 Okay, well welcome everyone we'll just get going and so um to be honest it's lovely to see a list of people's names that I don't know because so often we have webinars like this and we're talking to people that we that we already know so it's great that we've got so many people um attending and I'm Emily Cock and I lead the advice team at COPS UK and so I thought it would be useful just to give a very little bit of information about COPS UK but mostly about co-ops and then also I can then go through what the webinar is going to be looking at today what the format's going to be who's going to be speaking and the reason for why we're holding this webinar and hopefully what you'll get out of it. So in terms of COPS UK we are the voice for the UK's independent co-ops we promote develop and unite co-ops and we provide support throughout the life of a co-op so from pre-start start-up growing and existing co-ops and also winding up or the the death of COPS as well which obviously is putting forward today so in the UK there are more than 7 000 co-ops 14 million members of those co-ops and between them they contribute 38 billion pounds to the UK economy. We do know that COPS are resilient and in the UK 72% of COPS survive the first five years of their business compared to any 43% of companies so maybe we're quite lucky in the insolvency practitioners might not know that much about co-ops because not that many of them become insolvent and we do hope that this continues but we do know that where there have been insolvencies that sometimes what we've noticed is that insolvency practitioners sometimes haven't got full awareness of the co-op business model and the legal form and member ownership generally and how members are involved in the organisation and the say that they have within it. This has caused some issues I would say many of you may have heard of Hastings Pier that will be something that some of the panelists will be will be talking about today. Really this webinar we hope will be the beginning of discussions and conversations with you all so that insolvency practitioners can hopefully understand co-ops and the business model in the same way that they can understand any other types of businesses and that they might come into contact with. So we've got a few panellists today before you before I pass you over to David who is the first one just a little bit of housekeeping. We're going to have around an hour of presentations but there'll be four or five different people speaking. They won't all have slides and then half an hour at the end for an opportunity for us to ask some questions. If you have any questions you can use the chat function and then I'll ask the questions on your behalf to the panellists. So we will be done by half past three. We are recording the webinar so we'll put the recording of the webinar and the slides on the event booking page after the event and you'll receive notification of that. So I'm going to pass over first to our speaker David from Anthony Collins Solisters who will introduce himself and then the other panellist will introduce themselves as we go along. Thanks so much Emma, good afternoon everybody. So my name is David Alcock and I am a Solister from Anthony Collins Solisters. We're a law firm based in Birmingham and Manchester and we work in many of the sectors that co-ops and community benefit societies find themselves operating in and we were involved in some of the discussions that took place around the administration of Hastings Pier which was one of the catalysts for the protecting community assets inquiry and indeed today which you will hear more about later on. My job this afternoon is a relatively simple one. I'm now going to attempt the usual technological feat in moments of this kind and share my screen. So I'm hopeful that you can now see a slide that says in Sol's administration of registered societies by excellent. I don't think that's great. So there's two of us from ACS presenting today myself and my colleague Ian Snaith who you'll hear from later on. Really what I want to do first of all is to introduce in legal terms what a registered society is and that's I hope not to insult anyone's intelligence but is simply to make sure that everybody knows what we're talking about, what we talk about registered societies. Because as I say I think it's although there are around about 10,000 registered societies in the UK it's not always a well understood legal form and given that relatively few societies have gone into administration or insolvency it's important that when that does happen that we all understand what we're talking about. So that's my function today. There are two forms of registered society and they are cooperative societies and community benefit societies and they are both registered under the Cooperative and Community Benefit Societies Act 2014. So it's an immediate kind of basic thought. Register societies are not companies. For that reason you will not find them apart from their their name only at company's house and they are not subject to the company's Act 2006. What that means for example is that a very small point is that it's not correct to refer to the company secretary of a society because are they not companies they are societies. But it also means that some of the rights that you might be very used to that for example members of a company would have do not apply to registered societies because they are not governed by the 2006 company legislation. So for example the members of a registered society do not have a right in law to call a general meeting and vote to remove the directors of the society in the way that company members would have. They may have that right but if they do it'll be because it is in the society's rules not because there's anything in statute that applies it and that's an example of one of a number of ways in which the legal framework for societies is different and it's that difference that we want to point you towards this afternoon. I thought it would be helpful just to see that these are not organisations that appeared last week so there have been societies since the Industrial and Provincial Societies Act of 1852. The most important piece of legislation for our purposes on that page is the 1965 INP Act because until 2014 you might also have heard societies referred to as Industrial and Providence Societies and societies that were registered in that form were usually registered either as co-ops or community benefit societies so the distinctions that applied but they were often referred to as Industrial and Providence Societies so you may have heard that term and the legislation was eventually consolidated