Industrial and provident society

Last updated

An industrial and provident society (IPS) is a body corporate registered for carrying on any industries, businesses, or trades specified in or authorised by its rules. [1]

Contents

The members of a society benefit from the protection of limited liability much like other corporate forms, but unlike companies for example, each member will normally only have one vote at a General Meeting regardless of their shareholding. The governance of a society is therefore democratically oriented rather than financially oriented.

The legal form originated in the United Kingdom of Great Britain and Ireland and became the traditional legal form taken by trading organisations with democratic governance including:

In Great Britain the Co-operative and Community Benefit Societies Act 2014 has renamed these societies as co-operative or community benefit societies.

The term industrial and provident society is still used in statute in New Zealand, [2] the Republic of Ireland [3] and within the UK in Northern Ireland. [4]

History 1852 to 2014

The first legislation basis for industrial and provident societies arose in the Industrial and Provident Societies Partnership Act 1852.

The consolidated Industrial and Provident Societies Act 1893 (56 & 57 Vict. c. 39) was passed by the parliament of the United Kingdom of Great Britain and Ireland, [5] and was amended in 1895 and 1913. This legislation still forms the basis of the law on societies in the Republic of Ireland.

The Industrial and Provident Societies Act was passed by the parliament of New Zealand in 1908, and forms the basis of the law on societies in New Zealand.

In 1965, an act of Parliament came into effect called the Industrial and Provident Societies Act 1965.

In 2006, the Friendly and Industrial and Provident Societies Act 1968 (Audit Exemption) (Amendment) Order 2006 [6] increased the audit exemption threshold level for industrial and provident societies to £5.6 million. Also the Charities Act 2006 removed certain exemptions of charitable IPSs in England and Wales. From that point, charitable IPSs had to register with both the FCA and the Charity Commission, except registered social landlords, who register with the Tenant Services Authority. [7]

Since 2010 the IPS laws explicitly name co-operatives in their titles.

In 2011, the Legislative Reform (Industrial and Provident Societies and Credit Unions) Order 2011 [8] increased the maximum shareholding limit, changed the date of submission of the annual return, permitted children to be members, and allows the publication of unaudited interim accounts. [9]

In January 2012, the UK Prime Minister, David Cameron announced a project to consolidate all the legislation applicable to industrial and provident societies to be passed by 2015. [10] There was some uncertainty as to how far new developments would address the problems with the legislation. [11] Cameron stated, "We know that breaking monopolies, encouraging choice, opening up new forms of enterprise is not just right for business but the best way of improving public services too." Ed Mayo, Secretary General of Co-operatives UK, welcomed the project. [10] In mid-2012, revision of laws for co-operative was in its early stages. [12] Some felt the reforms did not deal with certain key problems. [11]

Changes to the registration system under the Financial Services Act 2012 which splits the Financial Services Authority into the Financial Conduct Authority (FCA) and the Prudential Regulation Authority (PRA) took effect on 1 April 2013. [13] The registration function for societies was transferred to the FCA while the prudential regulation of credit unions was transferred to the PRA. [14] In September 2013, the English and Scottish Law Commissions published a draft consolidation bill and related documents for consultation. [15] Earlier that year, the UK Treasury, which is the department responsible for legislation for societies, published a series of proposals to increase the holding limit for withdrawable share capital in societies to at least £31,000, to apply insolvency rescue procedures to societies, and to change the rules applicable to their registers of members. [16] Draft regulations linked to that consultation were also available, having been circulated to a small number of people. Those drafts and other materials, including a private member's bill to liberalise the use of share capital by societies presented to the UK House of Lords were explained and brought together online. [17]

A new Co-operative and Community Benefit Societies Act received royal assent in 2014.

Regulation

In the United Kingdom, IPSs are registered (but not regulated) by the Financial Conduct Authority (FCA), which took over the job from the Registrar of Friendly Societies when it was part of the Financial Services Authority (FSA) (both being supervised by the Treasury). Society registration is quite separate from the FCA's function of regulating financial institutions. [18]

Such businesses have been controlled in the past by the Industrial and Provident Societies Partnership Act 1852, the Industrial and Provident Societies Act 1893 (56 & 57 Vict. c. 39), and the Industrial and Provident Societies Act 1965.

