Co-operative and Community Benefit Societies Act 2014

• Citation: 2014 c. 14
• Sections: 366

Section 1 Meaning of “registered society”

(1) In this Act “ registered society ” means a society registered under this Act, that is—

(a) a society registered under this Act on or after 1 August 2014 (the day this Act comes into force), or

(b) (by virtue of section 150(1)) a society that immediately before that date was registered or treated as registered under the 1965 Act.

(2) In this Act “ the 1965 Act ” means the Industrial and Provident Societies Act 1965.

Section 2 Societies that may be registered

(1) A society for carrying on any industry, business or trade (including dealings of any kind with land) which meets the conditions in subsection (2) may be registered under this Act as—

(a) a co-operative society, or

(b) a community benefit society.

(2) The conditions are—

(a) that it is shown to the satisfaction of the FCA—

(i) in the case of registration as a co-operative society, that the society is a bona fide co-operative society, or

(ii) in the case of registration as a community benefit society, that the business of the society is being, or is intended to be, conducted for the benefit of the community,

(b) that—

(i) the society has at least 3 members, or

(ii) the society has 2 members both of which are registered societies,

(c) that the society's rules contain provision in respect of the matters mentioned in section 14, and

(d) that the place that under those rules is to be the society's registered office is in Great Britain or the Channel Islands.

(3) For the purposes of subsection (2)(a)(i) “ co-operative society ” does not include a society that carries on, or intends to carry on, business with the object of making profits mainly for the payment of interest, dividends or bonuses on money invested or deposited with, or lent to, the society or any other person.

(4) For registration under this Act as a credit union, see the Credit Unions Act 1979.

Section 3 Registration

(1) An application for the registration of a society under this Act is made by sending the following to the FCA—

(a) an application for registration, signed by—

(i) the society's secretary and 3 of its members, or

(ii) where both or all of its members are registered societies, the secretaries of 2 of those registered societies, and

(b) 2 copies of the society's rules or, if the application is made by electronic means, 1 copy of those rules.

(2) If the FCA is satisfied that the society has complied with the requirements under this Act as to registration, it must—

(a) register the society, and

(b) give the society an acknowledgment of registration bearing the FCA's seal.

(3) A registered society is by virtue of its registration a body corporate by its registered name, with limited liability.

(4) The society may sue and be sued by its registered name.

(5) Registration vests in the society all property for the time being vested in any person in trust for the society.

(6) Any legal proceedings pending by or against the trustees of the society may (once the society is registered) be brought or continued by or against the society.

(7) The acknowledgement of registration also constitutes an acknowledgment of, and is conclusive evidence of, the registration under this Act of the rules of the society in force at the date of the society's registration.

Section 4 Registration etc : special cases

(1) A society which has any withdrawable share capital may not be registered with the object of carrying on the business of banking.

(2) Section 67(2) (taking of deposits below limits specified there not to be treated as carrying on the business of banking) applies for the purposes of subsection (1).

(3) For the prohibition on registering a society whose objects are wholly or substantially those of a credit union otherwise than as a credit union, see section 2(3) of the Credit Unions Act 1979.

(4) Subsection (5) applies where, for the purposes of securing (and maintaining) approval of its profit sharing scheme in accordance with Part 1 of Schedule 9 to the Income and Corporation Taxes Act 1988, the rules of a society that is a workers' co-operative contain any of the following—

(a) provision for membership of the society by trustees of the scheme;

(b) provision denying voting rights to those trustees;

(c) other provisions which appear to the FCA to be reasonably necessary for that purpose.

(5) The provisions are to be disregarded in determining—

(a) whether the society should be registered as a co-operative society under this Act;

(b) if the society is a registered society, whether for the purposes of this Part the society is a bona fide co-operative society.

Section 5 Cancellation of registration: conditions for cancellation

(1) The FCA may, in writing, cancel the registration of a registered society if any of conditions A to E is met.

(2) Condition A is that—

(a) the society has requested the cancellation of its registration,

(b) the request is evidenced in such way as the FCA from time to time directs, and

(c) the FCA considers it appropriate to cancel the registration.

(3) Condition B is that any of the following is proved to the FCA's satisfaction—

(a) that an acknowledgment of registration has been obtained by fraud or mistake;

(b) that the society has less than 3 members (and does not have 2 members both of which are registered societies);

(c) that the society has ceased to exist.

(4) Condition C is that it is proved to the FCA's satisfaction—

(a) that the society exists for an illegal purpose, or

(b) that the society has wilfully and after notice from the FCA violated any of the provisions of this Act.

(5) Condition D is that it appears to the FCA—

(a) in the case of a society registered as a co-operative society, that the condition in section 2(2)(a)(i) is not met;

(b) in the case of a society registered as a community benefit society, that the condition in section 2(2)(a)(ii) is not met;

(c) in the case of a pre-commencement society, that neither of the conditions in section 2(2)(a) is met.

(6) Condition E is that—

(a) the society's registered rules contain provision of a kind authorised by section 22 (rules of agricultural, horticultural or forestry society), and

(b) it appears to the FCA that—

(i) the society no longer consists mainly of members of a kind mentioned in that section, or

(ii) the activities carried on by the society do not mainly consist in making advances to its members for the purposes mentioned there.

Section 6 Cancellation of registration: procedure and effect

(1) The FCA must give a registered society at least 2 months' notice in writing of the proposed cancellation of its registration, specifying briefly the ground of the proposed cancellation.

(2) Subsection (1) does not apply to any cancellation—

(a) made by virtue of condition A in section 5 (cancellation at society's request),

(b) made by virtue of section 112(2) (cancellation following conversion into a company etc), or

(c) made after a relevant certificate within the meaning of section 126 (certificate that society's property has been transferred to persons entitled to it) has been lodged with the FCA.

(3) If the society appeals under section 9 before the end of the period of notice, its registration may not be cancelled before the date the appeal is determined or abandoned.

For the FCA's power to suspend the society's registration in these circumstances, see section 8(3).