in the 2014 Act which made that distinction between the two different forms of society much clearer and that's now the main operating legislation. What you will observe and that as I say was a consolidating rather than updating Act what you will observe is that society law has not changed or been updated with the same regularity and frequency that company law has and indeed there is the 2014 Act has I think around about 120 sections it's a much smaller piece of legislation than the 2006 Act and that's partly why. So what do registered societies do? Well historically they were distributive or productive co-ops by and large but today you will find registered societies acting as Emma said in introduction as co-ops whether that's co-ops that are owned by their customers in the case of the large retail societies or by their workers in the terms of the workers co-op movement. You'll also find societies that are working men's clubs, markets, cricket clubs, rugby clubs, housing associations so a number of housing associations and probably the majority actually are registered societies but also credit unions. In recent years we've seen a significant number of community enterprises taking on the community business society form community land trusts, football clubs supporters trusts and so on and many of them will have used model rules so societies have rules rather than articles association as their formal constitutional document and those rules are often approved by what are known as sponsoring bodies so there are a number of different bodies you can go to and typically people use one of those model rules if they want to register a society more of which in a second. Societies are registered as I've said not with Companies House but with the FCA and in their capacity is registrar for mutual societies how they're collectively known. The FCA are a registrar they're not a regulator but they have a more active role than Companies House though a less active role than a regulator for example like the charity commission and their job is to register societies subject to them being satisfied but the society complies with the conditions for registration and they've issued a statutory guidance document to find which you can find on their website as to how they exercise that registration function it's worth saying this is quite separate from their role as a regulator of financial services it's a separate distinct role that they have in relation to mutual societies and their role includes as I say assessing applications for registration dealing with all amendments but also determining whether societies are complying with the 2014 act and on some occasions taking action against societies that do not comply they have a fairly restrictive range of powers but one of which is they can for example call a special meeting of the society if the members request that they do so. They also deregiter societies where they take the view that society is no longer comply with the conditions for registration and they keep the public register as I've said so there are two types of societies that can be registered and that's either a co-op society or a community of society I'm going to briefly outline the difference between the two and because of the 2014 consolidating act there are now three types of societies therefore technically those societies that were registered before 2014 are referred to by the act as pre commencement societies and those that have been registered since then are registered either as co-ops or as community benefit societies. When the FCA is looking at the registration of a co-op society then they are required under that legislation and the guidance that they have set out to consider whether or not it is actually what's referred to as a bona fide cooperative and to determine that they use the internationally accepted principles of cooperation I'm not going to go through those in detail because there isn't time to do that we can pick up in questions if that's of relevance. Where they are we'll receive an application to register a community benefit society then they have to ensure that the business of that society will be carried on for the benefit of the community. That community may be the community at large or a defined community and they've satisfied themselves that everything that society is going to do will be for the benefit of the community so not some things but not others but everything that society will do. CBSs cannot give benefits or distribute surplus to members and they can only pay interest on their share capital certain restrictions and the FCA will ensure that all these criteria are complied with as part of that process. To finish I want to say a word or two about shares in registered societies all societies have share capital both community benefit societies and co-ops but share capital performers a different function in societies as in companies and the nature of share capital is therefore different. Share capital and society is variable not fixed shares always remain at par value and they are commonly withdrawable so they in one sense they function almost they can function as a deposit so the share capital in a society can go up and it can go down and members can apply to withdraw their capital. Normally there's a discretion on the board in relation to that which is one of the reasons why share capital nonetheless counts as equity rather than debt funding. There is no link between the amount of share capital a member has and how many votes they get so every shareholder every member gets one vote irrespective of the value of their shares and because shares remain at par there's generally no share for members in the underlying value of that society which belongs to the society itself so just on this next slide you'll see just a summary of those differences between share capital in a society and in a company. Part of the outworking of that is that some of the restrictions that apply to companies in relation to share offers don't apply in the same way to co-ops or community benefit societies which means they are able to do something which has become commonly known as a community share issue without being subject to some of the restrictions in the financial services legislation and that's relevant in terms of some of the way in practice that members relate to societies. That's all I want to say by way of introduction to registered societies at this stage. We thought it was important to kind of just set that groundwork before we move on. For a hand over to Islay who's going to introduce the next section. Emma, any quick questions to pick up on at this point? No, not at this point. Great, okay much because