Co-op legal changes pending in Ireland

Posted on February 12, 2020 · Posted in Co-operative News

Co-operative legislation in Ireland is set for a major overhaul, but the slow pace of decision-making is leaving uncertainty for the sector.

It was back in 2016 that Ireland’s Department of Jobs, Enterprise and Innovation’s Co-operative Legislation Unit initiated a review of the relevant laws, the Industrial and Provident Societies Acts that date from the 1890s and which have since repeatedly updated.  These changes comprise what the department has referred to as “piecemeal amendments” to “what is a largely Victorian statutory code”.

The intention is to at the least codify, and probably substantially re-write, that old legislation.  A spokeswoman for what is now the Department of Business, Enterprise and Innovation explained: “The department is undertaking a root and branch review of the Industrial and Provident Societies Acts 1894-2018. It is intended to bring forward a General Scheme of a Bill which will consolidate and modernise the existing legislation by the end of year.”

Ten responses were submitted to the consultation exercise, but the nature of these varied.  Accountancy body ACCA was concerned that the disclosure and governance requirements for industrial and provident societies are less rigorous than for companies.  It also expressed concern that the register of industrial and provident societies is not up to date.

In its submission, the Centre for Co-operative Studies at University College Cork focused on the co-operative concept – seeking changes to the name of the law to include the word ‘co-operative’; creating a separate category for employee-owned/workers’ co-operatives; and to reduce the required minimum number of members from seven to three.  Co-operative Housing Ireland similarly sought a reduction in the required number of members to three, while co-operative development body Co-operation Works proposed the minimum number to be reduced to just two.

The Society for Co-operative Studies Ireland – whose members include Co-operative Alternatives of Northern Ireland and the Co-operative Forum of Northern Ireland – is another that called for the name of the new legislation to include the word ‘co-operative’ and to provide clearer definitions to the co-operative identity.  “A distinction is also required within the legislation between different types of co-operatives, that is between larger, more business-oriented co-operatives and those co-operatives who are owned and run by a group of people wishing to serve a social or environmental need,” it said.  SCSI also wants small co-ops to be exempted from the legal requirement for external audit in the same way as small companies.

ICOS – the Irish Co-operative Organisation Society – called for stronger rules for governance in IPSAs, while urging that company law is not adopted wholesale for co-ops.  Its submission stated: “While some elements of company law are necessarily applicable to a co-operative, to use a blanket approach would subvert the unique characteristics and ethos of a co-operative. ICOS believes any changes to the IPS Acts must protect and respect both the principles and practices of the co-operative model.”  ICOS believes that IPSA law should not create greater compliance burdens than company law.

James Doyle, a spokesman for ICOS, explained it expected proposed legal changes to include the codification of committee member duties to provide for comparable responsibilities under company law; a “revamp” of protections for stakeholders, including shareholders and workers; and the consolidation of the various acts into a single piece of legislation.  It also hopes that the financial reporting framework will be modernised, including by allowing comparable audit exemptions to those available for companies.

ICOS wants other modernisation measures.  Doyle explained: “The modern world is a busy place. Time is precious and communication is increasingly instantaneous. That said, the co-op model is rooted in personal engagement and co-decision. To do that it has always been necessary to facilitate the coming together of shareholders and their elected leadership. This principle has featured in co-operative rule books where for example proxy voting is typically prohibited. Securing a legal framework that validates the use of technology to enhance, rather than subvert, member participation and control would be a positive outcome.”

He added: “Co-operative ownership and the rights that go with that ownership warrant proper expression in the new legislation. The common law has spoken on some of these issues which is helpful when the existing statute is as outdated as it is. But there is more work to be done. ICOS is hopeful that the outcome of the legislative process will provide a solid basis for any co-operative enterprise to thrive in a manner that serves the needs and interests of its members.”

But the consultation process is proving both slow and “frustratingly opaque”, according to academic Patrick Doyle, author of ‘Civilising rural Ireland: The co-operative movement, development and the nation-state, 1889–1939’ and is Hallsworth Research Fellow at the University of Manchester.

“My own personal read is that this is a piece of legislation that has fallen down the priority list due to Brexit and the distinct possibility there may be a general election in the near future – but that is a hunch,” said Doyle. “In terms of what might I expect the changes to be, I’m increasingly concerned that it might only be minor adjustment of existing legislature – perhaps updating language and likely to be cosmetic.

“I also fear that it will be written from the perspective of a managed decline of the sector. Obviously I hope that isn’t the case. To be honest I think this is probably a once in a generation opportunity to effect some positive and purposeful change in the co-op sector.”

He added: “In a highly aspirational sense I would personally like to see an emphasis placed on trying to achieve greater social value in public sector procurement – a la Preston – and using co-operatives to deliver on a range of public service contracts. I believe if Ireland is to have its own iteration of a Green New Deal then co-ops can play a central part in building the necessary economy. I see the Co-op Party Northern Ireland manifesto as an incredibly useful document for helping to think through a lot of these issues.”

With the prospect of an Irish general election in the near future, it is reassuring that all the major political parties in Ireland are supportive of co-operatives.  Current governing party Fine Gael’s last manifesto expressed support for energy co-ops and shared ownership renewable energy projects.  Fianna Fáil – which is well placed to lead the next government – declared in its manifesto support for co-ops, particularly as part rural development.  And the Green Party – which might be members of a future coalition government – has pledged to “facilitate the creation of co-operative businesses” and “introduce legislation to facilitate the conversion of private business into worker-owned co-operatives”.

Whether this cross-party political support translates its way into the forthcoming legal changes is unclear.  Firstly, it is possible that legislation may be introduced before the general election – a date for which has not yet been set.  And if the legislation is delayed until after the election, its character may be influenced by the composition of the government, given the different points of focus of the main parties.

A coalition government containing the Green Party is the most likely to commit to radical pro-co-op  measures.  However, those might be separate to a process that is mostly designed to consolidate and modernise existing legislation.