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Whose Interest?

John Goodman, National Policy Officer, Co-operative Union
New Sector Magazine, No.53, December/January 2002-3

John Goodman looks at the impact of the report by the UK Cabinet Office Strategy Unit, Private Action, Public Benefit may have on updating co-operative legislation to meet current needs.

Important Recommendations for Co-operatives

The Strategy Unit's long-awaited report, published in September 2002, has mostly been grabbing attention for what it has to say about charities, but it also recommends important changes to Industrial & Provident Society law and introduces another phrase into the debates about legal structures - the Community Interest Company. It's worth having a look at some of these ideas.

The Industrial & Provident Society is a tried and trusted structure for co-operatives. It's a favourite for housing associations, credit unions and clubs too.

It's been updated several times in its 150-year history and the report suggests a number of further changes to meet current needs, mostly in line with what organisations such as the Co-operative Union were asking for:

bulletRenaming the bona-fida co-operative as a Co-operative and the Society for the Benefit of the Community as a Community Benefit Society, no longer using the umbrella term Industrial & Provident Society.
bulletDefining the co-operative in line with the International Co-operative Alliance Statement on Co-operative Identity.
bulletAllowing Community Benefit Societies to have separate categories of members.
bulletAbolishing the 20,000 ceiling on an individual member's shareholding.

Two other recommendations (on the threshold for demutualising and on easier updating of the law) have already been implemented in Gareth Thomas' recent Private Members Bill.

Locking in the Assets

A breakthrough recommendation is that the members of a Community Benefit Society should be able to choose to protect their assets from demutualisation permanently.

The report also recommends establishing a new structure called Community Interest Company that would similarly have assets that were prevented from being distributed. It could be either a company limited by guarantee or by shares. It would have to have objects that were in the public and community interest, which would be checked when the company was registered and which couldn't be changed without approval.

This would be quite a step for Companies House, which currently acts more like a giant filing cabinet than a regulatory body.

It looks as though the idea of permanently locking up the assets of a business that exists for the public interest is gaining ground, despite suspicion, especially from the Treasury, which fears that these bodies will claim to be private sector, but effectively be dependent on the state to guarantee their debts.



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