Short Q and A on Limited Legal Rights of Minority Members in IPS’s in the UK

With Dave Hollings permission, I reproduce this exchange I had with him about minority member protection in industrial and provident societies:

On 13 January 2014 14:31, Dave Hollings wrote:

I have a client which is registered as a co-op with multiple shares.

For a variety of reasons (business and financial), they want to convert to a bencom and to convert the shares to a nominal amount of £1 (with the value of shareholdings being converted either to loans or donations, depending on each member’s wishes). They have sounded out their members and most have no problem with this.

However, what if a small number of members do have a problem? They lose the vote at the General Meeting, so the change goes through. But, if this were a company, there would be protections for minority shareholders’ rights which would have to be taken into account and dealt with. Do such protections exist for minority shareholders in Societies (I have found no reference to such rights).


Dave Hollings

From: Ian Snaith

Sent: 14 January 2014 12:35
To: Dave Hollings
Subject: Re: Minority Shareholders Rights in a Society

Dear Dave

The short answer is that sections 994-999 of the Companies Act 2006 do not apply to societies so there is no remedy for “unfair prejudice” of members. The “just and equitable” winding up remedy under section 122(1)(g) of the Insolvency Act 1986 does apply to allow a member of a solvent society to petition for it to be wound up. However, the courts will be reluctant to agree to that and the process will be very expensive and troublesome for the minority member(s).

There is a duty for members voting to amend rules to convert to a bencom and change the structure of the share capital to do so bearing in mind the interests of the whole society but in the light of the above it is difficult to enforce.

It would be wise for this to be completed and the rule changes registered before 1st August this year when the new consolidating legislation comes into force.

I’ll put this on my blog  without identifying you as the person with the query if you are OK with that.

Best Wishes


From: Dave Hollings

Date: 14 January 2014 12:36

Subject: RE: Minority Shareholders Rights in a Society

To: Ian Snaith


No problem with you putting this on your blog – or even identifying me, as the client is not identified.



© 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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