If the 'co-op option' is going to be more accessible and mainstream, we need government to provide user-friendly legal and regulatory frameworks for co-ops.
FCA fees proposals
In November 2018 the FCA proposed abolishing the annual fees it charges societies, while also making it free for the public to access records on the Mutuals Register online, abolishing the £12 fee per record it currently charges. These measures have our full support and are in part a result of pressure we've put on policymakers behind the scenes to give societies a better deal.
Member consultation: getting a better deal for societies
We are consulting our members on possible legislative and non-legislative improvements for co-operative and community benefit societies. The deadline was 30 November 2018.
A better deal for societies?
Following lobbying from Co-operatives UK and others, Government has announced that it will be working with the sector to explore ways of improving 'regulatory clarity' for co-operative and community benefit societies.
Companies House co-operative identity policy
We are asking members to join with us in asking Companies House to update its co-operative identity policy.
UK Corporate Governance Code
As part of the UK government's ongoing efforts to improve corporate governance and improve the fairness and responsibility in British business the Financial Reporting Council has consulted on revisions to its corporate governance code. When it comes to giving a voice to stakeholders, looking after the 'triple bottom line' and nurturing positive cultures and values, big business can learn a lot from co-ops.
Fairer audit requirements for growing co-ops
Following extensive lobbying we secured government action to increase the threshold above which all co-operative and community benefit societies are required to pay for a full audit of accounts. The legislation took effect from 6 April 2018. This change will save some societies thousands of pounds each year.
FCA registration forms
To complement its Guidance on registering co-operative and community benefit societies the FCA has drafted new registration forms and a new annual return form. These new forms are intended to reflect the FCA's published policy and to implement statutory tests based on that policy. Overall the forms are an improvement and most questions do correspond to the Guidance but we believe there are a number questions that need reordering and refocusing, while others are inappropriate and need to be omitted.
FCA fees (2017/18)
In April 2017 the FCA consulted on proposed increases to the already high annual fees co-operative and community benefit societies pay to fund their registrar, the Mutuals Team. This increase is justified by jumps in the running cost of the Mutuals Team in recent years. We propose to our members that we accept these increases, on the following conditions:
That future changes to fees charged reflect year-on-year changes in the running costs of the Mutuals Team, minus any investment in efficiencies by the FCA:
- That action is taken to improve the value societies receive for the fees they pay
- That societies are exempted from paying towards any general increase in the annual funding requirement stemming from the FCA’s more expensive activities as a financial services regulator
FCA: Our Future Mission
In January 2017 we responded to the FCA 'Our Future Mission' consultation. We explained how essential the Mutuals Team's role is in creating a decent corporate framework for co-ops and why it needs to have a clear mission and more accountability to stakeholders.
Persons of Significant Control - mutual exemption
In September 2016 government consulted on whether extend the Persons of Significant Control regime to co-operative and community benefit societies. As 98 percent of societies have no Persons of Significant Control and as their ownership and control is already subject to regulatory scrutiny, we told government that extending the current regime would create additional burdens without any clear gain. Thankfully they listened, and while we never received any formal conclusion to the consultation, we can confirm that societies do not have to file a useless Persons of Significant Control register with the FCA. See paragraph 1.2.3 of this government guidance for formal written confirmation.
Overhauling policymaking for co-ops
More by historical happenstance than logical design, legislative responsibility for co-operative and community benefit societies sits within the Banking and Credit Team of HM Treasury rather than within the Business Frameworks directorate of the Department for Business. A related consequence of this is that the registrar function for these businesses sits within the Financial Conduct Authority.
Put simply we think this arrangement is not only illogical but also dysfunctional for co-ops and we want it changed.
Asset lock for co-operative societies
We are currently exploring the potential of changing the law to give co-operative societies the option of a statutory asset lock. In early 2016 we consulted members and have now published an analysis of the responses and next steps.
Corporate insolvency provisions
Government has consulted on new insolvency provisions for UK businesses. These include a new 'preliminary moratorium' period which could provide more space and incentives to save a business. The problem is that without intervention such measures will only apply to companies with co-operative and community benefit societies losing out once again. We've responded to the consultation and notified HM Treasury.
As of summer 2016 Cabinet Office is working on legislation to ensure smoother charitable conversions. As is too often the case, the society legal form is excluded. Government is not providing routes for people to convert to and from charitable community benefit societies. For more on this see our consultation response.
Business Impact Targets and the Growth Duty
Government is rolling out a number measures designed to improve the quality of regulation for UK businesses. Business Impact Targets require Whitehall departments to assess the impact of their policies on business and set annual targets for reducing the overall regulatory burden. Business Impact Targets are now being applied to a whole host of regulators as well. From 2016 key regulators will also have a statutory Growth Duty, which will require them to understand the needs of the businesses they interact with and asses impact in order to limit the extent to which their activities limit growth.
While we think there is real merit in improving transparency and accountability in regulation we are very concerned that co-ops, and particularly societies, stand to lose out. This is yet another example of the uneven playing field co-ops compete on. We've made government aware of this in a recent consultation on the scope of Business Impact Targets and the Growth Duty.
Regulatory barriers to social investments
In early 2016 the FCA undertook a wholesale review of the financial promotion regulations as they relate to social investment. Called 'Call for input: Regulatory barriers to social investments' this consultation put a spot light on how investment in different forms of enterprise, including co-operative and community benefit societies, is regulated.
In October 2016 the FCA published the outcome of this consultation. In line with our position the FCA decided not to alter the current regulatory treatment of capital raising by co-operative and community benefit societies. It reiterated that society capital is already subject to regulation under the Co-operative and Community Benefit Societies Act, and intimated that so long as societies raise capital from members in accordance with its guidance there is no need to impose further regulation.
FCA regulation of co-operative and community benefit societies
Recently the regulation of co-operative and community benefit societies by the FCA has been a source of considerable controversy and concern. Prompted by innovations such as renewable energy co-ops and community shares, as well as by legal reforms in 2014, the FCA sought to codify its policy in new guidance.
Draft guidance put out for consultation in October 2014 posed significant risks across the co-op sector and heralded a year of vocal lobbying, campaigning and detailed consultation. In November 2015 the FCA published final guidance containing significant policy improvements across the board.
Reforms in 2014
In 2014 government delivered a package of legislative reforms for co-operative and community benefit societies.