I will stop sharing my screen and hand over to Islay McCulloch from COPS UK to talk a bit more about the practice of shares and societies and how that relates to today's topic. Islay. Thanks David. Hello everyone, lovely to not see you all to be here. So yeah I'm going to pick up on this. My name is Islay McCulloch and I work as the Program Manager for Community Shares Standards at Cooperatives UK. My role is really really really interesting. My focus is on, as David has mentioned, mostly community benefit societies, some cooperative societies that are using this mechanism of withdrawal share capital, withdrawal non-transferable share capital which we about 10 years ago branded up as community shares. The community shares market has grown significantly since around 2012 when the community shares unit was established as a partnership between us at COPS UK and Locality who you might have heard of who work very closely with the community sector. I'm not going to share any slides, we thought we'd mix it up a little bit so you're not having to look at too many slides. I'm going to talk through some of the findings from some research we did last year on community share offers and community shares and what our findings touched on issues around insolvency but also to give you a bit of context on what the impact of insolvency is or could be on these societies. So to date we have seen over 170 million pounds raised through community shares from almost a standing start in about 2012. There were some societies pre-2012 that had used their withdrawal share capital mechanism as a registered society to raise share capital but it wasn't really well known, it wasn't really a thing at that time. That 171 million plus has been raised by well over 115,000 individual members of investors so it's a lot of money but from a lot of investors. We've had some really interesting resilience figures as Emma alluded to, not many societies so for COPS she talks about about 76% of COPS will survive the first five years. We found in our research that 92% of societies that have issued community shares to date have survived, leaving about 8% to have since dissolved since raising capital through community shares so that resilience figure to us was you know we had a good feeling because we hear about a lot of them if they fail but that was a really really encouraging figure. We decided because it was such a small percentage and therefore a small number of the societies that had dissolved to do a bit of deeper digging into the nature of these societies that had failed and of the societies that had dissolved we realised they had raised around a total of about five million pounds in share capital and actually in the process of winding up 2.7 million was actually returned to shareholders in that process so that was quite a few of them were renewable energy societies who'd maybe raised a huge amount of capital to build a hydro scheme or equivalent and then planning issues and other things came up maybe cost-spiled, well I wouldn't say cost-spiled because they haven't spent the money yet but there can be a lot of hurdles to jump through to get these projects off the ground and sometimes raising the capital early can help progress a project but some things just don't work out so in those cases they were able to return the capital back to the investors quite quickly and you know that's a kind of best case scenario nobody was too negatively impacted by that. On the other hand that means that we can see about 2.3 million pounds in community shares has been officially written off which is you might work out just about 1.3% of the total share capital raised to date so it's not a huge amount in the grand scheme of things but it's worth noting as well that of that 2.3 million pounds written off was attributed to only 11 societies of which one society Hastings Pier which is the society that kind of instigated some of the work around protecting community assets constituted almost a million pounds of that almost 40 odd percent of the total that's been written off so when we look at it like that you might think this isn't a huge problem you know this is relatively small in the grand scheme of things but you know the pandemic has hit many businesses there are a lot of community pubs who are really struggling this year who we've engaged with and also because of the flexible nature of community shares it's any struggles the societies may have in fulfilling investors expectations around interest payments and withdrawals can be quite masked because they're not held to account in the same way it's not a debt if they can't afford it like has happened this year so many societies have paused withdrawals and interest payments and this you don't always see that things are going wrong until things get quite bad and I think that's you know anecdotally from working in the sector you've got a lot of very well-intentioned people running these organisations who feel a huge sense of responsibility to their community shares investors and that can go the way where we see it a lot with huge collaboration and cooperation to keep a society on its feet and keep it running but it can also lead to a little bit of burying of head in the sand and not fully understanding what their obligations might be or also it's worth I'll come into this a bit more thinking about the board members and directors of these societies are generally lay people who've come together to save an asset so they are also relatively naive in what their financial position might be in so a lot of the work we've done over the last year has been in that sort of recovery response and trying to make sure that societies and their lay board members really understand their own accounts and understand their financial position when facing uncertain trading conditions as we've seen recently so just to give you a bit of an idea I think what makes this world interesting for us from a community shares perspective is you know if a community benefit society that's raised capital from their community maybe several hundred thousand pounds goes into insolvency or into difficulties it's not a handful of people who run a company that are impacted at all you know they might appear to be small businesses on the outside often not having lots of employees but on average we're finding each society that's run a share offer has around 350 members on average and that can vary from about 8 000 members we've seen huge share offers with lots and lots of members to maybe just a handful a smaller group of members as well so there's a real diversity there to kind of bear in mind based on the data we've gathered the average investment per one