Co-operative and Community Benefit Societies Act 2014

The Co-operative and Community Benefit Societies Act 2014 (c. 14) is an act of the Parliament of the United Kingdom that consolidates enactments relating to (what were then called) industrial and provident societies, as well as introducing some reforms.

The act received royal assent on 14 May 2014.

Background The existing legal framework for co-operative organisations had arisen through a series of private members' bills. The legislation was the result of recommendations by the Law Commission.

Provisions 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.

Repealed enactments Section 151(4) of the act repealed 36 enactments and revoked 16 instruments, listed in schedule 7 to the act.

Acts CitationShort titleExtent of repeal1965 c. 12Industrial and Provident Societies Act 1965The whole act.1965 c. 32Administration of Estates (Small Payments) Act 1965In Schedule 3, the entry for section 25(1) of the Industrial and Provident Societies Act 1965.1967 c. 48Industrial and Provident Societies Act 1967The whole act.1968 c. 55Friendly and Industrial and Provident Societies Act 1968The whole act.1969 c. 39Age of Majority (Scotland) Act 1969In Schedule 1, the entry for section 20 of the Industrial and Provident Societies Act 1965.1969 c. 46Family Law Reform Act 1969In section 19, subsection (2) and, in subsection (3), the words from "and subsection (2)" to the end.In Schedule 1, the entry for section 20 of the Industrial and Provident Societies Act 1965.1974 c. 46Friendly Societies Act 1974In Schedule 9, paragraphs 18 and 22.1975 c. 41Industrial and Provident Societies Act 1975The whole act.1978 c. 34Industrial and Provident Societies Act 1978The whole act.1984 c. 28County Courts Act 1984In Schedule 2, paragraph 29.1985 c. 71Housing (Consequential Provisions) Act 1985In Schedule 2, paragraph 8.1986 c. 41Finance Act 1986Section 24(4) and (5).1986 c. 53Building Societies Act 1986In Schedule 18, paragraph 6.1992 c. 14Local Government Finance Act 1992In Schedule 13, paragraph 13.1992 c. 40Friendly Societies Act 1992Section 83.1993 c. 38Welsh Language Act 1993Section 28.1995 c. 7Requirements of Writing (Scotland) Act 1995In Schedule 4, paragraphs 42 and 43.1996 c. 23Arbitration Act 1996In Schedule 3, paragraph 20.2000 c. 8Financial Services and Markets Act 2000Part 4 of Schedule 18.2001 asp 10Housing (Scotland) Act 2001In Schedule 10, paragraph 2.2002 c. 20Industrial and Provident Societies Act 2002The whole act.2002 c. 40Enterprise Act 2002Section 255(1)(a).2003 c. 15Co-operatives and Community Benefit Societies Act 2003The whole act.2003 c. 44Criminal Justice Act 2003In Schedule 25, paragraphs 60 and 61.2004 c. 21Fire and Rescue Services Act 2004In Schedule 1, paragraph 19.2004 c. 33Civil Partnership Act 2004In Schedule 27, paragraph 24.2005 c. 4Constitutional Reform Act 2005In Schedule 7, in list A in paragraph 4, the entry for section 69 of the Industrial and Provident Societies Act 1965.2005 c. 9Mental Capacity Act 2005In Schedule 6, paragraph 11.2006 c. 50Charities Act 2006In Schedule 8, paragraph 47.2010 c. 7Co-operative and Community Benefit Societies and Credit Unions Act 2010Sections 1 and 2.Section 4.2011 c. 20Localism Act 2011Section 185(2) to (4).2011 c. 24Public Bodies Act 2011Section 36(2) and (3).2011 c. 25Charities Act 2011In Schedule 7, paragraphs 14 and 16.In Schedule 9, paragraphs 5, 27 and 28.2012 c. 14Finance Act 2012In Schedule 7, paragraph 24(3).In Schedule 8, paragraph 22(3).2012 asp 5Land Registration etc. (Scotland) Act 2012In Schedule 5, paragraph 15.2013 c. 22Crime and Courts Act 2013In section 61—(a) subsection (14); (b) in subsection (15), the words "and (14)".In Schedule 9—(a) in paragraph 52, the entry for section 60(8)(a) of the 1965 Act; (b) paragraph 91.

Subordinate legislation CitationShort titleExtent of revocationSI 1981/394Industrial and Provident Societies (Increase in Deposit-taking Limits) Order 1981The whole order.SI 1990/776Local Government Finance (Repeals, Savings and Consequential Amendments) Order 1990In Schedule 3, paragraph 9.SI 1996/1738Deregulation (Industrial and Provident Societies) Order 1996Articles 3 to 5.Articles 7 to 9.Article 12.SI 1997/627Housing Act 1996 (Consequential Amendments) (No. 2) Order 1997In the Schedule, paragraph 1.SI 2001/2617Financial Services and Markets Act 2000 (Mutual Societies) Order 2001In Schedule 3, paragraphs 214 to 263.SI 2001/3649Financial Services and Markets Act 2000 (Consequential Amendments and Repeals) Order 2001Article 183.SI 2006/265Friendly and Industrial and Provident Societies Act 1968 (Audit Exemption) (Amendment) Order 2006The whole order.SI 2007/2194Companies Act 2006 (Commencement No. 3, Consequential Amendments, Transitional Provisions and Savings) Order 2007In Schedule 4, paragraph 29.SI 2008/948Companies Act 2006 (Consequential Amendments etc) Order 2008In Schedule 1, paragraphs 1(j), 4 and 5.SI 2009/1941Companies Act 2006 (Consequential Amendments, Transitional Provisions and Savings) Order 2009In Schedule 1, paragraphs 14 and 16.SI 2010/866Housing and Regeneration Act 2008 (Consequential Provisions) Order 2010In Schedule 2, paragraphs 1 and 119.SI 2011/593Mutual Societies (Electronic Communications) Order 2011Articles 22 and 24.SI 2011/2687Legislative Reform (Industrial and Provident Societies and Credit Unions) Order 2011Articles 3 to 7.Article 8(1).Article 9.Article 10.SI 2012/700Housing (Scotland) Act 2010 (Consequential Provisions and Modifications) Order 2012In the Schedule, paragraph 6.SI 2012/961Localism Act 2011 (Consequential Amendments) Order 2012In Schedule 1, paragraph 1.SI 2013/496Financial Services Act 2012 (Mutual Societies) Order 2013Schedules 2 to 4.

Effects 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". However, for administrative purposes, the three types of society are categorised separately. The Act applies to Great Britain but not Northern Ireland.

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; 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 and an increase in the holding limit for withdrawable shares in societies from £20,000 to £100,000 in s. 24 of the act.

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.

Co-operative and community benefit societies

Characteristics 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".

Principal types 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. Co-operatives trade for the mutual benefit of their members, and the FCA as registrar will judge the legality of their initial or continued registration by reference to co-operative principles. Community benefit societies trade to benefit the community in general (or a particular community), and the FCA will consider whether they satisfy that requirement by prohibiting any distribution of assets or profits to members, and generally whether their aims are charitable or more widely philanthropic so as to offer "community benefit". A society must be registered in one or other of these categories: a society may be hybrid in practice, but cannot be so legally.

Shares 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.

Special cases