Reforms on the way – co-operatives and community benefit societies

The Law Commission, which recommends reforms in relation to the law in England and Wales, has turned its focus to co-operative societies and community benefit societies.

These entities were previously known as “industrial and provident societies” until the last reform of the law in this area, when they were renamed under the Co-operative and Community Benefit Societies Act 2014. The Law Commission’s principal task with this consultation is to review the 2014 Act.

Broadly, co-operative societies carry out their business mainly for the benefit of their members, and generally have open membership to all. Community benefit societies are similar but conduct their business for the benefit of the community, and in some cases they are charitable.

The proposals for reform in this area include:

  • new statutory definitions for co-operative societies and community benefit societies;
  • having charitable community benefit societies register with the Charity Commission;
  • an “overhaul” of the law relating to society shares;
  • society officers to be listed on the Mutuals Public register (here) maintained by the Financial Conduct Authority (FCA);
  • changes to society officers to be notified within 14 days;
  • introduction of the director duties set out in the Companies Act 2006;
  • reforms around the process where a society converts to, amalgamates with, or transfers its engagements to a company;
  • allowing execution of documents by one authorised signatory in the presence of a witness (to align with company law);
  • express permission for societies to hold virtual or hybrid meetings.

A particular area of focus may be the Law Commission’s proposal that societies should have a “one vote per member” approach in order to fall within the new definitions. This may not be viewed as suitable by all societies. Another area is around the principle of open membership. Again, some societies may wish to restrict their membership.

It should be noted that the new definitions (once finalised) will be retrospective, meaning that existing societies will need to comply with the new definition in order to retain their status and registration with the FCA.

Another key proposal is that charitable community benefit societies should cease to be “exempt” from registration with the Charity Commission. If this proposal goes ahead, and their annual income is above £5,000, they will become registrable with the Charity Commission and will be issued with a charity number.

Relevant societies may want to participate in the consultation (using the online questionnaire here), which runs until 10 December 2024. Boards will also want to monitor the Law Commission’s recommendations in due course. We will continue to review and report on the proposed reforms in this area of law.

If you have any queries regarding these reforms, or a legal issue relating to a society, please contact Martyn or one of our specialist charities team.