of these members is about one and a half thousand pounds so that's not huge but it's it's not that small either and we've also there is there is definitely if you're interested and I don't know whether any of you have invested in community shares you might know of platforms like crowd funder and ethics we do see a bit of a divergence in community shares investors where those who've invested in crowd funder on average investing around 400 pounds and the average investment on ethics platform about 4000 pounds so just to give you a bit of an idea if you're interested the key thing that we found in our research so we into we surveyed um we had survey responses from about 540 community shares investors from across the country which you know was fantastic response and actually it was a very long survey and a lot of people gave us lots of incredible qualitative responses as well on how inspired they were by the share offer they'd invested in how it impacted them individually how it impacted their families and their communities so there's a very emotional sense of investment coming across through this um piece of work we did some of the interesting demographic data we pulled out of this I think is relevant to this discussion because we found that a majority of investors over 55% aren't 35 000 pounds per year or less which is about the average income in the UK so the majority of community shares investors are earning about the same or less than the average UK income we're not talking about high net worth individuals we're not talking about investors that have a lot of money to lose one of our investors who responded to the survey said they didn't actually have the money to invest initially but they cut back on their weekly shop to be able to afford to invest so that's kind of getting into the motivations and also the nature of some of these community shares investors a lot of them also described what their barriers were to further investment and the number one barrier was around lack of disposable income and access to the cash to invest and that's really important as well just feeds that picture I think in terms of their position in the market like I said they're not high net worths a lot of them well about 15% said they have no other forms of savings or investments which it's you know community shares doesn't sit neatly it's not really a savings account and it's not a traditional investment you make for a financial return so it's not surprising that we're seeing you know not a huge segment but a segment of investors who have no other forms of savings or investments about 40% had invested in some other form of stock and shares and about half of the investors had a private pension and that's what they indicated that their relative related kind of forms of investment were which was quite interesting so part of my job as working in the community shares unit as we talked about how this is an unregulated market you know there's no access to the financial ombudsman or the financial services compensation scheme through investing in community shares investing in community shares is fully at risk for these investors and it's really important for us that those investors really understand that when they make that decision so a significant part of my work is working on what we call the community share standard mark which is a quality assurance scheme for community share offers it ensures that the society and all its relevant documents their business plan their share offer documents their financial projections all of that has been vetted by an independent licensed practitioner who goes through it all and you know does a fair analysis of it to make sure that principally our focus is on transparency and honesty and credibility so we know that some of these businesses are maybe quite risky but we also as long as people are aware of that risk and the societies are truly transparent about the risk these societies are undertaking that's our main focus so the standard mark is there to provide some level of reassurance but it can only go so far so this is why we're having an event like we're having today so i'm happy to provide more information on that as well but that's just a bit more background in our work in community shares and i'll hand over to bob now who has joined us from practical governance um to talk a wee bit about the protecting community assets inquiry and part of the instigation for this event as well thanks Eila um hi everybody delighted to be here um i'm bob tees the partner in practical governance um i was involved um in something called the protecting community assets inquiry back in september 2019 um and partly what came out of that inquiry is inspired this event to a certain degree um i'm going to tell you a little bit about that inquiry in the context for it but mainly going to focus on the key findings and i'm going to tell them through the lens of one particular asset just to bring it to life really which was uh hastings pier um hastings pier um burned down in a fire in the early 2000s um and restored via a community benefit society with 5000 community share owners went into administration however in 2018 and was bought for a private owner um at 10 000 pounds more than the community groups had offered that's the kind of nutshell i'll explain a bit more about that as an example as we go through so um we launched a report on on the assets in september 2019 having started work around febru 2019 and it was really in response to instances like hastings pier that i just um talked about um and we were really looking at assets that the communities had a big interest in so not necessarily just ownership but any asset in which local community people felt a sense of ownership in or had a big interest in um and where they were being preserved primarily for the benefit of the community both now and for future generations so really looking at not just the economic value um but the wider social environmental and cultural value um the inquiry was really about protecting the asset not so much the organisation that owned the asset so it was really about assets itself and we wanted to find practical ways to protect assets that really worked and made sense um so it wasn't a sort of lobbying exercise or or anything like that it was really a very practical kind of research live action research type project and it was a big collaborative effort so we had all the major funders of assets for community use including department for cultural media and sport the ministry for housing communities and local governments or england national trust um a couple of major national lottery funders um architectural heritage fund so not