DEFINITION AND OBJECTIVES OF COOPERATIVES

INTRODUCTION

In the UK, a body wishing to function as a cooperative is free to use any legal form it chooses. Th at includes registering under the Companies Act 2006 or the Limited Liability Partnerships Act 2000 or operating as a partnership under the Partnership Act 1890, subject to restrictions on the use of the word‘cooperative’.

However, the Co-operative and Community Benefit Societies Act 2014 (CCBSA 2014) provides a legal structure specifically designed for cooperatives. Credit unions, a form of savings and loan cooperative, must register under the 2014 Act as adapted by the Credit Unions Act 1979 and are prohibited from otherwise registering under the CCBSA 2014. Similarly, an organisation using any other legal structure (including the European Cooperative Society (SCE) form) is prohibited from using the words‘credit union ’as part of its name (ss. 1 – 3 Credit Unions Act 1979). Like other financial services businesses, credit unions are also subject to regulation by the Financial Conduct Authority (FCA) and the Prudential Regulatory Authority (PRA) as authorised deposit takers under the Financial Services and Markets Act 2000. For that reason, this report makes no further reference to the law governing credit unions.

The FCA is responsible for cooperative and community benefit society registration – a function similar to that performed by the Registrar of Companies for companies registered under the Companies Act 2006.

As is generally the case in UK business organisation law, the emphasis of the CCBSA 2014 is on providing default rules and so maximising the freedom of those using the legal structure to develop and apply their own rules. Th is means that subject to compliance with the FCA‘s view of the nature of a bona fide cooperative society, the governance structure, rights and duties of members, elements of the capital structure and rules about the return to members are all left to be dealt with by the rules of each society. Th is reflects the system also applicable to companies and partnerships in the UK.

DEFINITION OF A COOPERATIVE SOCIETY

Section 2 of the CCBSA 2014 lays down the conditions to be satisfied for a society to be registered as a cooperative society.