The legislation in the Republic of Ireland is based on modifications of the UK Industrial and Provident Societies Act 1893 (56 & 57 Vict. c. 39). [19]

Legislation

Forms of financial capital: Community shares

Unlike a company limited by guarantee (another form favoured by businesses not primarily motivated by profit), an IPS always has a share capital. However, in an IPS the shares cannot usually increase in value beyond their nominal amount. Often, no interest or dividend is payable on them at all, and they are voting shares only. The capital of an IPS is therefore not made up of equity shares like those in a company limited by shares, which appreciate or fall in value with the success of the enterprise that issues them. Rather they are par-value shares, which can only be redeemed (if at all) at face value. The profits and losses of an IPS are thus the common property of the members. The share often acts as no more than a "membership ticket", and voting is on a "one member one vote" basis.

Working capital is usually provided through non-voting shares, and these are often withdrawable. Withdrawable share capital is an unusual form of finance which is treated as equity but may be withdrawn subject to specified conditions. It has the great advantage of being exempt from the Financial Services and Markets Act, which makes the sale of securities to the public a criminal offence without compliance with expensive and onerous regulations. However, an IPS with withdrawable share capital is not allowed to carry on a banking business, presumably because a withdrawable share capital would make it impractical to ensure capital adequacy requirements are continuously met. The terms of society shares, whether withdrawable or not, may include the payment of interest on the capital, but this may only be paid out of profits.

The maximum individual withdrawable shareholding is currently set at £100,000 (although other IPSs may hold more shares than this). The limit used to include non-withdrawable shares, but this was removed in 2011. [25] [26] Since 2006, the FCA has been willing, in principle, to permit co-operative societies to have non-user investor members providing certain conditions are met and this, in combination with the removal of the £100,000 holding limit for non-withdrawable shares, may open up wider possibilities for co-operatives to raise finance from investors while maintaining user control. [27]

Since 2012, the use of withdrawable share capital by community benefit societies has been commonly described as 'community shares'. Over £150 million has been raised in community shares by over 440 community owned businesses across the UK. Recent research has shown that this model has proven very resilient, with 92% of all businesses who have raised capital through community shares still trading to date. [28] As community share offers are exempt from formal regulation, the Community Shares Unit (CSU) oversees best practice standards, intelligence and development of the community shares market. The CSU is a formal partnership between Co-operatives UK, Locality and The Plunkett Foundation.

In depth guidance on the legislation and best practice standards on running community share offers is available from The Community Shares Handbook. [29]

Examples

Community benefit societies

Co-operatives

Housing associations

See also

Related Research Articles

<span class="mw-page-title-main">Building society</span> Type of financial institution

A building society is a financial institution owned by its members as a mutual organization, which offers banking and related financial services, especially savings and mortgage lending. They exist in the United Kingdom, Australia and New Zealand, and formerly in Ireland and several Commonwealth countries, including South Africa as mutual banks. They are similar to credit unions, but rather than promoting thrift and offering unsecured and business loans, the purpose of a building society is to provide home mortgages to members. Borrowers and depositors are society members, setting policy and appointing directors on a one-member, one-vote basis. Building societies often provide other retail banking services, such as current accounts, credit cards and personal loans. The term "building society" first arose in the 19th century in Great Britain from cooperative savings groups.

<span class="mw-page-title-main">Cooperative</span> Autonomous association of persons or organizations

A cooperative is "an autonomous association of persons united voluntarily to meet their common economic, social and cultural needs and aspirations through a jointly owned and democratically-controlled enterprise". Cooperatives are democratically controlled by their members, with each member having one vote in electing the board of directors. They differ from collectives in that they are generally built from the bottom-up, rather than the top-down. Cooperatives may include:

<span class="mw-page-title-main">Friendly society</span> Mutual association for a common financial or social purpose

A friendly society is a mutual association for the purposes of insurance, pensions, savings or cooperative banking. It is a mutual organization or benefit society composed of a body of people who join together for a common financial or social purpose. Before modern insurance and the welfare state, friendly societies provided financial and social services to individuals, often according to their religious, political, or trade affiliations. These societies are still widespread in many parts of the developing world, where they are referred to as ROSCAs, ASCAs, burial societies, chit funds, etc.