architectural heritage fund although they were involved the national lottery um heritage foundation um so and as part of the inquiry we actually engaged with a number of insolvency practitioners and the insolvency service itself at senior levels we've been meeting that group um for every couple of months ever since so this work is ongoing as we try to bring forward some of the recommendations and really the context that this came out of um back in 2019 was things like um you know more than four thousand publicly owned buildings um being sold off every year um the value of local authority property sales 9.1 billion since 2014 and that was back in 2019 um an increasing feeling amongst communities that they lacked a sense of ownership and control um we're all familiar with that narrative um as on the backdrop of lots of great stories about the potential of community assets and hubs to deliver not just social and environmental benefit but huge economic impact as well within our communities as a quote I often use from Mark Kearney um interestingly back in 2018 prosperity requires not just investment in economic capital but investment in social capital and that was at the heart of it really so um at the same time as all of those things there were more and more investments happening in community assets and um this was happening from government and from foundations and indeed even this year there's a new government fund to promote community ownership and called community ownership fund so more and more assets coming into community ownership more and more assets becoming um sort of clear with the community interest um but there were also examples even back then um of a increasing example of assets falling out of community hands um like Hastings Pier and many others um and some underlying financial challenges um so it felt like there might be a bit of a ticking time bomb and the pandemic has clearly only brought that to the fore even more um so all of these things are true now but true even more and so the potential for community owned and community assets that people have a huge attachment to going into administration is actually pretty high at this point um much higher than it's ever been and in the context of of us losing those places and spaces where people is concerning when we actually focused our inquiry findings as we went through this and used lots of case studies on three areas one primary area was how to prevent this happening in the first place another was around how to rescue when it started getting difficult and the third really was well once it does actually happen once you are in a process of administration for example how do you um help protect the asset and the interest and the benefit that that brings um and that's the area um that I think is of most pertinence to this conversation that last of the three and we call it impact limitation um so I'll go through those findings and I'll put them in the context of Hastings Pier just so that everyone's got a sort of sense of it and can land it um so the first thing was just before administration happens um what we found was that for many community organisations they often feel under pressure to present a positive view to the outside world of what is happening and how things are going um and those investors that that Ila talked about they've invested in them um and sometimes don't seek to get sufficient help at early enough stage to prevent administration happening which absolutely happened in Hastings case there was a charitable community benefit society that perhaps went straight to the administration before consulting and engaging with shareholders so that's one thing we were focused on when administration did happen there was a real pressure obviously to resolve the financial position you know funders and finance providers tend to be the major creditors as an insolvency practitioner your job is to minimise the costs and there's a time pressure there and also to to maximise value and in the case of a community asset it can be quite a highly pressurised situation again in Hastings Pier the administrator had to deal with not just the administration but five thousand shareholders and more who would were very angry about what was happening um and wanted to be involved a difficult kind of set of circumstances to deal with um and so it focuses on a quick timetable and a focus purely on the financial considerations rather than that broader broader benefit um and one of the big challenges that we faced for example in Hastings is that the list of five thousand shareholders was not have made available or couldn't be legally made available to um those people that were part of it to contact each other and sort of try to work out how to respond and so in effect people felt like they were frozen out um they couldn't come together to make a bid or contact each other and they felt forced to be competitors not citizens with a with a private bid that was coming in and it all felt very closed um and exacerbated some of those challenges um this was sort of coupled with with a lack of kind of consistent understanding I suppose of exactly what the role of shareholders was and what their rights were in an administration process now I'm no expert at this but you'll hear plenty more during this session about what what that is and how community benefit societies and cooperatives sort of differ um and what the role of shareholders are and I think that there wasn't a clear understanding of that um which sort of left the administrator struggling to know how to engage with five thousand shareholders um and therefore didn't fully or directly um so what what we did with all of this um as we sort of started to to look at what practical recommendations might be is we had a number of areas that that we're still kind of developing and working on one was quite significant which was to consider a new or distinct process of administration for community assets um that is is a very big ambition and will take very many years to consider so that's not progressing right now but we are um in conversations about it the second was to develop a set of sort of administration principles or guidelines for insolvency practitioners which we are working on and this session is really a part of that raising awareness understanding what the the the the law is and what's unique about particularly cooperatives and community benefit societies and we felt that was that was very important um and then the other sort of recommendations we're developing is is the idea of a creating a register of protected community assets um this register would mean that that an asset had what we're calling a asset protector um