An industrial and provident society (IPS) is a body corporate 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 the union of the Kingdom of Great Britain and the Kingdom of Ireland into one sovereign state, established by the Acts of Union 1800, Acts of Union in 1801. It continued in this form until ...

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 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 ( 15 & 16 Vict. c. 31). The legislation was subsequently amended and consolidated by the Industrial and Provident Societies Act 1862 ( 25 & 26 Vict. c. 87), the Industrial and Provident Societies Act 1876 ( 39 & 40 Vict. c. 45) and most recently the Industrial and Provident Societies Act 1893 ( 56 & 57 Vict. c. 39), which was amended in 1895 and 1913 and still forms the basis of the law on societies in the

Republic of Ireland Ireland ( ), also known as the Republic of Ireland (), is a country in Northwestern Europe, north-western Europe consisting of 26 of the 32 Counties of Ireland, counties of the island of Ireland, with a population of about 5.4 million. ...

. 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 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. 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, Baron Cameron of Chipping Norton (born 9 October 1966) is a British politician who served as Prime Minister of the United Kingdom from 2010 to 2016. Until 2015, he led the first coalition government in the UK s ...

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. A new Co-operative and Community Benefit Societies Act received

royal assent Royal assent is the method by which a monarch formally approves an act of the legislature, either directly or through an official acting on the monarch's behalf. In some jurisdictions, royal assent is equivalent to promulgation, while in othe ...

in 2014.

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 Northwestern Europe, off the coast of European mainland, the continental mainland. It comprises England, Scotlan ...

, IPSs are registered (but not regulated) by the

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

(FCA), which took over the job from the Registrar of Friendly Societies when it was part of the Financial Services Authority (FSA) (both being supervised by the Treasury). Society 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 ( 56 & 57 Vict. c. 39), 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 ( 56 & 57 Vict. c. 39).

Legislation

* Industrial and Provident Societies Partnership Act 1852 * Industrial and Provident Societies Act 1893 ( 56 & 57 Vict. c. 39) * Industrial and Provident Societies (Amendment) Act 1913 * Industrial and Provident Societies Act 1965 (c. 12) * Industrial and Provident Societies Act 2002 (c. 20) *

Co-operative and Community Benefit Societies Act 2003 A cooperative (also known as co-operative, coöperative, co-op, or coop) is "an autonomous association of persons united voluntarily to meet their common economic, social and cultural needs and aspirations through a jointly owned and democr ...

* Co-operative and Community Benefit Societies and Credit Unions Act 2010 * Financial Services Act 2012 * Co-operative and Community Benefit Societies Act 2014

Forms of financial capital: Community shares

Unlike a

company limited by guarantee A company limited by guarantee (CLG) is a type of company where the liability of members in the event the company is wound up is limited to a (typically very small) amount listed in the company's articles or constitution. Most have no share ca ...

(another form favoured by businesses not primarily motivated by profit), an IPS always 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 ...

. However, in an IPS the shares cannot usually increase in value beyond their nominal amount. Often, no interest or dividend is payable on them at all, and they are voting shares only. The capital of an IPS is therefore 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 of the members. The share often acts as no more than a "membership ticket", and voting is on a "one member one vote" basis. Working capital is usually provided through non-voting shares, and these are often withdrawable. Withdrawable share capital is an unusual form of finance which is treated as equity but may be withdrawn subject to specified conditions. It has the great advantage of being exempt from the Financial Services and Markets Act, which makes the sale of securities to the public a criminal offence without compliance with expensive and onerous regulations. 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 requirements are continuously met. The terms of society shares, whether withdrawable or not, may include the payment of interest on the capital, but this may only be paid out of profits. The maximum individual withdrawable shareholding is currently set at £100,000 (although other IPSs may hold more shares than this). The limit used to include non-withdrawable shares, but this was removed in 2011. Since 2006, the FCA has been willing, in principle, to permit co-operative 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. 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
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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