Government adopts common asset reform from MP’s co-ops bill

The measure from Labour/Co-op MP Mark Hendrick’s bill will now go to the committee stage

The government has announced that it is taking forward legislation giving co-ops the option of legally guaranteeing that their assets are held in common.  

The measure is part of a private members bill brought by Labour/Co-op MP Mark Hendrick, which had its second reading last week. 

The government said it would adopt as legislation a measure in Sir Mark’s bill which gives co-operatives the option of legally guaranteeing that some or all of their assets are held in common and non-distributable among members. 

Related: Labour/Co-op MP introduces bill to improve co-ops’ access to capital

The next stage of the parliamentary process is the Commons Committee, where the government and a group of MPs will work on the detaxil of the Bill, with input from sector representatives.

James Wright, head of policy and development at Co-operatives UK, said: “We’re delighted that a more focused bill will go through to committee stage. For many years we’ve lobbied for legislation that gives co-operative societies the option of legally guaranteeing that some or all of their assets are held in common and not distributable among members.”

Wright, who worked on Sir Mark’s bill alongside partners from consultancy Mutuo, added: “If this legislation does indeed become law, Sir Mark will have played an instrumental role in giving co-operatives the more enabling legal framework they deserve. I am delighted to have been part of this. Co-operatives UK has been working with HM Treasury over many years to make the case for this reform in particular.

“Credit must also go to various people in the sector who agreed to speak to HM Treasury officials in recent weeks, to help them understand the case for this particular reform. These conversations have proven invaluable.”

The reform was also backed in a joint letter from the CEOs of the Co-op Group, Midcounties, Scotmid and Co-operatives UK, who call it a “business-led and growth-orientated supply-side reform.” 

Sir Mark Hendrick

They add: “Its measures would enable co-operative and mutual businesses to invest and innovate by removing anachronistic constraints imposed by UK corporate law. This is long overdue, as the last time government initiated significant legislative reform for co-ops was 1893.  

“In 2021, co-operatives were five times less likely to permanently close in than UK businesses generally, were better at creating jobs and significantly more likely to take action to decarbonise their business. Imagine what we could achieve with some effective supply-side reform?”

Wright said the accumulation and re-investment of ‘common capital’ is a key feature of co-operatives, but rules-based provisions fall short of the permanent legal guarantee sought by many co-operative founders, investors and policymakers.

He thinks the bill will encourage community ownership of local assets that make fuller use of co-operative business models to encourage local trade.

It will also enable housing co-ops to hold high-value property and expand without worrying about future members demutualising.

Other benefits include allowing co-ops to grow and take on investment with greater assurances that their co-operative purpose and culture will be protected.

Consumer co-ops will have a legal guarantee that future members will not seize commonwealth built up over generations, said Wright – while the co-op model will be “even more suited to co-operative buyouts of existing businesses”.

Co-operatives UK will hold an online meeting this month for members who want to feed into the process.