Law Commission consultation on possible changes to the Co-operative and Community Benefit Societies Act 2014

Posted: 22/11/2024

As the Co-operative and Community Benefit Societies Act 2014 has been in force for a decade, the Law Commission has decided that now is an appropriate time to review its effect, and has opened a consultation on its proposals to amend the act. People wishing to comment on the proposals can do so here. The consultation period ends on 10 December 2024.

However, some of the changes proposed in the consultation are likely to cause registered housing associations some difficulties and issues should they become enacted into law. In particular:

• The proposal to produce a new definition of what a community benefit society is, and what its objects should be. This is likely to be more restrictive than the current situation and may hinder housing associations when carrying out their mission.
  
  
• The removal of exempt charity status from charitable community benefit societies, forcing them to register and be regulated by the Charity Commission. Housing associations are already regulated by the Regulator of Social Housing and will not want (or need) an additional regulator, or the cost and burden of compliance with a second regulatory regime.
  
  
• The inclusion of statutory ‘asset lock’ provisions into community benefit societies. The Law Commission states in its consultation that this is not actually necessary as charitable community benefit societies (ie most housing associations) are already operating under similar restrictions as regards their assets. The old adage, ‘If it ain’t broke, don’t fix it’, would seem appropriate here.
  
  
• The adoption of the ‘one member, one vote’ rule alongside open membership for community benefit societies would enable all tenants to become members of their association and for groups of them to organise and vote out the management at annual general meetings (as has been attempted several times in the past). Whilst it can be fairly said that the current housing association policy of restricting membership to current board members is overly restrictive, opening up the membership to all tenants without proper safeguards is going too far in the other direction. The solution would seem to be the re-introduction of ‘weighted voting rights’ (as referred to in the consultation), but will the Law Commission agree to this?
  
  
• The introduction of a series of board members duties set out in the act, but based on non-economic goals and community benefit, rather than following the ones in the Companies Acts. This all sounds very worthy but leaves a nagging doubt as to whether the results will be quite as intended…

Lastly, the consultation makes several proposals regarding changing the law in respect of amalgamations and transfers of engagements, but completely misses a major issue: the impact of the creditors saving provisions in sections 109 and 110. Housing associations undertaking mergers are only too familiar with the demands of lenders for written confirmations from the associations’ unsecured creditors (particularly its pension providers) as regards the priority of their claims over the funders’ secured ones. The Law Commission should use this opportunity to clarify and confirm the rights of creditors post-merger as it would save a great deal of time and money.

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