New Legislation will encourage the growth of Co-operatives in Ireland and is the most far-reaching reform in this area for over a century

The Tánaiste and Minister for Enterprise, Trade and Employment, Leo Varadkar TD has secured Government agreement to commence drafting the Co-operative Societies Bill.

The General Scheme provides for a specific legislative framework for Co-operative societies for the first time, with societies registering under the legislation being required to adhere to the Co-operative ethos.

Government approves the drafting of ground-breaking legislation for the Co-operative Sector 1
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It consolidates and modernises existing provisions and introduces modern corporate governance, financial reporting and compliance requirements, thereby making Co-operatives more attractive to investors.

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The General Scheme also includes provisions to:

  • make it easier to set-up and operate a Co-operative society – for example, by reducing the minimum number of founding members (from seven to three);
  • expand the categories of founding members to include bodies corporate.
  • provide for audit exemptions for smaller Co-operatives.
  • provide for virtual and hybrid participation at general meetings.
  • empower Co-operatives by providing them with the flexibility to reflect in their rules what best suits their own particular circumstances.

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The Tánaiste said:

Many successful Co-operatives have operated in Ireland down the years including agricultural Co-ops and mutual building societies.

Co-operatives differ from companies in that they serve the interest of their members, who are often their suppliers, staff or customers, rather than shareholders.

It’s a model that can work particularly well for social enterprises.

However, the law governing Co-operatives has not kept up with the times.

This new law changes all that, responds to the needs of the cooperative movement and opens a path for a new wave of Co-operative societies.

This is a very substantial legislative initiative, and I am committed to bringing this new law into operation at the earliest date, thereby fulfilling another major commitment of this Government.

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The Minister of State for Trade Promotion, Digital and Company Regulation, Dara Calleary TD said:

I am conscious of the proud history of the Co-operative sector since the 1880s and the invaluable role it has played in this country. I want to build on this important legacy and provide a modern legal framework to help the sector grow.

I am particularly mindful of the diverse nature of the Co-operative sector, ranging from the sophisticated and very large to the very small and localised; from those with a successful commercial focus to others with a focus on community, culture and social enterprise; those comprised of producer, consumer, retail or worker members and those who provide services to members in areas such as advice, education, housing, water supply.

As a result, I am committed to ensuring that the proposed legislation will provide as much flexibility as possible, thereby empowering individual Co-operative societies to reflect in their rules what best suits their own particular circumstances.

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Minister Calleary added:

The legislation will introduce a modern legal framework which will place the Co-operative model on a more favourable and clear legal basis. It will create a level playing field with the situation applying to companies and encourage the consideration of the Co-operative model as an attractive formation option for entrepreneurs and also for social and community activities.

What is a Co-operative?

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Co-operatives are established to serve the interests of their members who range from consumers, producers, and workers, to the wider community.

A Co-operative is an association or body which is organised and which operates on the basis of Co-operative principles, such as “democratic member control” (one member one vote).

A widely used definition is

an association of persons united voluntarily to meet their common economic, social and cultural needs and who own jointly and control democratically their enterprise

There is no specific legislation dealing with Co-operatives in Ireland.

At present, those entities who wish to follow the Co-operative model primarily register as industrial and provident societies, operate under the Industrial and Provident Societies (IPS) Acts 1893-2021 and reflect their Co-operative ethos in their rules.

As an alternative, entities can register as companies; operate under the Companies Act 2014 and use the company constitution to reflect their Co-operative ethos.

The number of industrial and provident societies registered in Ireland has been relatively stable over the past decade with 967 industrial and provident societies registered at the end of 2021.

Overview of the Bill

The General Scheme provides a specific legislative basis for Co-operative societies for the first time, with societies registering under the legislation being required to adhere to the Co-operative ethos. The Industrial and Provident Societies legislation, some of which dates back to the 19th century, will largely be repealed with existing industrial and provident societies being provided with a transition period in which to register as a Co-operative society, adopt an alternative corporate structure or wind up and be dissolved.

The legislation also includes provisions to make it easier to set-up and operate a Co-operative society and to access alternative sources of finance.

The legislation will consolidate and modernise the existing provisions across a range of areas including the functions and powers of the Registrar; matters relating to registration, amalgamation, transfer of engagements and conversions, strike-off and restoration; shares and share capital and raising of funds, including charges and debentures.

While Co-operatives are by nature very distinct from companies, they are a body corporate and there are many aspects of good practice set out in company law that are applicable to Co-operatives, either directly or with adaptation.

As a result, the legislation will reflect the approach adopted in the Companies Act 2014 and will introduce modern corporate governance, financial reporting and compliance requirements.

For consistency and ease of understanding, these provisions are generally similar in approach to the provisions of the Companies Act 2014 but amended as appropriate recognising the distinctive characteristics of Co-operatives.

The legislation will introduce provisions to make it easier to set-up and operate a Co-operative society – by reducing the minimum number of founding members (from seven to three); expanding the categories of founding members to include bodies corporate; providing for audit exemptions for smaller Co-operatives; and providing for virtual and hybrid participation at general meetings.

The legislation will also repeal the existing outdated provisions on raising funds which will make it easier to access various sources of finance.

In recognition of the significant diversity across the Co-operative sector, the legislation seeks to provide as much flexibility as possible, thereby empowering Co-operative societies to reflect in their rules what best suits their own particular circumstances.

In addition to the publication of a General Scheme, a Regulatory Impact Analysis (RIA) of the proposal legislation and response to a public consultation, carried out in early 2022, are also being published.

For more information check General Scheme of the Co-operative Societies Bill 2022 accompanied by RIA

 

 

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