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Industrial and Provident Societies Bill

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Mr. Thomas: The hon. Gentleman is right that these amendments go to the heart of the proposals in the clause. He failed to acknowledge the flexibility that the provisions continue to make available to members of community benefit societies. Assets that have been built up to be used for the benefit of the community by many members over many generations should be protected. He is right, however, that members' different economic circumstances and interests may mean that it is appropriate to change the way in which the assets are used.

I shall return to the example of the Royal British Legion club that was used in the debate on amendments to clause 1. If a club's economic circumstances mean that it is timely for it to sell one of its main buildings, clearly, current members of the society should have the right to make that judgment. Clause 2 would not prevent that; it would simply prevent the money raised from such a sale from being handed out to current members of the society.

Another possibility is that, despite the opportunity for associate membership and for non-members of the armed forces to join, a club might be nearing the end of its useful life. If the society wanted to wind it up and the members were considering what to do with the assets in the bank after the sale of the club and other property, the only course of action that clause 2 would prevent would be their keeping the money. They could give it to a charity or to another community benefit society, or even to a company if it had appropriate limited purposes. Clause 2(1)(c) would still provide for considerable flexibility. The only thing that it would prevent the membership from doing would be distributing the assets among themselves.

Ruth Kelly: As my hon. Friend rightly said, the amendments go right to the heart of clause 2. I am in continuing dialogue with him about aspects of the clause. The amendment would remove the provision to allow societies to adopt rules irrevocably, committing their assets to the benefit of the community. I can see potential benefits to the sector from clause 2, although at this stage I do not think that the arguments are clear cut. Such a change in the law should be considered

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carefully. Locking-in a society's assets in perpetuity should not have unintended effects such as reducing the flexibility of the sector to consolidate and grow.

We need to consider some technical points. For example, provisions that would limit the use of a company's assets and that could not subsequently be altered would be highly unusual—perhaps even technically impossible in company law. Without such provisions, the clauses in the Bill to allow the transfer of assets from societies to companies do not seem appropriate. It may be possible to design powers to enable companies to make such unalterable commitments. However, that approach would be more far-reaching in scope than the current version of the clause. We need to examine the implications more carefully.

We also need to consider the framework provided in other sectors of the economy, such as the charity sector, where rules govern the use of assets. Clause 2(1)(b), which would allow industrial and provident societies to lock in their assets for the benefit of the community irrevocably, would produce consequences. We should be clear about whether that rule would benefit all societies, given the wide range of societies that operate for the benefit of the community. If so, should there be provision to overturn the rule in exceptional circumstances? For example, there may be occasions, such as on the dissolution of a society, when the redistribution of its assets might be impeded and less efficient if no suitable eligible society had adopted a similar lock-in rule. If it is appropriate for those asset lock-in rules to be reversed in special circumstances, we need to consider which body might be best placed to intervene, what powers it would require and in what circumstances it should exercise such powers. Those issues need further consideration.

If we accept the amendments, we will be left with little change to the present situation. In practice, limitations are already placed on the ability of community benefit societies to distribute assets outside of purposes that benefit the community. While I am sympathetic to the amendments in that they try to remove problematic provisions in the clause, I am not convinced that they leave us a useful basis for legislation.

Mr. Thomas: As I suggested on the previous group of amendments tabled by the hon. Member for Christchurch, I recognise that there are still issues to resolve on the clause. My hon. Friend the Minister alluded to some of the difficulties that are still to be resolved. If the Committee is minded to reject the three amendments, I will consider further the comments of the Minister and the hon. Gentleman, with a view to tabling amendments on Report or recognising that another legislative opportunity might be more appropriate for such changes.

Ruth Kelly: I very much welcome the commitment made by my hon. Friend and look forward to working closely with him on the issue.

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Mr. Chope: Again, we have had a constructive debate and I am grateful to the hon. Member for Harrow, West for demonstrating his flexible approach. He prayed in aid the word ''flexible'' in relation to the drafting, but my problem with it is that the flexibility goes one way. True flexibility can flex in more than one direction, so I hope that he will provide additional flexibility if and when he revises the clause. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 2 ordered to stand part of the Bill.

