IPS Reform in Ireland – Comment if you Know More

Chris Gordon was referred to me by the Legal team at Co-operatives UK with this query:

Hi Ian

Hey Ian I was put in contact with you by Cooperatives UK Legal team to have a quick chat. It’s about Irish Company Law and including cooperatives in the new updates to the law and having them in the mix. The Irish Company Law is under review and there is an open window to have amendments for companies but no-one has lobbied for Cooperatives to be included. I think this is an oversight and would like to talk to you about it.

The reason for the urgency is because, the public open submissions close and I need to get at least 30 responses in to the Department before the 9th September for inclusion in discussions.

Looking forward to chatting to you and getting your opinion if possible.

Kindest regards

Chris

I’ve never really researched IPS Law in the Irish Republic, although I know it’s based on the UK 1893 Act with some later amendments. I had also come across this consultation back in 2009: ROI IPS Consultation Paper (Final 2) 20.4.09.

However, a little internet research reveals that legislation is about to be brought to the Dail by the Department for Jobs Enterprise and Innovation. Here’s the detail of what I found out plus some thoughts and info based on the UK experience.

At least in ROI, unlike the UK, the same Department deals with both IPS and Company Law. I see it’s now called the Department of Jobs, Enterprise and Innovation (DJEI) and does cover both – but not in the same legislation.

Here, in the DJEI Action Plan for Jobs 2013 2nd Progress Report at page 84 there is a reference  IPS Law reform:

“Action 237:

Publish legislation aimed at easing the regulatory burden on co-operative societies and making it easier to run a co-operative as an alternative form of enterprise organisation.

Q2 Measure:
Support the OPC in drafting of the Bill and subsequent publication. (DJEI, OPC)

Update: Delayed
The Department of Jobs, Enterprise and Innovation worked closely with the Office of the Parliamentary Counsel in the drafting of the Friendly Societies and
Industrial and Provident Societies (Miscellaneous Provisions) Bill and the drafting was completed on July 2nd.”

The company law reform is dealt with on page 66:

” Action 168:
Progress the very substantial reform of the Companies Acts, following publication of the Companies Bill in December 2012. This Bill will bring significant benefits to companies of all types throughout the country, and will be a key part of the Government’s drive to make Ireland the best small country in the world in which to do business.”

Q2 Measure:
Assist in completing Second Stage in the Dáil. (DJEI)
Update: Complete
The Second Stage reading of the Bill commenced on April 23rd 2013 and was completed on April 25th 2013. Committee Stage is expected to commence in the autumn.”

So it looks as if separate legislation will be coming to the Dail on IPS law in due course. It is already drafted.

My limited knowledge of ROI IPS Law is that there is no test like our “bona fide co-op” or Bencom requirements for registration as they were introduced in the UK in 1939, after Irish Independence. I don’t know what the decision was in the end about whether to import something similar in ROI, although the Consultation document seems to suggest deferring it unless there was a lot of pressure in favour of it.

I also have limited knowledge of ROI Company law, although the large amount of EU Harmonisation means some things are bound to be the same as they are in the UK.

Here, the big problem has always been the failure to update IPS Law in line with desirable Company Law changes, while retaining the special co-op and bencom nature of the IPS. So what are the changes we have campaigned for and achieved on that over the years?

Most of them have been based on the idea that, as businesses competing in the marketplace with companies IPS’s should have many of the same rules. Among changes to achieve that by catching up with later company law developments have been:

The Co-operative and Community Benefit Societies Act 2003 which dealt with the technical processes of making contracts, the old ultra vires rule and issues around directors’ powers to bind societies. Essentially, the Company Law provisions were applied to IPS’s verbatim see sections 3 to 5 of the 2003 Act.

Then, using the power already provided by the Industrial and Provident Societies Act 2002, changes were made by regulations to bring the accounting exemptions for small societies more closely into line with those available to companies.

When the Co-operative and Community Benefit Societies and Credit Unions Act 2010 is implemented sections 3 and 4 will apply Company Director Disqualification rules to society directors and broadly bring the investigation and inspection powers applied to IPS’s in line with those applied to companies.

Perhaps most important of all, IPS’s never benefited from the administration or company voluntary arrangement procedures available to rescue insolvent companies – they were first introduced in 1986. Now, 11 or 12 years after the power was conferred by section 255 of the Enterprise Act 2002, the government plans to apply them and is
consulting on how to do that as well as on applying the inspection and investigation regime from the Companies Act 2006.

Finally, a Consolidation Bill is drafted, will be consulted on, beginning next month, and, Downing Street promises, passed before the 2015 general election.

Can anyone who knows more about the Irish plans and developments add comments to this post to keep us all up to date?

© Ian Snaith 2013 This work is licensed under the Creative Commons License
This work is licensed under a Creative Commons Attribution-ShareAlike 2.0 UK: England & Wales License.

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