The slides from the 2013 UKSCS Ian Pyper Memorial Lecture "Local, Loved and Trusted.....with Legal Support? given at Holyoake House on 03.07.13 on recent and planned Co-op Law Reform in the UK
2. Lecture Outline
•Legal Support that Co-ops Need
•Problems with Legal Support
•Improving Support 2000 – 2012
•Major Improvement 2013 Onwards?
•Questions & Comments
3. Legal Support that Co-ops
Need
● Security of Co-op Identity against
demutualisation
● Ability to apply ICA Principles/Definition
to business
● Level Playing Field for Business
Purposes
● Clarity & Simplicity
4. Choice of Legal Support
Structure
Can use CLG, Private Company, LLP or
General Partnership – subject to
protection of “Co-operative” name
BUT
Industrial and provident (IPS)/ co-
operative and community benefit
society(CCBS) is tailored to Co-ops
5. Creaking Support Before 2000
●
Before 2000 - Fast Change to
Company Law in C20th – only limited
change since 1860's for CCBS
●
Outdated CCBS Legislation –
accounting, capacity, capital rules,
insolvency & rescue, not updated
●
Conversion to demutualise too easy
6. Legal Support Grows: 2000 to
2012
I & P S Act 2002
•
Demutualisation: Turnout of 50% with
75% Majority to convert to company
•
Level playing Field: Power to
assimilate to changes to Co Law by
regulation (except key defining CCBS
features)
•
s255 Enterprise Act 2002
7. Legal Support Grows: 2000 to
2012
Co-operatives and Community Benefit
Societies Act 2003
•
Levels playing field on Capacity and
Contract making in line with 2003
Company Law
•
FCA enforced “Asset Lock” to prevent
demutualisation for bencom I & P - can
do it with rules – not available for co-op
- Compare CIC Company
8. Legal Support Grows
•
Asset Lock for bencoms implemented
by SI 2006/264
•
Audit exemption thresholds and rules
for smaller societies in line with Co's in
2006 SI 2006/265 – out of line again
now
Electronic Communication with
members and FCA SI 2011/593
•
9. Legal Support Grows
•
European Co-operative Society from
August 2006 – unused so far
•
Non-user Investor members in co-ops
since 2006
•
CCBSCUA 2010 – not yet in force -part
of package in 2014
Shareholding limit, under 16's as
members, easier interim accounts &
dissolution LRO SI 2011 268
10. How Support Developed
•
Pressure from 1990s via UKCC and Co-
ops UK & Co-op Party
•
Private Members' Bills 2002,2003 &
2010 as no Parliamentary Time
•
Secondary Legislation Builds on PMB's
– esp LRO's
•
Govt support
•
Still Big gap on insolvency – no rescue
procedure only liquidation for now
11. New Foundations? 2012-2014
Co-ops UK Initiative via No10:
•
HMT referred it to Law Commission
•
Law Commission has drafted the Bill
•
Draft CCBS Bill 2013 is now with HMT
12. New Foundations? 2012-2014
● Publication of Bill September 2013 for
Consultation?
● Fast Track legislation before Parliament
starts in December 2013?
● No change to substance
● Law in one place and language simpler
● Package of changes at once? 2010 Bill
in force, increased WSC holding limit,
insolvency rescue procedures, new
FCA Guidance – all in 2014?
13. New Foundations? 2012-2014
Financial Services Bill 2012 registration
to Financial Conduct Authority (FCA)
New Obligation on FCA in Sch1 of SI
2013/496 :
“5.—(1) The FCA must maintain
arrangements designed to enable it to
determine whether persons are
complying with requirements
imposed on them....”under IPSA's
14. Capital: Foundations for New
Growth
Basic Co-op rules:
OMOV
Profit Distributions on Transactions not
shareholding
Limited return i.e.
15. Capital: Foundations for New
Growth
Bona Fide co-op requirement of FCA:
“ members should receive only limited
compensation (if any) on any share or
loan capital which they subscribe.
Interest on share and loan capital must
not be more than a rate necessary to
obtain and retain enough capital to run
the business.”
16. Capital: Foundations for New
Growth
“Section 1(3) of the 1965 Act states that
a society may not be a bona fide co-
operative if it carries on business with
the object of making profits mainly for
paying interest, dividends or bonuses on
money invested with or lent to it, or to
any other person.”
17. Investors as Support?
FSA 2006 Policy Statement on Non-User
Investor members - Society rules must
still fit b f co-op:
•
Express society rules on investor
membership
•
User member not permitted to hold
Investor Shares
•
Investor Shareholders can elect some
directors
18. Investors as Support?
FSA 2006 Policy Statement on Non-
User Investor members
User member not permitted to hold
Investor Shares
No investor vote on a motion to convert
the co-operative to company
19. Capital: Shares as Support
WSC Holdings still limited - s6 IPSA
Non-WSC holdings are not – LRO 2011
Non-WSC cannot be purchased or
redeemed by the society but can be
transferable – Trevor v Whitworth
Other Rights e.g. preference shares not
prohibited
20. Support by Self Help
Community Shares Unit
Co-ops UK plus DCLG & FCA
Village Shops & Pubs
Energy
21. Support by Self Help
Best Practice on Investor/Member
protection
No FSCS
Prospectus & Financial Promotion
Exemptions
Best Practice with Guidance from CSU
with FCA support
22. How It Looks in 2015
Registration as Co-op or Bencom –
clarified with new FCA Guidelines
Director Disqualification as for
Companies – CCBSCU A 2010
FCA Powers to police wrongdoing as for
Companies – CCBSCU A 2010
Power to align with present Company law
and changes – CCBSCU A 2010
23. New Foundations by 2015
Co-operative and Community benefit
Societies Act 2014 in force – one source,
clear, modern language.
Application of Rescue Procedures of
Administration etc to CCBS's by SI from
BIS & HMT under s 255 Enterprise Act
2002
24. New Foundations by 2015
Clear Guidelines on Capital reward and
shares with flexibility within Co-op
Principles
Redeemable Shares available with
proportionate creditor protection -
overcoming Trevor v Whitworth problem
A Legal regime for Co-ops fit for the 21st
Century....