(4) For the right of the society to make representations and to be heard by the FCA in a case where condition D in section 5 is relied on, see section 7.

(5) The FCA must consult the PRA before cancelling the registration of a registered society that is a PRA-authorised person.

(6) The FCA must ensure that, as soon as practicable after a society's registration is cancelled, notice of the cancellation is published in—

(a) the Gazette, and

(b) a local newspaper circulating in or about the locality in which the society's registered office is situated.

(7) As from the date of publication of the notice in the Gazette, the society ceases to be entitled to any of the privileges of this Act as a registered society.

This does not affect any liability incurred by the society (which may be enforced against it as if the cancellation had not occurred).

Section 7 Cancellation of registration: additional procedure in cases involving condition D

(1) This section applies where the FCA gives a registered society a notice under section 6 (notice of proposed cancellation of registration) specifying a ground set out in condition D in section 5.

(2) The FCA must consider any representations about the proposed cancellation that the society makes to it in the period of notice.

(3) If the society requests, the FCA must give the society an opportunity of being heard by the FCA before its registration is cancelled.

(4) If, at any time after the end of one month from the date the notice is given, it appears to the FCA that there have not been taken the steps which by that time could reasonably have been taken for the purpose of—

(a) converting the society into a company, amalgamating it with a company, or transferring its engagements to a company, in accordance with section 112, or

(b) dissolving the society under section 119 or 123,

the FCA may give such directions as it considers appropriate for securing that the society's affairs are wound up before its registration is cancelled.

(5) The FCA must consult the PRA before giving directions under subsection (4) to a registered society that is a PRA-authorised person.

(6) A person who contravenes or fails to comply with a direction under subsection (4) commits an offence.

(7) A person guilty of an offence under this section is liable on summary conviction—

(a) in England and Wales, to a fine not exceeding level 3 on the standard scale;

(b) in Scotland, to a fine not exceeding level 3 on the standard scale or imprisonment for a term not exceeding 3 months (or both).

Section 8 Suspension of registration

(1) If any of conditions C to E in section 5 is met in relation to a society, the FCA may by notice in writing—

(a) suspend the society's registration for a term not exceeding 3 months, and

(b) from time to time renew any suspension for a term not exceeding 3 months.

(2) The FCA must give a registered society at least 2 months' notice in writing of the proposed suspension of its registration under subsection (1)(a), specifying briefly the ground of the proposed suspension.

(3) Where—

(a) a notice of proposed cancellation of a society's registration is given under section 6, and

(b) before the end of the period of notice, the society appeals under section 9 against the proposed cancellation,

the FCA may by notice in writing suspend the society's registration from the end of that period until the date the appeal is determined or abandoned.

(4) The FCA must consult the PRA before suspending, or renewing the suspension of, the registration of a registered society that is a PRA-authorised person.

(5) The FCA must ensure that, as soon as practicable after the suspension or renewal of suspension of a society's registration, notice of the suspension or renewal is published in—

(a) the Gazette, and

(b) a local newspaper circulating in or about the locality in which the society's registered office is situated.

(6) From the date of publication of the notice in the Gazette until the end of the period for which the society's registration is suspended, the society is not entitled to any of the privileges of this Act as a registered society.

This does not affect any liability incurred by the society (which may be enforced against it as if the suspension had not occurred).

Section 9 Appeal against refusal to register or cancellation or suspension of registration

(1) A society may appeal to the appropriate court from a decision of the FCA—

(a) to refuse to register the society (but see subsection (3)),

(b) to cancel the society's registration (but see subsections (3) to (5)), or

(c) to renew a suspension of the society's registration so far as the renewal provides for the suspension to continue more than 3 months from the date its registration was first suspended.

(2) “ The appropriate court ” means—

(a) if the society's registered office is in Scotland, the Court of Session;

(b) otherwise, the High Court.

(3) No appeal may be made against—

(a) a refusal to register a society on the ground that a condition in section 2(2)(a) is not met, or

(b) a decision to cancel a society's registration on the ground that condition D in section 5 is met.

(4) No appeal may be made against a cancellation within section 6(2).

(5) An appeal against a decision to cancel a society's registration must be lodged before the end of the period of notice of the proposed cancellation given under section 6.

(6) If a decision to refuse to register a society is overruled on appeal, the FCA must register the society and give it an acknowledgment of registration under section 3.

Section 10 A society's name

(1) A society may not be registered under this Act under a name which in the opinion of the FCA is undesirable.

(2) The last word in the name of every registered society must be—

(a) “limited”, or

(b) if the society's rules state that its registered office is to be in Wales, either “limited” or “cyfyngedig”.

This is subject to the following provisions of this section.

(3) If the FCA is satisfied that a society's objects are wholly charitable or benevolent—

(a) it may register the society by a name which does not comply with subsection (2), or

(b) it may give the society approval under section 13 for a change of name to one that does not comply with that subsection.

(4) But if it subsequently appears to the FCA that the society (whether in consequence of a change in its rules or otherwise) is not being conducted wholly for charitable or benevolent objects—

(a) the FCA may direct that the word “limited” (or in an appropriate case “cyfyngedig”) be added as the last word in the society's name, and

(b) if it does so, it must give the society notice of the direction.

Section 11 Registered name to be displayed and used

(1) A registered society must ensure that its registered name appears in a conspicuous position and in legible characters on the outside of—

(a) its registered office, and

(b) every other office or place in which its business is carried on.

(2) A registered society's registered name must appear in legible characters—

(a) in all of its notices, advertisements and other official publications,

(b) in all of its business correspondence,

(c) in all bills of exchange, promissory notes, endorsements, cheques and orders for money or goods, purporting to be signed by or on behalf of the society,

(d) in all its other business documentation, and

(e) on all its websites.

