Clause 3 - Power to modify, etc. to assimilate to company law

Part of Industrial and Provident Societies Bill – in a Public Bill Committee at 11:30 am on 13th February 2002.

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Photo of Gareth Thomas Gareth Thomas Party Chair, Co-operative Party 11:30 am, 13th February 2002

I am happy to oblige the hon. Gentleman. The sections to which he referred allow any necessary changes to the general provisions on offences and proceedings, and interpretation from them, that would flow from other possible changes that I have already set out.

New clause 5(3)(b) would allow the amendment of the Industrial and Provident Societies Act 1967 to bring the procedures for registering charges against societies' assets into line with the equivalent procedure applicable to companies. The type of charges that have to be registered obviously differ. For societies, it is only floating charges, but for companies, certain other charges are included. The details are entered on the register.

If a statutory instrument were made to bring about that change, and the provisions of the I and P Acts were consistent with those that apply to companies, societies obtaining finance would be facilitated because lenders would feel more secure. Again, that provision has been debated for building societies as well as for companies. Section 104A of the Building Societies Act 1986, inserted by section 42 of the Building Societies Act 1997, allows that change to be made for building societies by statutory instrument.

On the provisions for accounts, new clause 5(3)(c) would allow the amendment of the Friendly and Industrial and Provident Societies Act 1968, which governs the accounts and auditing requirements for societies. The purpose of permitting statutory instruments to do that is to apply a stricter regime, requiring the publication of more information, to larger societies as to larger companies, and to permit small and medium-sized societies to enjoy the exemptions and limited obligations that apply to companies of such size.

The hon. Member for Christchurch rightly made a virtue of recognising the differences between industrial and provident societies. The changes to accounts and auditing would mirror company law provisions and rightly introduce a stricter regime for the larger societies that compete with large companies but allow smaller societies to benefit from exemptions and limited obligations. I refer again to the analogy of the rugby club. Why should one rugby club, which is a company, have less rigorous auditing requirements than a rugby club of similar size that is an industrial and provident society?

These changes have also been considered for building societies. Part VIII of the Building Societies Act 1986 achieved that for building societies, and section 104(2)(c) of that Act allowed for further updating by statutory instrument as company law changed. The equivalent legislation for friendly societies is part VI of the Friendly Societies Act 1992, and section 102(2) of that Act permits updating by statutory instrument. I hope that that gives the additional information needed.

I shall summarise the case for accepting new clause 5 and for not allowing clause 3 to stand part of the Bill. There has been substantial modification to the areas where the Treasury can act. All these areas have already been considered by the House of Commons for company law reform. In six of the eight areas, changes to building societies or friendly societies have also been considered. I therefore suggest that the new clause is a sensible tightening of the provisions, reflecting the concerns aired on Second Reading.