Northern Ireland could have new legislation for co-ops and credit unions

A new law on co-operatives and credit unions is making its way through the Northern Ireland Assembly. The Credit Unions, Co-operative and Community Benefit Societies Bill was introduced in June 2015 and is currently going through the final stages where members will have a full debate on the bill.

The Act is sponsored by the minister of enterprise, trade and investment, Jonathan Bell. The bill proposes two changes in the rules governing share capital in co-operatives. The first change is a fivefold increase in the limit on a member’s holdings in withdrawable share capital from £20,000 to £100,000. According to Co-operatives UK, the limit is a major impediment for many co-operatives, particularly in the capital-intensive agricultural sector.

Co-operatives UK’s research also shows that before the limit was raised to £100,000 in Great Britain it was costing co-operatives between £1.5m and £2.5m a year through additional borrowing, with over-reliance on debt finance, a significant risk.

The bill will also remove any limit on a member’s holdings in non-withdrawable share capital. Another change will give co-ops more flexibility when it comes to financial reporting.

In terms of co-operative identity, the Bill introduces new, clearer legal names for industrial and provident societies. Enterprises will no longer be industrial and provident societies, they will be identified as either a “co-operative society” or a “community benefit society”.

James Wright, policy officer at Co-operatives UK, said: “The Bill passing through Stormont covers crucial updates to co-op law in Northern Ireland. They remove archaic limits on member investment and play catch-up with company law in a few key areas. The reforms will make the society legal form more user friendly and provide new opportunities for innovation and growth.

“These reforms are very welcome, though as we’ve told MLAs and the Department of Enterprise Trade and Investment (DETI) in recent months, there are some gaps, both between these reforms in Northern Ireland and those that took place in Great Britain, and in respect of where we think society law should be overall. For example, there’ll be no consolidation of society law in Northern Ireland and no new insolvency provisions either, both of which were crucial features of Great British reforms in 2014. Looking ahead, we’ve asked policymakers in Northern Ireland to consider further improvements, such as an optional asset lock for co-ops and measures to ensure society law is maintained on an equal footing with company law.

“We’re encouraging DETI to ensure its regulatory response to these reforms is balanced and avoids the damaging upheavals we experienced in Great Britain after 2014,” he said.

The bill also includes provisions about credit unions. If adopted by the Assembly, the Act will enable credit unions to have corporate members. The Irish League of Credit Unions (ILCU) has been actively involved in the consultation process and has made several appearances before the DETI Committee on behalf of its member credit unions. The league has 434 credit unions affiliated, 95 in Northern Ireland.

“The new bill seeks to modernise the 1985 Order and the framework within which credit unions in Northern Ireland operate,” said Marianne Cushley of the ILCU.

“It will allow credit unions to offer enhanced services to their members and prospective members; services which have not been available to them to date.  The key new provision for credit unions being the ability to open accounts for corporate members, including partnerships, unincorporated associations such as sports clubs and companies”.

She added: “The ILCU is broadly supportive of the bill and is appreciative of the work and support of the Committee for Enterprise, Trade and Investment and the Department for Enterprise Trade and Investment in respect of both the bill and the credit union movement in general.

“We still retain concerns that accounts cannot be opened in the name of unincorporated associations, but rather in the names of individuals.

“However, we will continue to engage with DET into a review of the operation of such accounts within the two-year review period set out in the new bill. The bill will be a welcome tool for Northern Ireland credit unions seeking to expand membership with corporate members. We are keen to see it enacted in a timely manner.”