We are assisting with the winding up of yet another working men's club.
What is a Registered Society?
Industrial and Provident Societies came into effect in 1852 with an Act of Parliament of the same name. Further Acts modernised the regulation of the Societies in 1893, 1913 and more recently in 1965 and 2002. An IPS is a legal entity for a trading business or a voluntary organisation in the United Kingdom. In 2014 these societies were renamed Co-operative Societies or Community Benefit Societies. All new societies must choose to be one or the other, whilst societies already in existence at 2014 may remain as a third category.
What is the difference between a Co-operative and a Community Benefit Society?
Principally, it’s a matter of what happens to any profits of the society. When a Co-operative Society makes a profit the monies are returned to the society’s members. However, a Community Benefit Society’s profits are reinvested in projects and assets for the cause of the society.
So, is a Registered Society like a company?
It is similar. Like a company, a Registered Society limits the liabilities of its individual members should the business be unsuccessful and become insolvent.
I think my society may have debts that it cannot pay.
Prior to 2014 the only insolvency procedures that were available to an Industrial and Provident Society were a secured lender appointed Receivership or a Liquidation; either voluntary or through a winding up Order of the Court. That changed by an Order of the Treasury, which allows for an Administration or a Company Voluntary Arrangement to deal with the society’s financial affairs. The same Order also prevented a holder of a floating charge, granted over a society’s assets after 6 April 2014, from appointing a Receiver.
What does that mean in practise?
If the business of a society is still viable and there is a plan to repay its creditors over a set period, then a Company Voluntary Arrangement could be proposed. If breathing space is required, with the possibility of saving the society, then Administration may be appropriate. If the society is no longer viable then a Liquidation is likely to be the right procedure to implement.
What practical considerations are there?
Most Registered Societies will have a lot of members and a committee to run the society’s business. Usually members will each hold one par-value share, like a membership ticket. The value of the share will not normally fluctuate with the success, or otherwise, of the society.
For a Voluntary Winding Up resolution to be passed, it will require the support of 75% of those members who vote in person or by proxy at a meeting convened by the committee to consider the resolution. The society’s rules may specify a different length of time between calling and holding the meeting, but it is usually 21 days. Sometimes the meeting will be well attended and members will have a variety of differing views and objectives. It requires an experienced Insolvency Practitioner to assist the committee with handling this sort of situation.
Instead of notifying Companies House of the insolvency procedure, the Insolvency Practitioner is required to tell the Financial Conduct Authority of their appointment. The Financial Conduct Authority maintains the Mutuals Public Register. A Certificate will also need to be filed with the Authority at the end of the Liquidation or upon the dissolution of the society.
If a society enters into Administration or a Company Voluntary Arrangement then the proposals to creditors must be drafted so that the society may still comply with its own rules and the relevant statutory provisions.
My society is not insolvent but the committee still want to close it.
From time to time a Registered Society will have run its course. If there are no funds to distribute then it can be dissolved by the completion of an Instrument of Dissolution form, followed by lodging a Certificate to show all property has been properly conveyed or transferred to the people entitled to it.
If there are still monies held by the society then a solvent, Members’ Voluntary Liquidation can be used to realise any remaining assets and distribute the cash balance.
 Industrial and Provident Societies Partnership Act 1852.
 Co-operative and Community Benefit Societies Act 2014.
 The Industrial and Provident Societies and Credit Unions (Arrangements, Reconstructions and Administration) Order 2014
Click for our Guide to insolvent "Registered Societies" to print and keep.