(3) An officer of a registered society, or any other person acting on behalf of a registered society, who—

(a) issues or authorises the issue of a document within subsection (2) (a), (b) or (d) that does not comply with subsection (2),

(b) signs on behalf of the society a document within subsection (2)(c) that does not comply with subsection (2) or authorises the signing of such a document on its behalf, or

(c) causes or authorises the appearance on the internet of a website within subsection (2)(e) that does not comply with subsection (2),

commits an offence and is liable on summary conviction to a fine not exceeding level 3 on the standard scale.

(4) A person convicted of an offence under subsection (3) by virtue of subsection (3)(b) is also personally liable to the holder of the document for the amount specified in the document unless that amount is duly paid by the society.

(5) References to a society's website include a section of any other person's website that relates to the society if—

(a) the society placed the section on the other person's website, or

(b) the society authorised it to be placed there.

Section 12 Charitable status to appear on documents etc

(1) A charitable registered society whose registered name does not include the word “charity” or “charitable” must state the fact that it is a charity in legible characters—

(a) in all of its notices, advertisements and other official publications,

(b) in all of its business correspondence,

(c) in all bills of exchange, promissory notes, endorsements, cheques and orders for money or goods, purporting to be signed by or on behalf of the society,

(d) in all conveyances purporting to be executed by or on behalf of the society,

(e) in all its other business documentation, and

(f) on all its websites.

(2) Subsection (1) does not apply to any document wholly in Welsh if the society's registered name includes the word “elusen” or “elusennol”.

(3) The statement required by subsection (1) must be in English, except that it may be in Welsh if—

(a) the document is otherwise wholly in Welsh, and

(b) the statement consists of or includes the word “elusen” or “elusennol”.

(4) An officer of a registered society, or any other person acting on behalf of a registered society, who—

(a) issues or authorises the issue of a document within subsection (1)(a), (b) or (e) that does not comply with this section,

(b) signs on behalf of the society a document within subsection (1)(c) that does not comply with this section or authorises the signing of such a document on its behalf,

(c) executes on behalf of the society a document within subsection (1)(d) that does not comply with this section or authorises the execution of such a document on its behalf,

(d) causes or authorises the appearance on the internet of a website within subsection (1)(f) that does not comply with this section,

commits an offence and is liable on summary conviction to a fine not exceeding level 3 on the standard scale.

(5) A person convicted of an offence under subsection (4) by virtue of subsection (4)(b) is also personally liable to the holder of the document for the amount specified in the document unless that amount is duly paid by the society.

(6) For the purposes of this section—

(a) “ conveyance ” means any document for the creation, transfer, variation or extinction of an interest in land;

(b) references to execution include—

(i) purported execution, and

(ii) the doing of any act which (though not by itself execution) combined with other acts constitutes execution or purported execution;

(c) references to a society's website include a section of any other person's website that relates to the society if—

(i) the society placed the section on the other person's website, or

(ii) the society authorised it to be placed there.

Section 13 Change of name

(1) A registered society may change its name if—

(a) a resolution for that purpose is passed at a general meeting of the society, appropriate notice of the resolution having been given, and

(b) the FCA gives its approval in writing to the change of name.

(2) “ Appropriate notice ” means—

(a) the notice required by the society's rules for a resolution changing its name, or

(b) if the rules do not make special provision about the notice for such resolutions, the notice required by the rules for a resolution to amend the rules.

(3) A change in the name of a registered society does not affect any right or obligation of the society or of any member (and any pending legal proceedings may be continued by or against the society notwithstanding its new name).

Section 14 Content of a society's rules

A registered society's rules must contain provision about the following matters—

1. Name The society's name (which must comply with section 10).

2. Objects The objects of the society.

3. Registered office The place of the society's registered office, to which all communications and notices to the society may be addressed.

4. Membership The terms of admission of the members, including any society or company investing funds in the society under the provisions of this Act.

5. Meetings, voting, changes to rules The method of holding meetings, the scale and right of voting, and the method of making, altering or rescinding rules.

6. Committees and officers The appointment and removal of a committee (by whatever name) and of managers or other officers and their respective powers and remuneration.

7. Maximum shareholding Determination in accordance with section 24 of the maximum amount of the interest in the shares of the society which may be held by any member otherwise than by virtue of section 24(2).

8. Borrowing powers etc Determination whether the society may contract loans or receive moneys on deposit subject to the provisions of this Act from members or others, and if so under what conditions, under what security, and to what limits of amount.

9. Shares Determination whether any or all shares are transferable, and provision for the form of transfer and registration of shares, and for the consent of the committee to transfer or registration. Determination whether any or all shares are withdrawable, and provision for the method of withdrawal and for payment of the balance due on them on withdrawing from the society.

10. Audit Provision for the audit of accounts in accordance with Part 7.

11. Withdrawal etc Determination whether members may withdraw from the society and if so how, and provision for the claims of the representatives of deceased members and of the trustees of the property of bankrupt members (or, in Scotland, members whose estates have been sequestrated), and for the payment of nominees.

12. Application of profits The way in which the society's profits are to be applied.

13. Seal If the society is to have a common seal, provision for its custody and use.

14. Investment of society's funds Determination whether any part of the society's funds may be invested, and if so by what authority and in what way.

Section 15 Rules to bind members

(1) A registered society's registered rules bind the society and all its members and all persons claiming through them to the same extent as if—

(a) each member had subscribed the member's name and affixed the member's seal to the rules, and

(b) there were contained in the rules a covenant on the part of each member and any person claiming through the member to observe the rules (subject to the provisions of this Act).

(2) But a member of a registered society is not bound by an amendment of the society's rules registered after the person became a member if and so far as the amendment—

(a) requires the member to take or subscribe for more shares than the number held by the member at the date of registration of the amendment,

(b) requires the member to pay upon the shares held by the member at that date any sum exceeding the amount unpaid upon them at that date, or

(c) in any other way increases the liability of that member to contribute to the share or loan capital of the society,

unless the member consents in writing to the amendment.

(3) In its application to Scotland, subsection (1) has effect as if the words “and affixed the member's seal” were omitted.

