Clause 3 - Formalities of Carrying on Societies' Business

Co-operatives and CommunityBenefit Societies Bill – in a Public Bill Committee at 3:15 pm on 18th March 2003.

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

Photo of Mr George Stevenson Mr George Stevenson Labour, Stoke-on-Trent South

With this it will be convenient to discuss new clause 4—Purported contracts, deeds and obligations—

'(1) After section 29 of the 1965 Act insert—

''29A Purported contracts, deeds and obligations

(1) A contract which purports to be made by or on behalf of a registered society at a time when the society has not been registered under this Act has effect, subject to any agreement to the contrary, as one made with the person purporting to act for the society or as agent for it.

(2) Accordingly, the contract is to be treated—

(a) as imposing on that person all the obligations it purports to impose on the society; and

(b) as conferring on him all the rights it purports to confer on the society.

(3) Subsections (1) and (2) of this section apply—

(a) to the making of a deed under the law of England and Wales, and

(b) to the undertaking of an obligation under the law of Scotland,

as they apply to the making of a contract.''

(2) In section 76 of the 1965 Act, after subsection (2) insert—

''(2A) In section 29A(1) of this Act—

(a) the reference to a registered society includes a reference to a society registered under the law for the time being in force in Northern Ireland for purposes corresponding to those of this Act; and

(b) the reference to this Act includes a reference to that law.'' '.

New clause 5—Execution of deeds and other documents—

'(1) After section 29A of the 1965 Act (which is inserted by section [Purported contracts, deeds and obligations]) insert—

''29B Common seal

(1) Notwithstanding any enactment or rule of law, a registered society need not have a common seal.

(2) If a registered society has a common seal, the society shall have its registered name engraved on the seal in legible characters.

(3) If, after the coming into force of subsection (1) of this section, a registered society decides to have a common seal, it shall not cause such a seal to be made unless the registered rules of the society contain provision for the custody and use of that seal.

(4) Section 62 of this Act does not apply in respect of an offence committed by a registered society under section 61 of this Act where the offence consists of a failure to comply with subsection (2) or (3) of this section.

(5) Any officer of a registered society, or any other person acting on such a society's behalf, who uses or authorises the use of any seal purporting to be the common seal of the society which does not have the society's registered name engraved on it in legible characters shall be liable on summary conviction to a fine not exceeding level 3 on the standard scale.

(6) In this section ''enactment'' includes an enactment comprised in—

(a) an Act of the Scottish Parliament;

(b) subordinate legislation, whether made under an Act or an Act of the Scottish Parliament.

29C Methods for execution of documents: England and Wales

(1) The following provisions have effect with respect to the execution of documents by a registered society under the law of England and Wales.

(2) A registered society may, if it has a common seal, execute a document by affixing that seal to it.

(3) A document—

(a) signed by a member of the committee of a registered society and the secretary of the society, or by two members of that committee, and

(b) expressed (in whatever form of words) to be executed by the society,

has the same effect as if it were executed under the common seal of the society.

(4) A document executed by a registered society which makes it clear on its face that it is intended by the person or persons making it to be a deed has effect, upon delivery, as a deed; and it shall be presumed, unless a contrary intention is proved, to be delivered upon its being so executed.

(5) In favour of a purchaser a document shall be deemed to have been duly executed by a registered society if it purports to be signed by a member of the committee of the society and the secretary of the society, or by two members of the committee, and, where it makes it clear on its face that it is intended by the person or persons making it to be a deed, to have been delivered upon its being executed.

(6) Subsections (3) to (5) of this section apply whether or not the society has a common seal; and, in subsection (5) of this section,

''purchaser'' means a purchaser in good faith for valuable consideration and includes a lessee, mortgagee or other person who for valuable consideration acquires an interest in property.

29D Execution of documents: Scotland

(1) Under the law of Scotland, for the purposes of any enactment—

(a) providing for a document to be executed by a registered society by affixing its common seal, or

(b) referring (in whatever terms) to a document so executed,

a document signed or subscribed by or on behalf of the society in accordance with the provisions of the Requirements of Writing (Scotland) Act 1995 shall have effect as if so executed.

(2) In this section ''enactment'' includes an enactment comprised in—

(a) an Act of the Scottish Parliament;

(b) subordinate legislation, whether made under an Act or an Act of the Scottish Parliament.

29E Power of society to have official seal for use abroad

(1) This section applies to a registered society if—

(a) it has a common seal; and

(b) its objects require or comprise the transaction of business in foreign countries.

(2) The society may, if authorised by its registered rules, have an official seal for use in any territory, district, or place elsewhere than in the United Kingdom.

(3) An ''official seal'' is a facsimile of the society's common seal with the addition on its face of the name of every territory, district or place where it is to be used.

29F Effect of use of official seal

The official seal of a registered society when duly affixed to a document has the same effect as the society's common seal.

29G Authorisation of use of official seal

(1) If a registered society has an official seal, it may authorise any person appointed for the purpose as respects any territory, district or place appearing on the face of that seal to affix it to any deed or other document to which the society is party there.

(2) An authorisation for the purposes of subsection (1) of this section must be given—

(a) in the case of a society with its registered office in Scotland, by writing subscribed in accordance with the Requirements of Writing (Scotland) Act 1995; and

(b) in any other case, by writing under the society's common seal.

(3) As between the society and a person dealing with such an agent, the agent's authority continues—

(a) if a period is mentioned in the authorisation, during that period; or

(b) if no period is there mentioned, until notice of the revocation or determination of the agent's authority has been given to the person dealing with him.

(4) The person affixing the official seal shall certify in writing on the deed or other instrument to which the seal is affixed the date on which and the place at which it is affixed.''

(2) In section 3 of the 1965 Act (registration to effect incorporation of society), omit ''a common seal and with''.