Clause 3

Power to modify, etc. to assimilate to company law

Question proposed, That the clause stand part of the Bill.

The Chairman: With this it will be convenient to take the following: New clause 5—Power to modify, etc. to assimilate to company law—

    '(1) If at any time, whether or not on any modification of the statutory provisions in force in Great Britain relating to companies it appears to the Treasury to be expedient to modify the relevant statutory provisions for the purpose of assimilating the law relating to companies and the law relating to industrial and provident societies, the Treasury may, by order, make such modifications of the relevant statutory provisions as they think appropriate for that purpose.

    (2) If, on any modification of the statutory provisions in force in Great Britain relating to companies, it appears to the Treasury to be expedient to modify any provisions of the Industrial and Provident Societies Act 1965 to 1978 for the time being in force for the purpose of assimilating the law relating to companies and the law relating to industrial and provident societies, the Treasury may, by order, make such modifications of those Acts for the time being in force as they think appropriate for that purpose.

    (3) The ''relevant statutory provisions'' are the following provisions of the Industrial and Provident Societies Act 1978 as for the time being in force:

      (a) the following sections of the Industrial and Provident Societies Act 1965: Section 1(1)(b) and Schedule 1 paragraphs 2 and 6 and section 14 so far as necessary to assimilate the law as to: limitations on the society's capacity;the power of its board of directors, officers or committee to bind the society or authorise others to do so; and remove any duty on parties to transactions with the society to enquire as to its capacity or those powers of the board of directors or committee; Section 3 in so far as it refers to a common seal, section 1(1)(b) and schedule 1 paragraph 13 (custody and use of seal); Section 5 (name of society); Section 29 (contracts); Section 39 (annual returns); Sections 41, 42 and 43 so far as necessary to assimilate the law as to the accountability of, and fair dealing by, directors, committee members and officers of societies with the equivalent provisions applicable to company directors and officers; Sections 47, 48 and 49 inspection of books by the Authority, production of documents and provisions of information, the appointment of inspectors,and the calling of special meetings; Paragraph (a) of section 55 (application of Insolvency Act 1986 to societies) to apply to societies of any provisions of that Act or of the Company Directors' Disqualification Act 1986 applicable to companies whether on or involving the dissolution of a society or not; Section 61, 62, 63, 64 and 65 (General offences by societies, officers, members or others); Sections 66, 67, 68 and 69 (Proceedings and costs) Section 74 (Interpretation);

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      (b) any section of the Industrial and Provident Societies Act 1967 (borrowing by registered societies and registration of charges); and

      (c) any section of the Friendly and Industrial and Provident Societies Act 1968 (society accounts, audit and group accounts).

    (4) The powers conferred by subsections (1) and (2) of this section include the power to modify the relevant statutory provisions or any provision of the Industrial and Provident Societies Acts 1965 to 1978 as the case may be so as to—

      (a) confer power to make orders, regulations, rules or other subordinate legislation;

      (b) create criminal offences; or

      (c) provide for the charging of fees but not any charge in the nature of taxation.

    (5) An order under this section may—

      (a) make consequential amendments of or repeals in any provisions of the Industrial and Provident Societies Acts 1965 to 1978; or

      (b) make such transitional or saving provisions as appear to the Treasury to be necessary or expedient.

    (6) The power to make an order under this section shall be exercisable by statutory instrument and no order shall be made unless a draft of it has been laid before and approved by resolution of each House of Parliament.

    (7) In this section—

    ''modification'' includes any additions and, as regards modifications of the statutory provisions relating to companies, any modification whether effected by any future Act or by an instrument made after the passing of this Act under an Act whenever passed; and

    ''statutory provisions'' except in the expression ''relevant statutory provisions'' includes the provisions of any instrument made under an Act.'.

And the following amendments thereto: (a), after first ''If'', leave out

    'at any time, whether or not'.

    (c), leave out paragraph (b) of subsection (4).

    (d), in subsection(4)(c), at end insert—

    '(3A) No power conferred by subsections (1) and (2) of this section shall extend to the creation of criminal offences.'.

 
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Prepared 13 February 2002