What’s in a name? That which we call a rose / by any other name would smell as sweet.
So said Shakespeare in one of his many classic lines, this one from Romeo and Juliet. Almost certainly, when writing those words, Shakespeare did not have in mind the humble industrial and provident society (though some may argue that it sometimes felt as though the Industrial and Provident Societies Act 1965 actually dated back to the Elizabethan era).
All of this is a roundabout way of letting you know (or perhaps reminding you if you knew already) that as of 1st August this year, the name “industrial and provident society” has been officially dropped in favour of the two variants of the model being the “co-operative society” and the “community benefit society”, collectively known as “registered societies”. The change is part of several pieces of legislation brought in this year designed to modernise the framework for this type of organisation. At this point, you might well be thinking “I’ve never heard of an industrial and provident society” or “what on earth has all this got to do with me?”
For the uninitiated, what I still want to refer to as IPS is a legal structure distinct from other forms that social enterprises might use like companies and (possibly) charitable incorporated organisations. Co-operatives are essentially set up for the benefit of their members and community benefit societies, as their name suggests, are for wider benefit than that. The former can appear on high streets offering the likes of food or funeral services whilst others commonly crop up as credit unions, housing associations, or as a vehicle for community share issues (such as community-owned shops or pubs).
So, what kind of changes does the legislation bring about and does it make any difference to anything in the social enterprise world? There are several pieces of legislation – various sets of regulations and the Co-operative and Community Benefit Societies Act 2014. The former were all timed to come into effect on 6th April this year and the latter is in force from 1st August.
One of the key things coming out of the first set of changes was the increase to £100,000 from £20,000 of the limit for withdrawable share capital for individual members of a society. Co-operatives UK had pushed for this for some time and Co-ops UK has long-stated that the old limit was a barrier to growth for some societies (not surprising when you consider that HMRC had not elected to increase the £20k limit for almost 20 years). There were also changes bringing some elements more in line with existing company law. Another amendment was allowing registration documents to be submitted electronically.
This last point actually gives societies something of an edge, at least over CICs where paper registration is still needed. With ‘normal’ companies, charities, and CICs all having had updates to their legislative framework, the new laws are certainly a sign that co-ops and community benefit societies are seen as still having lots to offer in a more ‘social’ economy.
The 2014 Act itself does a lot of consolidating – eight old Acts replaced by this one new shiny one – and puts all the provisions in a good and sensible order making things easier to find. (Registration / Names, Rules, and Powers / Members and Officers, and so forth).
All things considered, does a new registered society smell as sweet as an old industrial and provident society? In many ways, not much has changed, but the consolidated legal framework is a positive move as is the increase to £100k for withdrawable share capital, which could help with community share issues. For most social enterprises, though, there’s no significant incentive for you to set up as a registered society instead of more common forms such as CICs or companies limited by guarantee, or even to convert your existing structure to one. Some community benefit societies have obtained charitable status with HMRC but at some point the Charities legislation is going to require some of them to register with the Charity Commission if they are to remain a charity.
So, what’s in a name? There is one change that legal and other commentators have so far overlooked – one which is a saving both to the public purse and also to the environment, and that has to be a good thing. That is that the phrase “industrial and provident society” consists of 29 characters whilst “registered society” is a mere 18. This constitutes a saving of more than 1/3 in ink costs when writing or printing the relevant phrase, and that’s not to be sniffed at in this age of austerity…
Simon Lee, Hempsons Solicitors
Simon has provided legal advice to social enterprises, charities, and other community and voluntary sector bodies for over 10 years. He is passionate about the sector and is able to advise on a wide range of matters affecting such organisations including legal structures, contracts, funding and governance issues.