(3) In subsection (6) of section 5 of the 1965 Act (registered name of society) omit ''engraven in legible characters on its seal and''.

(4) In subsection (7) of that section—

(a) omit paragraph (a); and

(b) in paragraph (b) for ''that name'' substitute ''the society's registered name''.

(5) Omit section 36 of the 1965 Act (provision about the execution of documents by societies in Scotland which has been superseded and repealed there but which remains in force elsewhere).

(6) In section 76(2) of the 1965 Act (provisions which apply to Northern Ireland societies that have recorded their rules with the

Financial Services Authority), for ''26 to'' substitute ''26 to 29, 29B to 29D,''.

(7) For paragraph 13 of Schedule 1 to the 1965 Act substitute—

''13. If the society is to have a common seal, provision for its custody and use.''

(8) In section 91 of the Land Registration Act 2002 (c.9) (formalities in relation to electronic dispositions) after subsection (9) insert—

''(9A) If subsection (3) of section 29C of the Industrial and Provident Societies Act 1965 (execution of documents) applies to a document because of subsection (4) above, subsection (5) of that section (presumption of due execution) shall have effect in relation to the document with the substitution of ''authenticated'' for ''signed''.''

(9) The Schedule to this Act (which contains repeals made as a result of this section) shall have effect.'.

New schedule 1—'Repeals—

Short title and chapter

Extent of repeal

Industrial and Provident Societies Act 1965 (c. 12)

In section 3, the words ''a common seal and with''. In section 5, in subsection (6) the words ''engraven in legible characters on its seal and'', and subsection (7)(a). Section 36.'.

Photo of Mark Todd Mark Todd Labour, South Derbyshire

May I briefly remind the Committee what clause 3 is designed to achieve. It addresses the technical issues relating to the process of agreeing contracts and undertaking business transactions. That is not surprising, because that aspect of industrial and provident society law has not been revised in recent times and some provisions are archaic. The new provision sets out the changes in law with greater clarity and, admittedly, at somewhat greater length than the original draft. Incidentally, if the House passes the Bill into law, I will certainly have a more substantial bundle to my name than I thought that I would have at the start.

Let me give examples of the way in which the new clauses and the schedule will work. The current legislation requires a society to have a common seal and to use it in certain transactions. It also requires a society to keep the seal in a secure place, which often means that documents requiring the use of a seal must be transported to the location where the seal is kept.

New clause 5 will allow societies to operate without a seal. That freedom is the same as that for a company. Overseas transactions, which are particularly difficult when a seal is required, will be facilitated, and the enabling of contracts before a society is registered, which is obviously a critical part of the establishment of a society, will also be made easier. The new clause will reduce the costs on the co-operative and community benefit society movement, and the administrative complexity of co-operatives. I commend the provisions to the Committee.

Photo of Stephen O'Brien Stephen O'Brien Shadow Paymaster General

It is wholly appropriate to rely on what I said on Second Reading on the provisions that the new clauses replace, because both sets of provisions are uncontroversial, timely and important in the modern world of transactions. It is wholly fair for the societies that we are considering as a result of the Bill to have the opportunity to operate in a modern

way. I therefore have no difficulty whatever with the provisions.

The Minister has sought to reassure us on the only overriding issue. Indeed, I received reassurance during Second Reading on 31 January that, to the extent that anything in the provisions might hint—hypothetically, I dare say—at any past ultra vires by comparison with what is proposed under the Bill, it is not intended in any sense to throw into doubt past transactions and is intended to operate wholly for future transactions. That is in the Bill, so I do not have difficulty with it. However, it was a concern that we rightly raised on Second Reading. It is important that those who later read our proceedings understand that there is no suggestion that anything in the past has the potential to be ultra vires. We do not want those who have had transactions with these societies are not faced with greater uncertainty or change in their circumstances.

The hon. Member for South Derbyshire said that the new clauses were incontrovertibly longer than those that they replace. I make no bones about that, as it is important that the thought process that resulted in these proposals should cover as many angles as possible. I have spent much time with the Paymaster General on the tax law rewrite measure, which is going through the House at present. The language in this Bill does not seem to fit with the language in that proposal, although it is unlikely to change much at this stage. That may be slightly unfair as it is a difficult area in which to apply an English crystal mark, as it were. It is always helpful if the language in a Bill is as easy to read as the tax law rewrite measure, which all parties support, and on which there is further work to be done.

I am happy to register our support for the new clauses.

Photo of Mr Simon Thomas Mr Simon Thomas Plaid Cymru, Ceredigion

New clause 4(2) would insert a new subsection in section 76 of the Industrial and Provident Societies Act 1965, which would state:

''the reference to a registered society includes a reference to a society registered under the law for the time being in force in Northern Ireland''.

However, clause 6, which refers to short title, commencement and extent, states that the Bill does not extend to Northern Ireland. Why insert a new clause into the 1965 Act by means of a Bill that does not extend to Northern Ireland? There may be a good reason for it, but it does not seem to marry with my reading of the proposals.

Photo of Ruth Kelly Ruth Kelly Financial Secretary, HM Treasury

The new clauses inserted into the 1965 Act would facilitate the ability of societies to enter into contracts and to undertake business transactions by modernising the measure in line with the position in company law in relation to how societies execute deeds and documents and enter into contracts.

I will clarify the point about Northern Ireland. The provision that the hon. Gentleman mentioned refers to Northern Irish societies which are operating within Great Britain—hence the need for the reference.

I welcome the endorsement of the new clauses made by the hon. Member for Eddisbury. I confirm that they apply only to future transactions and we will ensure

that that is clarified in the commencement order. I commend the new clauses to the Committee.

Question put and negatived.Clause 4Interpretation