Accidental Officers of Co-operative Societies & Bencoms?

I’ve just added a very late reply on this to my post of last December on committees, boards, officers etc under CCBSA 2014 and I thought it might be worth highlighting it with a post of its own. It’s a reply to this question from Linda Barlow of Co-operatives UK:

“Just one point, I was wondering if you could provide an example of “(except an employee appointed by the society’s committee)” in context as I would imagine it may vary depending on the governance arrangements of the society.

Under s149, it seems to me that a ‘regular salaried employee’ which are invariably appointed by a senior management team via delegated authority from the Board, wouldn’t be an officer of the society? Is that correct? Does it matter that it wasn’t a direct appointment?

In what instances would employees not be appointed by the Board?”

My short answer is:

“I think you’re right that it depends on governance arrangements in the rules of the society and that employees not directly appointed by the committee will not be officers.”

My longer reply is this:

“A Westlaw search reveals no case law on this question which does not surprise me.

I think a court would look at this definition in the legislation in its context. The words do seem to refer to an employee directly appointed by the committee or board. In general, that will be the CEO and secretary in, for example, large co-operative societies – as required by Co-operatives UK Consumer Co-op Governance Code paras 74 & 79. The Co-operatives UK Model Rules for consumer co-ops, at rule 8.4(a)(iv), provide for that as well.

Given all that context, I think a court would probably look at what a society’s rules said about how different levels of employees were appointed when applying this definition.  Then they’d look at how the person in question was actually appointed. If the society’s rules were silent, evidence about the practice of that society when appointing different levels of employee might well be relevant.

The above probably works for most hierarchically organised co-ops – like the consumer ones. In a workers’ co-op where, if the membership requirement for employment meant every employee who was a member could be said to be appointed by the committee, things would be less clear. If all members are also committee members (the collective model) then that works and all employees who are members are officers and have the potential liabilities flowing from that. If there’s an elected committee which gives all employees membership then the question might be trickier but, in principle, if the appointment as an employee was made by the committee, the person would be an “officer” under s149 CCBSA 2014. So a lot will depend on the way the distinction between membership and employment works in a particular workers’ co-op which is a matter of detail.

The main consequence of that under CCBSA 2014 will be the application of sections: 30 (register of members and officers); 41-42 (security and accounting by officers); and, most important, 128 (offences by society also offences by officers if the rules made it their job to do something). However, in most of those cases, it’s committee members who are singled out.

So maybe employees who just happen to have been appointed by the board don’t have too much to worry about. In a collective where all members are committee members, the risks just go with the territory. Responsibility goes with power.”

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Ian Snaith 2015

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