A worker cooperative is a cooperative owned and self-managed by its workers. This control may mean a firm where every worker-owner participates in decision-making in a democratic fashion, or it may refer to one in which management is elected by every worker-owner who each have one vote.

The United Kingdom is home to a widespread and diverse co-operative movement, with over 7,000 registered co-operatives owned by 17 million individual members and which contribute £34bn a year to the British economy. Modern co-operation started with the Rochdale Pioneers' shop in the northern English town of Rochdale in 1844, though the history of co-operation in Britain can be traced back to before 1800. The British co-operative movement is most commonly associated with The Co-operative brand which has been adopted by several large consumers' co-operative societies; however, there are many thousands of registered co-operative businesses operating in the UK. Alongside these consumers' co-operatives, there exist many prominent agricultural co-operatives (621), co-operative housing providers (619), health and social care cooperatives (111), cooperative schools (834), retail co-operatives, co-operatively run community energy projects, football supporters' trusts, credit unions, and worker-owned businesses.

<span class="mw-page-title-main">Southern Co-operative</span> English consumer co-operative

Southern Co-op is a regional consumer co-operative in the United Kingdom. The principal activities of the Society are food retailing, funerals and cafés. It operates more than 300 convenience stores, funeral homes and Starbucks coffee shops. Its operations are mainly located in the southern English counties of Berkshire, Bristol, Buckinghamshire, Cornwall, Devon, Dorset, Hampshire, Isle of Wight, Kent, London, Somerset, Surrey, Sussex and Wiltshire. Southern Co-op society is owned by over 170,000 members who share in the business's profits and democratically control its operations. It was previously registered as an Industrial and Provident Society, but its status is now as a mutual society under the Co-operative and Community Benefit Societies Act 2014.

<span class="mw-page-title-main">Libraries Offences Act 1898</span> United Kingdom legislation

The Libraries Offences Act 1898 is an Act of the Parliament of the United Kingdom, applying in England and Wales.

Shared Interest Society Limited is a fair trade financial co-operative based in the United Kingdom formed in 1990. Today it provides credit and financial services to fair trade producers, retailers, importers and exporters throughout the world. Shared Interest works with both Fairtrade International and the World Fair Trade Organization (WFTO). In 2004, the Shared Interest Foundation was formed as a charitable subsidiary, providing training and support services to producers, complementing the financial services offered by the Society. Shared Interest received the Queen's Award for Enterprise in 2008.

<span class="mw-page-title-main">Co-op Insurance</span>

Co-op Insurance is the trading name of CIS General Insurance, a general insurance company, which is part of the Co-operative Group, based in Manchester, United Kingdom. Co-op Insurance Services, an insurance intermediary incorporated in 2017, is a wholly owned subsidiary of CIS General Insurance.

<span class="mw-page-title-main">UIA Mutual</span>

UIA (Insurance) Limited was a mutual insurance company in the United Kingdom, providing general insurance products to members of the trade union movement and other not-for-profit organisations. It was a member of the Association of British Insurers, authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority. UIA Limited was a wholly owned subsidiary, authorised and regulated by the Financial Conduct Authority.

<span class="mw-page-title-main">Co-operative and Community Benefit Societies and Credit Unions Act 2010</span> United Kingdom legislation

The Co-operative and Community Benefit Societies and Credit Unions Act 2010 is an Act of the Parliament of the United Kingdom that received royal assent on 18 March 2010.

<span class="mw-page-title-main">Industrial and Provident Societies Act 1965</span> United Kingdom legislation

The Industrial and Provident Societies Act 1965 (c. 12) was an act of the Parliament of the United Kingdom that regulated industrial and provident societies in Great Britain and the Channel Islands.

Credit unions in the United Kingdom were first established in the 1960s. Credit unions are member-owned financial cooperatives operated for the purpose of promoting thrift, providing credit and other financial services to their members.

Hornsey (FIA) Co-operative Credit Union Limited was a savings and loans co-operative, established in the Municipal Borough of Hornsey, now part of the London Borough of Haringey, in 1964. One of the earliest credit unions in the United Kingdom, it merged with London Capital Credit Union in 2013.

<span class="mw-page-title-main">Lister Housing Co-operative</span>

Lister Housing Co-operative is a 185 flat housing co-operative and registered social landlord in Edinburgh's Old Town.