Section 16 Amendment of rules

(1) Any amendment of a registered society's rules is not valid until the amendment is registered under this Act.

(2) A registered society must give the FCA 2 copies of any amendment to its rules, signed by the society's secretary and—

(a) where both or all of its members are registered societies, by the secretaries of 2 of those registered societies;

(b) otherwise, by 3 of its members.

(3) Subsections (1) and (2) do not apply to a change in a society's registered office or name, but—

(a) the FCA must be given notice of any change of registered office, and

(b) where such notice is given, or where a registered society's name is changed (see section 13), the FCA must register the change of registered office or name as an amendment of the society's rules.

(4) If the FCA is satisfied that an amendment of a society's rules is not contrary to the provisions of this Act, it must—

(a) register the amendment, and

(b) give the society an acknowledgment of registration bearing the FCA's seal.

Section 17 Appeal against refusal to register amendment of rules

(1) A society may appeal to the appropriate court from a decision of the FCA refusing registration of an amendment of the society's rules.

(2) “ The appropriate court ” means—

(a) if the society's registered office is in Scotland, the Court of Session;

(b) otherwise, the High Court.

(3) If the decision is overruled on appeal, the FCA must register the amendment and give the society an acknowledgment of registration under section 16.

Section 18 Duty to provide copy of rules on demand

(1) A registered society must give a copy its registered rules to any person who asks for them and (subject to subsection (2)) pays such fee as the society may require.

(2) No fee is payable where the request is made by a member of the society who has not previously been given a copy of those rules.

(3) The fee may not exceed £5 or such other amount as the Treasury may by order specify.

Section 19 Provision of rules with intent to mislead or defraud

(1) A person commits an offence if, with intent to mislead or defraud, the person gives to any other person—

(a) a copy of any rules other than the registered rules of a registered society on the pretence that they are the society's existing rules or that there are no other rules of the society, or

(b) a copy of the rules of a society which is not a registered society on the pretence that they are the rules of a registered society.

(2) A person guilty of an offence under this section is liable on summary conviction to a fine not exceeding level 1 on the standard scale.

Section 20 Creation of offences by a society's rules

A registered society's rules may provide that any contravention or failure to comply with any of the rules is an offence, punishable on summary conviction by a fine not exceeding such reasonable sum as is specified by the rules.

Section 21 Rules as to fund for purchase of government securities

(1) The rules of a registered society (or a society to be registered under this Act) may make provision for the setting up and administration by the society of a fund for the purchase on behalf of members contributing to the fund of—

(a) defence bonds,

(b) national saving certificates, or

(c) any other securities of Her Majesty's Government in the United Kingdom for the time being prescribed under section 47(1) of the Friendly Societies Act 1974.

(2) The rules may make provision for enabling persons to become members of the society for the purpose only of contributing to that fund and without being entitled to any rights as members other than rights as contributors to that fund.

Section 22 Rules of agricultural, horticultural or forestry society may provide for loans without security

(1) This section applies to a registered society (or a society to be registered under this Act) if—

(a) the society consists mainly of members who are—

(i) producers of agricultural or horticultural produce or persons engaged in forestry, or

(ii) organisations of such producers or persons, and

(b) the society's object or principal object is the making to its members of advances of money for agricultural, horticultural or forestry purposes.

(2) The fact that the society's rules provide (or would if amended provide) for the making of such advances without security is not a ground for refusing to register those rules (or the amendment).

Section 23 Supplementary provisions as to rules

(1) The rules of a registered society (or any schedule to them) may specify the form of any instrument necessary for carrying the purposes of the society into effect.

(2) Any provision made by or under this or any other Act requiring or authorising the rules of a registered society to deal with particular matters does not affect the power of a registered society to make rules about any other matter which—

(a) are not inconsistent with the provision (or any other provision of this or any other Act), and

(b) are not otherwise unlawful.

Section 24 Maximum interest in a society's withdrawable shares

(1) A member of a registered society (or of a society to be registered under this Act) may not have or claim any interest in the society's withdrawable shares exceeding £100,000.

(2) Subsection (1) does not apply—

(a) to a member that is a registered society,

(b) to an authority that acquired the holding by virtue of section 58 or 59(2) of the Housing Associations Act 1985 or section 22 of the Housing Act 1996 (promotion and assistance by local authority of housing associations),

(c) if the society is a private registered provider of social housing, to shares acquired by a local authority under the power in section 2 of the Local Government Act 2000 (power of local authority to promote well-being) or section 1 of the Localism Act 2011 (local authority's general power of competence), or

(d) to a member who acquired the holding by virtue of paragraph 2 of Part 1 of the Schedule to the Agricultural Credits Act 1923 at a time when section 2 of that Act applied to the society.

Section 25 Power to amend limit in section 24

(1) The Treasury may by order substitute for the sum for the time being specified in section 24(1) (maximum interest in withdrawable shares) such other sum (not less than £5,000) as may be specified in the order.

(2) The order may—

(a) make any such provision in connection with the alteration of the limit for the time being applicable under section 24(1) as was made by section 1 of the Industrial and Provident Societies Act 1975 in connection with the alteration made by section 1(1) of that Act (power of committees to amend rules etc), and

(b) contain such other transitional, consequential, incidental or supplementary provisions as appear to the Treasury to be necessary or appropriate in that connection.

Section 26 Power to hold land etc

(1) A registered society may—

(a) (unless its registered rules provide otherwise) hold, purchase or take a lease of any land in its own name;

(b) sell, exchange, mortgage or lease any such land;

(c) construct, alter or demolish buildings on it.

(2) No purchaser, assignee, mortgagee or tenant is bound to inquire as to the authority for any such dealing with the land by the society.

(3) The society's receipt is a discharge for all moneys arising from or in connection with any such dealing.

(4) In Scotland, this section has effect as if—

(a) for “exchange” there were substituted “ excamb ” ;

(b) for “mortgage” there were substituted “ grant a heritable security over ” ;

(c) for “mortgagee” there were substituted “ creditor in a heritable security ” .

