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United Kingdom legislation From Wikipedia, the free encyclopedia
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 (what were then called) industrial and provident societies, as well as introducing some reforms.
| Act of Parliament | |
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| Long title | An Act to consolidate certain enactments relating to co-operative societies, community benefit societies and other societies registered or treated as registered under the Industrial and Provident Societies Act 1965, with amendments to give effect to recommendations of the Law Commission and the Scottish Law Commission. |
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| Citation | 2014 c. 14 |
| Dates | |
| Royal assent | 14 May 2014 |
| Other legislation | |
| Repeals/revokes |
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Status: Current legislation | |
| History of passage through Parliament | |
| Text of statute as originally enacted | |
| Text of the Co-operative and Community Benefit Societies Act 2014 as in force today (including any amendments) within the United Kingdom, from legislation.gov.uk. | |
It received royal assent on 14 May 2014.[1]
According to its long title, the act consolidates certain enactments relating to co-operative societies, community benefit societies and other societies registered or treated as registered under the Industrial and Provident Societies Act 1965, with amendments to give effect to recommendations of the Law Commission and the Scottish Law Commission.[1][2]
The act renamed industrial and provident societies as co-operative or community benefit societies. The act effectively implemented the renaming provisions first enacted in the Co-operative and Community Benefit Societies and Credit Unions Act 2010 and coincided with a number of other changes foreshadowed by the 2010 act, such as the application of the Company Directors Disqualification Act 1986 to society directors (known as committee members in the legislation) by the commencement of section 3 of the 2010 Act from 1 April 2014.
Since 1 August 2014, a new society must register as either a co-operative or a community benefit society rather than, as had been the case, an industrial and provident society that met either requirement. Societies already registered before that date remain registered under the 2014 Act. Sections 1 and 2 provide that all three types of society (co-operative societies, community benefit societies and societies already registered before 1 August 2014) are referred to together as "registered societies".[3][4] However, for administrative purposes, the three types of society are categorised separately. The Act applies to Great Britain but not Northern Ireland.[5]
The 2014 act consolidated previous legislation and modernised its language. Its enactment coincided with a number of reforms to the law applying to societies which were implemented by secondary legislation. They included the application of insolvency rescue procedures such as administration and creditors' voluntary arrangements, to societies by The Industrial and Provident Societies and Credit Unions (Arrangements, Reconstructions and Administration) Order 2014 SI 2014/229;[6] increased Financial Conduct Authority (FCA) powers of investigation and inspection of societies under the Co-operative and Community Benefit Societies and Credit Unions (Investigations) Regulations 2014 SI 2014/574[7] and an increase in the holding limit for withdrawable shares in societies from £20,000 to £100,000 in s. 24 of the Act. [8]
Societies are registered with the Financial Conduct Authority, which registers them and applies the statutory tests about whether a society meets on registration and continues to meet the requirements of s. 1 and 2 of the Act.[9]
Source:[10]
Co-operative and community benefit societies ("registered societies") are societies "for carrying on any industry, business or trade". They are bodies corporate separate from their members, and members have limited liability. They come into being as such upon registration by the Financial Conduct Authority (FCA).
A registered society may be conceptually distinguished from a company as being "an association of persons", as opposed to (in the case of a company) "an aggregation of capital". Unlike in the case of companies, which have no legal existence at all until registration, a registered society pre-exists its registration in the form of an unincorporated association. (An exception is that a company may by re-registration convert itself to a registered society.)
Organisations usually incorporated as registered societies include consumer, worker, agricultural and housing co-operatives, working men's clubs, Women's Institute markets, allotment societies, mutual investment companies, friendly societies and housing associations. Some social enterprises do so also. This process is facilitated by the existence of "model rules" developed by various federal bodies, which reduce the legal costs. The FCA maintains a list of these bodies which can be downloaded from their web site.
Registered societies may in general conduct any lawful business. However, a co-operative society may not carry on business "with the object of making profits mainly for the payment of interest, dividends or bonuses on money".[11]
The act makes a fundamental distinction between two types of registered society, formalising the two broad categories of industrial and provident societies that obtained from 1939 to 2014.
A society must be registered in one or other of these categories: a society may be hybrid in practice, but cannot be so legally.
A share in a registered society gives a right to the nominal value of the share. The capital of the association in excess of the nominal issued capital is owned by the members jointly, and not in shares. Thus profits, where they are distributable at all, are paid as interest on shares and not as a dividend. In this respect a share in a society is quite different from a share in a company - although, as in the case of a company, interest is not payable if there are no profits.
In principle shares can have any other characteristics the rules provide for, but in practice the FCA will not register any rule that allows for more than one voting share per member, or for interest on shares to exceed the minimum required to obtain the capital the society needs.
Society shares that are not transferable fall outside the regulatory perimeter of the Financial Services and Markets Act. This is a significant motive for some organisations to become or convert to a registered society.
Shares are often withdrawable. Most societies provide for a notice period and for the suspension of withdrawals to mitigate against the risk of capital flight. Normally the value of shares may be written down if the value of the society's assets falls below the total nominal value issued.
Credit unions and building societies, which sprang from the same roots as registered societies, are governed by specific legislation: see the Credit Unions Act 1979 and the Building Societies Act 1986 and later legislation. This said, the registration of a credit union is under the 2014 Act, and thus credit unions are strictly a subspecies of registered society. As deposit takers, credit unions and building societies are 'dual regulated', requiring authorisation from the Prudential Regulation Authority in addition to registration by the FCA. Friendly Societies are a different legal form, despite their similar history: prior to 1992 these could not be bodies corporate, whereas registered societies always have been.
A community benefit society may have charitable objects. If (in England and Wales) it otherwise meets the requirements for charitable status, it is categorised as an exempt charity.[12] This means it cannot register with the Charity Commission, with oversight instead provided by the FCA as 'principal regulator'. The Commission has jurisdiction to investigate and make schemes as for any other charity, but only at the request of the FCA.[13]
Exempt charities may apply to be recognised as such by the taxation authority, HM Revenue and Customs. If accepted they come under the same advantageous fiscal regime as any other charity.
As a charity by definition exists for public and not private benefit, cooperative societies cannot achieve charitable status. Where a charitable community benefit society pays interest on shares, this comes under special scrutiny: the Charity Commission has published guidelines.
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