and in the title deed of an asset um it would require that under any administration um that under under any administration that the the the administration would need to contact the uh protector and there may be a period of time under which they could contact all of those people that have a community interest because they have that register and they have that contact um so they would be able to get in touch with them um and potentially put in a bid and in Haston Kears place that would have given them time to put in a relevant bid and protect that asset in community interest hands rather than it going through too quickly in a private sale um and the final element that we're looking at um is a rescue fund which again uh would come in right at the end and help uh buy up that asset in in the case of administration so these are some of the things that that we've been doing and some of the reasons why this session is here to raise that sort of awareness and the context I suppose for the for the assets and I hope that's given people a bit of a sense of what we've been doing and how we've been trying to do it and if anybody um here uh feels like they would like to get involved to help with support on that please do get in touch um because this is an ongoing piece of work and we're really trying to think very deeply about it but but lovely to see you all that's a little bit of context from me and I think I'm handing over now to to to Ian um thank you okay okay hopefully you can now hear me yeah okay right um I took my remit as being to explain to an audience who were mainly insolvency practitioners how insolvency rules apply to these societies really um I mean this obviously dovetails with some of Bob's points but um I need I I felt the need to explain how winding up receivership in the old days administration apply to societies and the slides are focused on that so the first thing to say is that for anyone who's used to dealing with insolvency many of the principles are familiar and essentially similar to those that apply to companies so capital shares are risk capital so the shareholders effectively are behind all creditors um secured creditors have priority over assets in the same way that they do in corporate contexts where they have a charge over assets but just as in the corporate context that is subject to some of the assets going to unsecured creditors um in advance of the secured creditors the famous prescribed part order which says there is a formula for a certain value of asset to be available to unsecured creditors even when security covers almost everything and obviously we're talking here about fixed and floating charges being the security um and then the other the other point that would be familiar is that the standard insolvency act provisions about adjusting prior transactions preferences setting aside transactions that all applies to societies in just the same way as it applies to companies so those are perhaps the familiar points in in the next slide we we have a look at the more recent temporary provision about a moratorium where the financial difficulties have been caused by COVID-19 and the effects of it so the company insolvency and governance act moratorium and its amendments to the insolvency act do apply to societies but with modifications in much the same way as as they apply to companies but the modifications deal with the detail of how how that actually works um the unsecured creditors after security has been dealt with then of course rank parry pasu as they do in a corporate insolvency if there's anything left for them at all so those are just the standard familiar principles about preference and rankings um but then the question is how does this apply to societies and what I've given on this slide and hopefully the slides will remain available for you to look further at this is some key materials which do apply a lot of the the information or the insolvency rules to societies the first one is um and this relates to to to what my colleague david was saying is that there is some very helpful guidance from the financial conduct authority and odd as it may seem to those who are used to the company context the financial conduct authority is the registrar for societies as david said companies the registrar of companies has no role for societies at all effectively so all of that work is done by the financial conduct authority and their guidance which i've given a reference to and a link which allows you to access it deals with all aspects of their function in relation to this and is really helpful in terms of how they operate and for the context of dissolution insolvency of societies chapters eight and nine of that guidance are particularly helpful so that's worth getting hold of if you haven't dealt with societies before and you do now deal with insolvency societies the second thing to say on this slide is that for many years ever since the industrial and province societies acts which originate in the 19th century the the main law which is now the the cooperative and community benefits societies act as david pointed out that rule and i've referred here to the sections of that act apply company winding up provisions to societies they're basically say in sections 123 to 126 that um voluntary winding up um by resolution of creditors or members and also compulsory winding up by court order on the grounds as they apply for companies apply to societies in just the same way so all of that is actually the same there are minor changes i'll come back to those because some of those changes also apply to the other insolvency procedures in terms of the more recent and i'll take is that including the 1985 86 in reduction of administration as an insolvency procedure for companies the more recent developments are applied to societies by a set of regulations and essentially those regulations are made under the cooperative and community benefits societies act it's section 118 which gives authority for that and and allows the regulations to be made and continues old regulations and then on the next slide making the point that those regulations uh do vary some of the some of the requirements and are the are the key resource so um the perhaps the key thing to say about those regulations um and i've again i have given the reference it's statutory instrument 2014 229 that is why you will find all the information about how insolvency procedures apply to societies and what the differences are from when they apply to companies and they do modify the insolvency act 1986 in its application to societies but the key point to mention about those regulations which is another element i'm afraid of complexity is