Section 27 Power to invest

(1) A registered society may invest any part of its funds in or upon any security authorised by its registered rules.

(2) A registered society may, unless its registered rules provide otherwise, invest any part of its funds—

(a) in or upon any relevant security of a relevant authority (see subsection (3));

(b) in the shares or on the security of—

(i) any other registered society,

(ii) a building society, or

(iii) a company registered under the Companies Acts or incorporated by Act of Parliament or by charter,

being a society or company with limited liability;

(c) in or upon any other security in which trustees are for the time being authorised by law to invest (for which purpose sections 1 to 6 of the Trustee Investments Act 1961 apply as if the society were a trustee and its funds were trust property).

(3) In this section—

“ building society ” has the same meaning as in the Building Societies Act 1986;

“ relevant authority ” means—

a billing authority or precepting authority, as defined in section 69 of the Local Government Finance Act 1992,

a fire and rescue authority in Wales constituted by a scheme under section 2 of the Fire and Rescue Services Act 2004 or a scheme to which section 4 of that Act applies,

a levying body within the meaning of section 74 of the Local Government Finance Act 1988, or

a body as regards which section 75 of that Act applies;

“ relevant security ” means any mortgage, bond, debenture, debenture stock, corporation stock, annuity, rentcharge, rent or other security (not being securities payable to bearer) that is authorised by or under any Act.

Section 28 Proxy voting by societies

(1) A registered society which has invested any part of its funds in the shares or on the security of any other body corporate may appoint one of its members as its proxy (whether or not the member is a shareholder of the body corporate).

(2) A member appointed under this section is, during the period for which the member is appointed, to be taken by virtue of the appointment as holding the number of shares held by the society for all purposes except—

(a) the transfer of any such share, and

(b) the giving of a receipt for any dividend on any such share.

Section 29 Power to restrict use of assets of a community benefit society

(1) The Treasury may by regulations make provision for enabling any community benefit society, or any community benefit society of a prescribed kind, to ensure that—

(a) assets of the society of a prescribed kind,

(b) assets of the society specified by it in accordance with the regulations, or

(c) all of the society's assets,

cannot be used or dealt with except in a case mentioned in subsection (2).

(2) The cases are—

(a) where the use or dealing is, directly or indirectly—

(i) for a purpose that is for the benefit of the community and is of a prescribed kind, or

(ii) if no kinds of purpose are prescribed under this paragraph, for any purpose that is for the benefit of the community, or

(b) where the circumstances are such as may be prescribed.

(3) Where under the regulations a society has ensured as mentioned in subsection (1) as respects any of its assets, the assets concerned are “ dedicated assets ” for the purposes of this section.

(4) Regulations under this section may, in particular—

(a) provide for the procedure by which a society may ensure as mentioned in subsection (1);

(b) provide for such of a society's rules as are of a prescribed kind to be unalterable, or for them to be alterable only in prescribed circumstances or in circumstances specified in rules of a prescribed kind;

(c) provide that, in any circumstances prescribed under subsection (2)(b), dedicated assets must be dealt with in a prescribed way;

(d) make provision for ensuring that any society, company or other person to whom any dedicated assets are transferred in prescribed circumstances cannot use or deal with those assets except in a case mentioned in subsection (2);

(e) provide for members of a society who lose property rights as a result of the society's ensuring as mentioned in subsection (1) to be compensated for that loss (whether by payment of a prescribed amount or of an amount determined in a prescribed way or otherwise), subject to such exceptions as may be prescribed;

(f) provide for the enforcement of provisions designed to ensure as mentioned in subsection (1);

(g) make provision for the carrying out of investigations by persons appointed by a prescribed person;

(h) confer power on a prescribed person to require persons of a prescribed description to provide the prescribed person with information in order to enable or assist that person to perform any of the person's functions under the regulations;

(i) provide for restrictions on the use and disclosure of information obtained by any person in the performance of any function under the regulations.

(5) Regulations under this section may—

(a) impose criminal liability;

(b) confer functions on a prescribed person;

(c) confer jurisdiction on any court;

(d) authorise a prescribed person to make rules, binding on persons of a prescribed description, for the purpose of enabling or assisting the prescribed person to perform any of the person's functions under the regulations;

(e) make provision as to the making, publication and enforcement of such rules;

(f) provide for a prescribed person to charge fees sufficient to meet the costs of performing any of the person's functions under the regulations;

(g) modify, exclude or apply (with or without modifications) any enactment or rule of law;

(h) contain such incidental, consequential and supplementary provision as the Treasury consider appropriate;

(i) make different provision for different cases.

(6) Regulations under this section may not create any new criminal offence punishable with imprisonment for more than 7 years.

(7) In this section—

“ community benefit society ” includes a pre-commencement society that meets the condition in section 2(2)(a)(ii);

“ prescribed ” means prescribed by regulations under this section.

Section 30 Register of members and officers

(1) A registered society must keep a register of members and officers (“ the register ”) at its registered office.

(2) The following information must be entered on the register in relation to each member—

(a) the member's name and postal address;

(b) where the member has notified the society of an electronic address for the purposes of receiving notices or documents under this Act, the electronic address and the purposes for which it has been notified;

(c) the number of shares held by the member and the amount paid or agreed to be considered as paid on the shares;

(d) a statement of other property in the society held by the member (whether in loans, deposits or otherwise);

(e) the date the person was entered on the register as a member;

(f) (where applicable) the date the person ceased to be a member.

(3) The following information must be entered on the register in relation to each officer—

(a) the officer's name and postal address;

(b) where the officer has notified the society of an electronic address for the purposes of receiving notices or documents under this Act, the electronic address and the purposes for which it has been notified;

(c) the office held;

(d) the date the person took office.

(4) Where it appears to the society that an electronic address shown on the register pursuant to subsection (2)(b) or (3)(b) is no longer current, the society may remove that address from the register.

