The Tánaiste and Minister for Enterprise, Trade and Employment (Minister) has secured the Government's agreement to draft the Co-Operative Societies Bill 2022. The bill envisaged by the General Scheme (Bill) will modernise and consolidate existing legislation, some of which dates back to the 19th century, and ensure that there is an effective framework in place for the range of organisations using the co-operative model in Ireland.
Setting up a Co-Operative Society
The Bill will make it easier to set up and operate a co-operative society (co-operative) in Ireland. Under the Bill:
- The minimum number of persons required to form a co-operative will be reduced from 7 to 3.
- A body corporate can now be a founding member of a co-operative.
- The Bill allows a co-operative to carry out any (lawful) activity in the State based on the co-operative principles set out in the Bill. This change will make it easier to form a co-operative creating a level playing field with companies.
- Audit exemptions will be available to co-operatives, which will reduce the administrative burden on smaller cooperatives.
- Co-operatives will be able to hold general meetings on a hybrid basis or on an entirely virtual basis.
The current light-touch corporate governance regime is not considered fit for purpose and doesn't adequately protect the interests of co-operatives, their members, or third parties. While co-operatives are by nature very distinct from companies, they are ultimately a body corporate. There are many aspects of good practice set out in company law that apply to co-operatives, either directly or with adaptation. Modernising existing provisions of the Industrial and Provident Societies Act 1893, the Bill will introduce modern corporate governance, financial reporting and compliance requirements. Several provisions deal with directors, members, registers, meetings and resolutions. For consistency and ease of understanding, these provisions generally mirror the provisions of the Companies Act 2014 (CA 2014) but are amended as appropriate to reflect the distinctive characteristics of co-operatives.
The Bill will result in a more robust regulatory and governance regime with greater assurances provided to co-operatives' members, employees and creditors. It should also make co-operatives more attractive to investors.
The current legislation provides a minimum set of matters that need to be addressed in the rules of societies. The proposed legislation expands on the matters that need to be addressed in the rules without being prescriptive on the details, thereby providing cooperatives with the flexibility to agree on rules appropriate to their particular circumstances. Cooperatives will also be free to include additional rules which reflect the nature of their operation or particular ethos, as long as these are not in breach of the proposed legislation.
Registrar of Co-operative Societies and Trade Unions
The Bill proposes establishing the Office of the Registrar of Co-Operative Societies and Trade Unions (Registrar). The General Scheme outlines the Registrar's functions once established, including maintaining a register of co-operatives. Existing functions of the Registrar of Friendly Societies will transfer to the new Registrar under the Bill.
Financial Statements, Annual Returns and Audits
The Bill provides that the provisions of Part 6 of the CA 2014 relating to financial statements, annual returns and audits that apply to a private company limited by shares will apply to co-operatives, subject to any necessary tailoring. Financial reporting generally has evolved considerably, and the Bill will address the applicable requirements in more detail than under current legislation.
Registration of Charges
The Bill aims to mirror the provisions of the CA 2014 governing the registration and priority of charges. The Registrar will maintain a register of charges open to inspection by any person on payment of a fee.
The General Scheme intends for a transition period to run for 30 months on the enactment of the Bill to give existing industrial and provident societies time to decide whether to:
- Register as a co-operative.
- Convert to a company under section 54 of the Industrial and Provident Societies Act 1893.
- Wind up and be dissolved under Part 11 of the CA 2014.
The Bill provides the Minister with the power to extend the "transition period" by order in circumstances where difficulties arise in the operation of provisions of the Bill or to the extent that more time is required for interested parties to carry out any procedures under the Bill.
Regulatory Impact Analysis
In addition to the publication of the General Scheme, a Regulatory Impact Analysis of the proposed legislation and response to a public consultation carried out in early 2022 was published and can be accessed here.
Contributed by Rory Carbery
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