that for certain types of society some of them really quite common ones those regulations do not apply and i mean this dovetails with bob's point about having a special administration regime well there is a special administration regime for essentially housing associations registered social landlords registered providers of that kind of social housing they have their own special rules and therefore they are excluded from these general regulations that apply to all other cooperatives and community benefits societies and again i'll mention those briefly in a further slide but essentially um the regulator of social housing has a significant role in those contexts and i guess bob's protector of community assets would have some similar role if there were a special administration procedure for community asset based societies um so that's the the the key point to say it doesn't apply to housing associations and so on and the other exclusion is financial services cooperatives which are credit unions effectively and other bank type entities deposit takers is the technical expression and those also are covered by different procedures not the procedures that apply to other cooperatives and community benefit societies they're basically classed with banks and dealt with in the same way as other deposit takers banks credit unions have dealt with if they become insolvent so that's another element of kind of complexity and then just to say that i've given the technical reference for the amendment that included the COVID-19 moratorium as an additional layer which does apply to cooperatives and community benefit societies and there are again modifications to the insolvency act to accommodate that so um that that's hopefully a helpful indication from that slide of where you find that information and how it's been done over the years by these regulations and how it does apply the insolvency act appropriately moving on to the the next slide and thinking about winding up um i had already mentioned that um the act itself the 2014 act does actually as its predecessors did apply to societies the company winding up system but there are some key changes and i've listed them on this slide and that some of them are fairly technical and detailed but if you're actually hands-on insolvency practitioners who are dealing with winding ups it's important that you don't send things to companies house because they won't be interested it's the fca that um for instance the winding up resolution has to be has to be sent to because the the the sections of the act say references to the registrar of companies in this context are to be read as references to the financial conduct authority and they have a kind of mutuals sectional department within the fca that does deal with this and the society itself if it passes a voluntary winding up resolution normally of course because it's insolvent and creditors need that or demand that it would also apply if there were members voluntary winding up when it was solvent but normally we're talking insolvency here so it'll be a creditors voluntary winding up the society must send a copy of that resolution to the financial conduct authority and that's to be done within 15 days of the resolution being passed by the society general meeting to initiate the winding up and that's the kind of process i guess you as insolvency practitioners would be involved in organising in the case of an insolvency society that was going to be wound up similarly there is a rule in the 2014 act that society must give a copy of its rules to any member who asks for it who hasn't already had one and anyone else with an interest in the society normally taking as being a financial interest must be given a copy of the rules well to that copy of the rules must be attached the resolution starting the winding up of the society if they have passed one so that's a modification to the to the normal situation and on dissolution at the end of the winding up process again there's a difference in that the society cannot be dissolved until the certificate has been sent to the fca indicating that all the society's property has been dealt with so you can't just dissolve it unless you've actually dealt with all the property in any context where you're dissolving either at the end of an administration process or because the society's been wound up and of course what you're dissolving is the corporate entity because these societies are entities they have corporate personality just the same way as it as a company does and then again final point on this slide um the insolvency rules 1986 themselves which of course are vitally important in company insolvencies are applied to societies but subject to changes in those regulations i've called them the a r a regulations because that's the acronym but regulations 2014 two nine nine essentially they apply the insolvency rules to societies subject to a whole lot of changes that are in a schedule to the a r a regulations so that's a brief trot through the key changes as far as winding ups concern moving on to the administration of society is as in obviously the technical insolvency meaning of administration this it's just interesting to mention in passing that this was an example of catching up as i see it initially societies were not offered the chance of the moratorium that comes with administration from 1985 86 it applied to companies societies didn't get it until the the noughties of this millennium but they do now have it and there were a series of private members bills and so on but it is now applicable to societies but they have to be done by empowering the treasury to make regulations to apply it to societies which they did and which the regulations i've kept referring to actually do that the a r a regulations one of the a's is administration of course so it does apply to societies um and it applies in much the same way instead of referring to company directors it refers to committee members because that's how the the 2014 act refers to them and again linking to david's comments on shares in societies members of societies are excluded from the definition of creditors but only in so far as they are owed money because of shares in other words they've withdrawn their shares applied to withdraw their shares the site has gone into insolvency in the meantime become insolvent in the meantime in which case they they are only in regard as creditors to the extent that money is owed to them um on their shares they're not they're excluded from being creditors for money owed to them in respect of shares thus maintaining the standard kind of hierarchy that shareholders are wiped out unless all the creditors can be