An industrial and provident society (IPS) is a

body corporate In law, a legal person is any person or 'thing' (less ambiguously, any legal entity) that can do the things a human person is usually able to do in law – such as enter into contracts, sue and be sued, own property, and so on. The reason for ...

registered for carrying on any industries, businesses, or trades specified in or authorised by its rules. 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 The United Kingdom of Great Britain and Ireland was a sovereign state in the British Isles that existed between 1801 and 1922, when it included all of Ireland. It was established by the Acts of Union 1800, which merged the Kingdom of Great ...

and became the traditional legal form taken by trading organisations with democratic governance including: * co-operatives (which trade for the benefit of their members); * societies for the benefit of the community (which trade for the benefit of the broader community). In Great Britain the

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 received Royal Assent on 14 May 2014. Provisions According to its long title, the Act consolidates certain enactments rela ...

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, the Republic of Ireland and within the UK in Northern Ireland.

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 was passed by the parliament of the

in 1893, and was amended in 1895 and 1913. This legislation still forms the basis of the law on societies in the

Republic of Ireland Ireland ( ga, Éire ), also known as the Republic of Ireland (), is a country in north-western Europe consisting of 26 of the 32 counties of the island of Ireland. The capital and largest city is Dublin, on the eastern side of the island. ...

. 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 increased the audit exemption threshold level for industrial and provident societies to £5.6 million. Also the

Charities Act 2006 The Charities Act 2006 (c 50) is an Act of the Parliament of the United Kingdom intended to alter the regulatory framework in which charities operate, partly by amending the Charities Act 1993. The Act was mostly superseded by the Charities Ac ...

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. Since 2010 the IPS laws explicitly name co-operatives in their titles. The 'Industrial and Provident Societies Act 1965' was renamed 'Co-operative and Community Benefit Societies and Credit Unions Act 1965'. In 2011, the Legislative Reform (Industrial and Provident Societies and Credit Unions) Order 2011 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. In January 2012, the UK Prime Minister,

David Cameron David William Donald Cameron (born 9 October 1966) is a British former politician who served as Prime Minister of the United Kingdom from 2010 to 2016 and Leader of the Conservative Party from 2005 to 2016. He previously served as Leader o ...

announced a project to consolidate all the legislation applicable to industrial and provident societies to be passed by 2015. There was some uncertainty as to how far new developments would address the problems with the legislation. 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. In mid-2012, revision of laws for co-operative was in its early stages. Some felt the reforms did not deal with certain key problems. 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. The registration function for societies was transferred to the FCA while the prudential regulation of credit unions was transferred to the PRA. In September 2013, the English and Scottish Law Commissions published a draft consolidation bill and related documents for consultation. 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. 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. In 2014, the

was given royal assent.

Regulation

In the

United Kingdom The United Kingdom of Great Britain and Northern Ireland, commonly known as the United Kingdom (UK) or Britain, is a country in Europe, off the north-western coast of the continental mainland. It comprises England, Scotland, Wales and No ...

, IPSs were registered (but not regulated) by the

Financial Conduct Authority The Financial Conduct Authority (FCA) is a financial regulatory body in the United Kingdom, but operates independently of the UK Government, and is financed by charging fees to members of the financial services industry. The FCA regulates financ ...

(FCA), which took over the job from the Registrar of Friendly Societies when it was part of the

Financial Services Authority The Financial Services Authority (FSA) was a quasi-judicial body accountable for the regulation of the financial services industry in the United Kingdom between 2001 and 2013. It was founded as the Securities and Investments Board (SIB) in 198 ...

(FSA) (both being supervised by the Treasury). Note that IPS registration is quite separate from the FCA's function of regulating financial institutions. Such businesses have been controlled in the past by the Industrial and Provident Societies Partnership Act 1852, the Industrial and Provident Societies Act 1893, and the Industrial and Provident Societies Act 1965. The legislation in the

is based on modifications of the UK Industrial and Provident Societies Act 1893.

Legislation

* Industrial and Provident Societies Partnership Act 1852 * Industrial and Provident Societies Act 1893 * Industrial and Provident Societies (Amendment) Act 1913 * Co-operative and Community Benefit Societies and Credit Unions Act 1965 * Industrial and Provident Societies Act 2002 *

Co-operative and Community Benefit Societies Act 2003 The Co-operatives and Community Benefit Societies Act 2003 (c.15) was an Act of the Parliament of the United Kingdom that received Royal Assent. It was repealed in full in 2014 by the Co-operative and Community Benefit Societies Act 2014. See ...

* Co-operative and Community Benefit Societies and Credit Unions Act 2010 * Financial Services Act 2012 *

Forms of financial capital: Community shares

Unlike a

company limited by guarantee In British, Australian, Bermudian, Hong Kong and Irish company law (and previously New Zealand), a company limited by guarantee (CLG) is a type of corporation used primarily (but not exclusively) for non-profit organisations that require legal pe ...

, an IPS generally has a

share capital A corporation's share capital, commonly referred to as capital stock in the United States, is the portion of a corporation's equity that has been derived by the issue of shares in the corporation to a shareholder, usually for cash. "Share capita ...

. However, in a not-for-profit IPS the share capital may be limited to a nominal amount. Both types of IPS have a share capital, but it is usually 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 Common ownership refers to holding the assets of an organization, enterprise or community indivisibly rather than in the names of the individual members or groups of members as common property. Forms of common ownership exist in every econom ...

of the members. The share typically acts as a "membership ticket", and voting is on a "one member one vote" basis. The maximum individual withdrawable shareholding is currently set at £100,000 (although other IPSs may hold more shares than this). The Legislative Reform Order (Industrial & Provident Societies and Credit Unions) Order 2011 removed the limit for non-withdrawable shares. Since 2006, the FCA has been willing, in principle, to permit 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. It may be withdrawable share capital, an unusual form of finance which is treated as equity but may be withdrawn subject to specified conditions, and is relatively cheap for small co-operatives to raise as it is exempt from certain regulations applicable to conventional share issues regarding the publication of a prospectus. 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 A capital requirement (also known as regulatory capital, capital adequacy or capital base) is the amount of capital a bank or other financial institution has to have as required by its financial regulator. This is usually expressed as a capital a ...

requirements are continuously met. 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. 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
an
The Plunkett Foundation
In depth guidance on the legislation and best practice standards on running community share offers is available fro
The Community Shares Handbook

Examples

Community benefit societies

* Broadband 4 Rural North *

F.C. United of Manchester Football Club United of Manchester is a semi-professional football club based in Moston, Manchester, England, that competes in the , the seventh tier of the English football league system, and plays home matches at Broadhurst Park. Founde ...

* Hull United A.F.C. * Fordhall Community Land Initiative * Greater Manchester Tree Station *

Manchester United Supporters' Trust Manchester United Supporters' Trust (formerly Shareholders United) is the official supporters' trust of Manchester United F.C., as recognised by Supporters Direct. The group, like other supporters' trusts, seeks to strengthen the influence of su ...

RLLMUK RLLMUK is an internet discussion forum that primarily contains discussion about video games, although many other topics of discussion have developed over the years. It was founded in 2003 by Rob Purnell, in response to the closure of the Edge dis ...

Co-operatives

* Ethical Consumer Research Association *

Shared Interest 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. Sha ...

References

External links

shares.coop - The Community Shares MarketplaceCommunity Shares directoryIndustrial & Provident Societies
Financial Services Authority
FSA Mutuals Public Register - searchable
Financial Services Authority {{co-operatives Co-operatives in the United Kingdom Legal entities Types of business entity Charity law Finance