(5) The register may be kept by—

(a) making entries in bound books, or

(b) recording the matters in question in any other way.

(6) Where the register is kept otherwise than by making entries in a bound book, the society must take adequate precautions for—

(a) guarding against falsification, and

(b) facilitating its discovery.

(7) A registered society must—

(a) keep a duplicate register at its registered office, containing the information in the register except information about members' shares and other property in the society, or

(b) construct the register in such a way that it is possible to open to inspection so much of the information in it as would be contained in a duplicate register without exposing information recorded in it about members' shares and other property in the society.

(8) A person authorised for the purpose by the FCA may at all reasonable hours, on producing evidence of the authorisation, inspect any entry in a register or duplicate register kept under this section.

(9) A registered society's register or duplicate register kept under this section, or any other register or list of members or shares kept by the society, is prima facie evidence of any of the following information entered in it—

(a) the name, postal address, electronic address and occupation of a member;

(b) the number of shares held by a member, the shares' distinguishing numbers (if any), and the amount paid or agreed to be considered as paid on any of those shares;

(c) the date a person's name was entered on the register or list as a member;

(d) the date any person ceased to be a member.

Section 31 Members under 18

(1) A person under the age of 18 may be a member of a registered society unless the society's registered rules provide otherwise.

(2) A person under the age of 18—

(a) may enjoy all the rights of a member of a registered society, and

(b) if aged 16 or over, may execute all instruments and give all receipts necessary to be executed or given under a society's registered rules.

This is subject to the society's registered rules and to the provisions of this Act.

(3) A person under the age of 16 may not be a member of a registered society's committee or a trustee, manager or treasurer of a registered society.

Section 32 Bodies corporate may be members

Shares in a registered society may be held by any other body corporate (if that body's regulations so permit) by its corporate name.

Section 33 Society a member of another society: references to members making and signing documents etc

(1) This section applies where a registered society (“society A”) is a member of another registered society (“society B”).

(2) For the purposes of any enactment relating to a registered society's members making or signing an application, instrument or document, any reference in the enactment to a member is to be read, in relation to society A as a member of society B, as a reference to 2 members of society A's committee and its secretary.

Section 34 Advances to members

A registered society's rules may provide for advances of money to members—

(a) on the security of real or personal property or, in Scotland, of heritable or moveable estate, or

(b) if the society is registered to carry on banking business, in any way that is customary in the conduct of such business.

Section 35 Remedies for members' debts

(1) Money payable by a member to a registered society is a debt due from the member to the society, and is recoverable as a debt—

(a) in the county court, or

(b) in Scotland, before the sheriff whose jurisdiction contains the society's registered office or the member's residence, at the option of the society.

(2) A registered society has a lien on a member's shares in the society for any debt due from the member to the society, and may set off any sum credited to the member on those shares in or towards the payment of that debt.

Section 36 Payments in respect of persons lacking capacity

(1) This section applies if—

(a) a registered society's committee is satisfied (after considering medical evidence) that a member is incapable of managing the member's own affairs by reason of a mental disorder or mental disability, and

(b) the committee is satisfied that no person has been duly appointed to administer the member's property on behalf of the member.

(2) The society may (if it is proved to the committee's satisfaction that it is just and expedient so to do) pay the amount of any shares, loans, and deposits belonging to the member to a person whom the committee judges proper to receive it on behalf of the member.

(3) Receipt by that person is a valid discharge to the society for the sum paid.

(4) Subsections (1) to (3) do not apply where—

(a) the member lacks capacity (within the meaning of the Mental Capacity Act 2005) for the purposes of this Act,

(b) there is a donee of an enduring power of attorney or lasting power of attorney (within the meaning of that Act) or a deputy appointed for the member by the Court of Protection, and

(c) the donee or deputy has power in relation to the member for the purposes of this Act.

(5) In this section references to a member include a person claiming through a member.

(6) A payment made under this section to a person appearing to the committee at the time of the payment to be entitled under this section is valid and effectual against any demand made upon the committee or society by any other person.

Section 37 Nomination by member of entitlement to property in society on member's death

(1) A member of a registered society may, in accordance with subsection (2), nominate one or more persons to become entitled at the member's death to—

(a) the whole of any property in the society (whether in shares, loans or deposits or otherwise) which the member may have at the time of death, or

(b) to such part or respective parts of that property as may be specified in the nomination.

(2) A nomination must be—

(a) made in a written statement signed by the member and delivered at or sent to the society's registered office during the member's lifetime, or

(b) made in any book kept at the society's registered office.

(3) The nomination of a person who (at the date of the nomination) is an officer or employee of the society is valid only if that person is the nominator's spouse, civil partner, parent, child, brother, sister, nephew or niece.

(4) For the purposes of the disposal of any property which is the subject of a nomination, if at the date of death the amount of property in the society comprised in the nomination exceeds £5,000, the nomination is valid to the extent of £5,000 but not further or otherwise.

(5) A registered society must keep a book recording—

(a) the names of all persons nominated under this section, and

(b) any revocation or variation of a nomination.

(6) An order under section 6 of the Administration of Estates (Small Payments) Act 1965 (power to provide for increases in amounts disposable on death by nomination) has effect in relation to the limits in subsection (4) as it has effect in relation to the limits referred to in section 2 of that Act.

Section 38 Section 37: variation and revocation of nominations

(1) In this section “ nomination ” means a nomination under section 37.

(2) A member's nomination may be varied or revoked by—

(a) a subsequent nomination by the member, or

(b) any similar document in the nature of a revocation or variation signed by the member and delivered at or sent to the society's registered office during the member's lifetime.

(3) A member's nomination is not revocable or variable by the member's will (or by any codicil to the will).

(4) Any nomination made by a member who subsequently marries or forms a civil partnership is revoked by the marriage or formation of the civil partnership.

(5) But if any of the member's property is transferred by an officer of the society in pursuance of the nomination in ignorance of the marriage or civil partnership, the nominee's receipt is a valid discharge to the society (and the society is under no liability to any other person claiming the property).

