase consumer confidence in the IPS sector
- Providing greater transparency in the IPS sector by providing for the inspection of the register of IPS members in a similar manner to that currently employed by the Companies Act 2006
- The final measure provides for electronic registration for new IPSs. This will be an option but not compulsory. The aim appears to be to create an alternative voluntary registration mechanism that is cheaper and faster than the current system to encourage the take up of the IPS structure.
The above proposals are anticipated for England, Wales and Scotland with proposal 3 (the Banking Act amendments) also applicable to Northern Ireland.
The consultation closes on 20 September 2013. Draft statutory instruments will apparently be available for comment on an informal basis. Contact IPSconsultation@hmtreasury.gsi.gov.uk to request copies.
It is anticipated that the Consolidation Bill will be introduced to Parliament in late 2013.
Full details of the proposed reforms can be found here.