The Co-op Credit Union is a not-for-profit member-owned financial co-operative, based in Manchester and operating throughout the United Kingdom.

<span class="mw-page-title-main">Co-operative and Community Benefit Societies Act 2014</span> United Kingdom legislation

The Co-operative and Community Benefit Societies Act 2014 (c.14) is an Act of the Parliament of the United Kingdom. It consolidates existing legislation relating to industrial and provident societies, as well as introducing some reforms.

<span class="mw-page-title-main">Company register</span> Faomco company

A company register is a register of organizations in the jurisdiction they operate under.

References

  1. ↑ Industrial and Provident Societies Act 1893 (Act). Parliament of the United Kingdom of Great Britain and Ireland. 1893.
  2. ↑ "Industrial and provident societies".
  3. ↑ "RFS - Registration of Society or Union".
  4. ↑ "NI Credit Unions and Societies | Department of Enterprise, Trade and Investment (DETI)". Archived from the original on 10 July 2015. Retrieved 19 July 2015.
  5. ↑ https://www.legislation.gov.uk/primary+secondary/1893?title=industrial%20and%20provident [ bare URL ]
  6. ↑ Statutory Instrument 2006 No. 265
  7. ↑ "A briefing on the 2006 Charities Act". NCVO. Archived from the original on 13 January 2008.
  8. ↑ Statutory Instrument 2011 No. 2687
  9. ↑ "The Legislative Reform (Industrial and Provident Societies and Credit Unions) Order 2011".
  10. 1 2 "Co-operatives Bill will 'build a fairer economy'". gov.uk. Retrieved 26 April 2015.
  11. 1 2 "Co-operatives Bill: Cameron's Consolidation Plan for Co-op Law in Great Britain - Co-operative News". Co-operative News. 23 January 2012.
  12. ↑ "Co-op Law Consolidation: Where is it now?". Co-operative News. 23 May 2012.
  13. ↑ "HM Treasury - GOV.UK". Archived from the original on 5 February 2013. Retrieved 18 February 2013.
  14. ↑ "Financial Services Act 2012".
  15. ↑ "Law Commission". Archived from the original on 6 October 2013.
  16. ↑ "Industrial and Provident Societies: growth through co-operation". 26 July 2013.
  17. ↑ "UK Co-op Law in 2015 & the 2014 Changes | Ian Snaith's Website".
  18. ↑ FCA Handbook, paragraph RFCCBS -1.1.5 https://www.handbook.fca.org.uk/handbook/RFCCBS/-1/?view=chapter
  19. ↑ "Industrial and Provident Society". Companies Registration Office (Ireland). Archived from the original on 21 August 2010.
  20. ↑ Book (eISB), electronic Irish Statute. "electronic Irish Statute Book (eISB)". www.irishstatutebook.ie.
  21. ↑ "Industrial and Provident Societies (Amendment) Act, 1913".
  22. ↑ "Industrial and Provident Societies Act 1965 (repealed)".
  23. ↑ "Industrial and Provident Societies Act 2002 (repealed)".
  24. ↑ "Co-operatives and Community Benefit Societies Act 2003 (repealed)".
  25. ↑ Legislative Reform (Industrial & Provident Societies and Credit Unions) Order 2011
  26. ↑ LRO info from FSA
  27. ↑ "Investor Membership 20061220.pdf". Google Docs.
  28. ↑ McCulloch, Isla (27 October 2020). "Understanding a Maturing Community Shares Market 2020" (PDF). Co-operatives UK.
  29. ↑ "The Community Shares Handbook". Co-operatives UK. 24 August 2021.
  30. ↑ Forde, Barry (10 April 2013). "Broadband for the Rural North Business Plan V5.2" (PDF). Archived from the original (PDF) on 14 March 2016. Retrieved 27 April 2015.
  31. 1 2 3 4 "Directory (Filter by type of society: community Benefit)". Community Shares. Retrieved 27 April 2015.
  32. ↑ "RULES of I-MUST LIMITED" (PDF). Manchester United Supporters' Trust. Retrieved 27 April 2015.
  33. ↑ "Directory (Filter by type of society: co-operatives)". Community Shares. Retrieved 27 April 2015.
This page is based on this Wikipedia article
Text is available under the CC BY-SA 4.0 license; additional terms may apply.
Images, videos and audio are available under their respective licenses.