Section 39 Section 37: procedure on death

(1) This section applies where a member of a registered society has made a nomination under section 37.

(2) On receiving satisfactory proof of the member's death, the society's committee must—

(a) transfer to a person any property to which the person is entitled under the nomination, or

(b) pay the person the full value of that property.

(3) Subsection (2) applies in relation to property consisting of shares in the society even if the society's rules provide that its shares are not transferable.

(4) But if the transfer of shares to a person in accordance with the nomination would raise the person's share capital beyond the maximum for the time being permitted in the case of the society, the society's committee—

(a) must not transfer to the person more of those shares than raises the person's share capital to that maximum, and

(b) must pay the person the value of any of those shares not transferred.

(5) The society may pay any sum falling to be paid under subsection (2) or (4) to a person under the age of 16 (“ the nominee ”) to—

(a) a parent or guardian of the nominee, or

(b) any other person aged 18 or over who undertakes to hold it on trust for the nominee or to apply it for the nominee's benefit and whom the society considers to be a fit and proper person for the purpose.

The receipt of the parent, guardian or other person is a valid discharge to the society for any sum paid under this subsection.

Section 40 Death of member: distribution of property not exceeding £5,000

(1) This section applies if—

(a) a member of a registered society dies,

(b) the member's property in the society (as at death) in respect of shares, loans or deposits does not exceed £5,000, and

(c) that property is not the subject of a nomination under section 37 (nomination by member of entitlement to property in society on member's death).

(2) The society's committee may, without letters of administration or probate of any will (or, in Scotland, confirmation) having been obtained, distribute that property among such persons as appear to the committee (on such evidence as it considers satisfactory) to be entitled by law to receive it.

(3) A payment or transfer made under this section to a person appearing to the committee at the time of the payment or transfer to be entitled under this section is valid and effectual against any demand made upon the committee or society by any other person.

(4) An order under section 6 of the Administration of Estates (Small Payments) Act 1965 (power to provide for increases in amounts disposable on death without representation) has effect in relation to the limit in subsection (1)(b) as it has effect in relation to the limits referred to in section 1 of that Act.

Section 41 Security to be given by certain officers

(1) This section applies to an officer of a registered society who receives or is in charge of money.

(2) If the society's rules so require, the officer must (before undertaking the duties of office) give security in such sum as the society's committee may direct conditioned for—

(a) the officer rendering an accurate account of all moneys received and paid by the officer on account of the society, at such times as its rules provide or as the society or its committee requires, and

(b) the payment of all sums due from the officer to the society.

(3) The security must be given by the officer—

(a) becoming bound, with or without a surety (or, in Scotland, cautioner) as the society's committee may require, in a bond in one of the forms set out in Schedule 1 or in such other form as the committee may approve, or

(b) giving the security of a guarantee society.

Section 42 Duty of certain officers and employees to account

(1) This section applies to—

(a) an officer of a registered society who receives or is in charge of money, and

(b) an employee of a registered society who receives or is in charge of money and is not engaged under a special agreement to account.

A person to whom this section applies is referred to below as a “relevant person”.

(2) A relevant person must render such an account as the society or its committee may require (to be examined and allowed or disallowed by it)—

(a) at such time as the relevant person is required to do so by the society's rules, or

(b) on demand, or

(c) on notice in writing requiring the relevant person to do so, given or left at that person's last or usual place of residence.

(3) A relevant person must, on demand or on the giving of notice of a kind mentioned in subsection (2)(c), pay over all moneys and deliver all property for the time being in the relevant person's hands or custody to such person as the society or its committee may appoint.

(4) Duties imposed on a relevant person under subsection (2) or (3) are, after that person's death, to be treated as imposed on the person's personal representatives.

(5) In case of any neglect or refusal to comply with the preceding provisions of this section, the society may—

(a) sue on any bond or security given under section 41, or

(b) apply to—

(i) the county court (which may proceed in a summary way) or a magistrates' court, or

(ii) in Scotland, the sheriff.

(6) The order of the county court, magistrates' court or sheriff is final and conclusive (despite anything in section 77 of the County Courts Act 1984).

Section 43 Capacity of a society and relationship with its rules

(1) The validity of an act done by a registered society may not be called into question on the ground of lack of capacity by reason of anything in the society's registered rules.

(2) A member of a registered society may bring proceedings to restrain the doing of an act which would, but for subsection (1), be beyond the society's capacity.

(3) But proceedings may not be brought in respect of an act to be done in fulfilment of a legal obligation arising from a previous act of the society.

(4) It remains the duty of the members of a registered society's committee to observe any limitations on their powers flowing from the society's registered rules.

(5) Action by the members of the committee which would, but for subsection (1), be beyond the society's capacity may be ratified by the society only by a special resolution.

(6) A special resolution ratifying such action does not affect any liability incurred by a member of the committee or any other person; relief from any such liability must be agreed to separately by special resolution.

(7) In the case of a charitable registered society whose registered office is in England or Wales, ratification under subsection (5) is ineffective without the prior written consent of the Charity Commission for England and Wales.

(8) Section 44 contains provisions about special resolutions under this section.

(9) This section is subject to—

(a) section 47 (application to charitable societies);

(b) section 48 (transactions with members of the committee and connected persons in excess of powers).

Section 44 Special resolutions under section 43

(1) This section supplements section 43.

(2) A resolution is a “special resolution” if—

(a) it is passed at a general meeting by at least 75% of the eligible members who vote, and

(b) at least 21 days' notice of the meeting, specifying the intention to propose the resolution, is given in accordance with the society's rules.

(3) In subsection (2)—

(a) “ eligible member ” means a member who is entitled to vote;

(b) references to voting are to voting in person or, where the society's rules allow proxies, by proxy.

(4) A copy of a special resolution, signed by the chair of the meeting at which the resolution was passed and countersigned by the society's secretary, must be sent to the FCA and registered by it.

