From 6 April 2014 Industrial and Provident Societies will have more company insolvency rescue options available to them.
The Industrial and Provident Societies and Credit Unions (Arrangements, Reconstructions and Administration) Order 2014 (S1 2014/229) (2014 Order) comes into force on 6 April 2014 (the “Order”).
An Industrial and Provident Society (“IPS”) is an organisation conducting an industry, business or trade, either as a co-operative or for the benefit of the community, and is registered under the Industrial and Provident Societies Act 1965.
There are two main types of IPSs;
i) co-operative societies are run for the mutual benefit of their members, with any surplus usually being ploughed back into the organisation to provide better services and facilities; and
ii) community benefit societies, which must satisfy the same co-operative principles as a co-operative society and but must also be operated for the benefit of the community in which it operates.
The government is committed to promoting IPSs and numbers of newly registered IPSs reached 7,000 during 2013. The Order will offer more corporate rescue options for IPSs facing financial difficulty such as Company Voluntary Arrangements, Administrations under the Insolvency Act 1986 and arrangements and reconstructions under the Companies Act 2006, where previously the only option was winding up.
It is hoped that the Order will encourage further growth in the mutuals sector by providing an added safety net for co-operative and community benefit societies in financial difficulty.
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