(5) The resolution does not take effect until a copy of it has been registered.

Section 45 Power of committee to bind society

(1) In favour of a person dealing with a registered society in good faith, the power of the committee to bind the society (or to authorise others to do so) is treated as free of any limitation under the society's registered rules.

(2) For this purpose—

(a) a person “deals with” a society if the person is a party to any transaction or other act to which the society is a party,

(b) a person is not regarded as acting in bad faith by reason only of knowing that an act is beyond the powers of the committee under the society's registered rules, and

(c) a person is presumed to have acted in good faith unless the contrary is proved.

(3) The references above to limitations on the powers of the committee under the society's registered rules include limitations deriving—

(a) from a resolution of the society in general meeting or a meeting of any class of members, or

(b) from any agreement between the members of the society or of any class of members.

(4) Subsection (1) does not affect any right of a member of the society to bring proceedings to restrain the doing of an act which is beyond the powers of the committee.

(5) But proceedings may not be brought in respect of an act to be done in fulfilment of a legal obligation arising from a previous act of the society.

(6) Subsection (1) does not affect any liability incurred by a member of the committee, or any other person, by reason of the committee's exceeding its powers.

(7) This section is subject to—

(a) section 47 (application to charitable societies);

(b) section 48 (transactions with members of the committee and connected persons in excess of powers).

Section 46 No duty to enquire as to capacity of society or authority of committee

A party to a transaction with a registered society is not bound to enquire as to—

(a) whether the transaction is permitted by the society's registered rules, or

(b) any limitation on the powers of the committee to bind the society or authorise others to do so.

Section 47 Application of sections 43 and 45 to charitable societies

(1) Sections 43 and 45 (capacity of society not limited by its rules and power of committee to bind society) apply to an act of a charitable registered society only in favour of—

(a) a person who—

(i) gives full consideration in money or money's worth in relation to the act, and

(ii) does not know that the act is not permitted by the society's registered rules or is beyond the powers of the committee (as the case may be), or

(b) a person who does not know at the time the act is done that the society is a charity.

(2) However, where a charitable registered society purports to transfer or grant an interest in property, the fact that—

(a) the act was not permitted by the society's registered rules, or (as the case may be)

(b) the committee in connection with the act exceeded any limitation on its powers under those rules,

does not affect the title of a person who subsequently acquires the property (or any interest in it) for full consideration without actual notice of any such circumstances affecting the validity of the society's act.

(3) In any proceedings arising out of subsection (1) a person who alleges—

(a) that a person knew that an act was not permitted by the society's registered rules or was beyond the powers of the committee, or

(b) that a person knew that the society was a charity,

has the burden of proving the allegation.

Section 48 Transactions with committee members etc in excess of powers

(1) This section applies where—

(a) a registered society enters into a transaction the parties to which include—

(i) a member of the society's committee, or

(ii) a person connected with such a member, and

(b) in connection with the transaction, the society's committee exceeds any limitation on its powers under the society's registered rules.

(2) The transaction is voidable at the instance of the society.

(3) Whether or not it is avoided, a party to the transaction who is within subsection (1)(a)(i) or (ii), and any member of the committee who authorised the transaction, is liable—

(a) to account to the society for any gain made directly or indirectly by the transaction, and

(b) to indemnify the society for any loss or damage resulting from the transaction.

(4) Nothing in the above provisions excludes the operation of any other enactment or rule of law by virtue of which the transaction may be called in question or any liability to the society may arise.

(5) The transaction ceases to be voidable if—

(a) restitution of any money or other asset which was the subject matter of the transaction is no longer possible,

(b) the society is indemnified for any loss or damage resulting from the transaction,

(c) rights acquired bona fide for value and without actual notice of the committee's exceeding its powers by a person who is not party to the transaction would be affected by the avoidance, or

(d) the transaction is ratified by the society in general meeting in such a way as the case may require.

(6) A person other than a member of the committee is not liable under subsection (3) if the person shows that at the time the transaction was entered into the person did not know that the committee was exceeding its powers.

(7) This section does not affect the operation of section 45 (power of committee to bind the society) in relation to any party to the transaction not within subsection (1)(a)(i) or (ii) above.

(8) But if the transaction is voidable by virtue of this section and valid by virtue of that section in favour of such a person, the appropriate court may, on the application of that person or the society, make such order affirming, severing or setting aside the transaction, on such terms, as appear to the court to be just.

(9) In the case of a charitable registered society whose registered office is in England or Wales, any ratification of the transaction is ineffective without the prior written consent of the Charity Commission for England and Wales.

Section 49 Section 48: definitions

(1) This section supplements section 48.

(2) “ The appropriate court ”, in relation to a registered society, means the court having jurisdiction to wind up the society under the provisions of the Insolvency Act 1986 as applied by section 123.

(3) “ Transaction ” includes any act.

(4) The reference in section 48(1) to limitations under the society's registered rules includes limitations deriving—

(a) from a resolution of the society in general meeting or a meeting of any class of members, or

(b) from any agreement between the members of the society or of any class of members.

(5) Sections 252 to 255 of the Companies Act 2006 apply for the purposes of references to a person's being “connected” with a committee member—

(a) as if any reference to a director of a company were to a member of a committee of a registered society, and

(b) subject to such other adaptations and modifications as may be specified by regulations made by the Treasury under this section.

Section 50 Common seal

(1) Notwithstanding any enactment or rule of law, a registered society need not have a common seal.

(2) A registered society which has a common seal must have its registered name engraved in legible characters on the seal.

(3) A registered society which decides to have a common seal must not cause such a seal to be made unless its registered rules contain provision for the custody and use of that seal.

(4) An officer of a registered society, or a person acting on behalf of a registered society, commits an offence if the officer or person uses or authorises the use of a seal purporting to be the society's common seal which does not have the society's registered name engraved in legible characters on it.

(5) A person guilty of an offence under this section is liable on summary conviction to a fine not exceeding level 3 on the standard scale.