paid before anything goes to shareholders and obviously creditors will include the costs and fees of the insolvency practitioner doing the winding up so you know whether there's anything left for members is maybe improbable um so that in respect of other debts of course their creditors like anyone else so if someone has bought some defective goods from a consumer cooperative and if they've then sued for damages and been awarded them they are a creditor for those damages you know and not be god as a member and therefore unable to claim them um and the other thing to say and this is quite an important distinction for any of you that are used to deal dealing with company insolvency and that is particularly in administration or I should say in voluntary arrangements which are also applied to societies by these same regulations anywhere where you have to have meetings of what would be shareholders in companies called members in societies the voting is following as David said will always be one member one vote and not according to the number of shares assuming that the rules provide for that which most society rules will and um it also allows for delegate meetings in much the same way as trade union legislation does so the the regulations specifically say that if you're having members meetings because there's a a voluntary arrangement being agreed or for the purposes of administration taking place those meetings can be delegate meetings if the rules of the society the society's constitution in other words provides for delegate meetings to be the way meetings take place so those are just some of the modifications for administration I thought it worthwhile to say that um members does mean people who appear on the society's register of members that is how you find out who they are um and I was slightly puzzled by bob's point because in principle there's no reason why one member shouldn't be able to find out who the other members are from the register of members if it's been properly kept by this society however um that's perhaps a matter of detailed administration but um that those are the people that count you don't have to show share certificates you do as a company member you would actually show point to a register and say I'm registered as a member and again all references to register of companies becomes register reference the fca okay so carrying on from general administration special regimes I mentioned them haven't really got time to to say much about them which will be much relieved about housing administration is a specialist area on its own it's um it's given by a different set of regulations 2018 regulations 2018 stroke 728 modify the insolvency act to apply to societies um which are covered that is housing associations registered providers of social housing and so on and they obviously again say the financial conduct authority replaces the um company registrar but they also make the point that there is a role for the regulator of social housing they will obviously want to express a view about who might be an appropriate insolvency practitioner for instance in the case of these societies and of course they have to be served with all formal documents and just to say briefly housing co-ops good question someone's just flashed up on my screen um they generally would also be subject I think to the regulator of social housing um as well as the fca and uh that that I think would be the position thanks for the question which I happen to see except flashed up credit unions another authorized deposit takers which is just the technical way of referring to a bank they again have a kind of special regime and I think we can do with the next slide now if possible um thank you very much um those kind of societies um have a dual they have all the fun of many regulators so they have the financial conduct authority instead of the registrar of companies like the others they also have the financial conduct authority in its role as a financial regulator and in addition they're covered by the prudential prudential regulation authority which is the bit of the bank of England that regulates banks so credit unions great fun for them they've got three effectively three regulators in that sense um and obviously again because of the special nature of these societies the financial services act 2000 applies to their insolvency with specialized practitioners specialized rules and so on um and and so it's just a point to the fact of those elements and I'm not going to go you'll be relieved to hear not going to go into any more detail about that so it's now the next slide um now the next slide is an attempt to summarize all of this um this is just my thoughts about maybe things you should bear in mind if you deal with one of these as a practitioner one don't assume it's exactly the same as companies that's probably the biggest one you've got these variations which are of some significance despite the fact that the regimes apply in a broadly similar way member meetings will not be the same it'll be voting by one member one vote not one share one vote or in whatever way the society rules say in some agricultural co-ops that might be about how many acres their farm or something like that so it can be something different it's worth saying that um the bearing in mind the point I've already made that the general regulations will not apply to housing providers which we've already dealt with or deposit date as we've said that um and again the insolvency process the process is differ from each other so you have different rules according to other to administration winding up and so forth um and just the general tip which is probably so obvious I don't need to say it you have to check which set of provisions applied to the particular society and that might be partly its business sector is it a bank type entity or and also what is the nature of it you know is it being going into administration is it being wound up depending on all those things you would look at different provisions so it's basically still very complex but at least it is essentially similar to companies with the same sets of regimes applying so there I will terminate and pass back to Emma I think yeah thanks Ian well thanks to all the panellists and we've now got around 25 minutes so as long as uh we need within that for some questions so I know that people have been sharing questions already um in the chat so if you have any questions if you want to put them in there and then I can ask them to the panellists you can see I think that someone might have their hand up Dave Boyle has got his hand up but I can't go to you because you can't speak so if you can put what you wanted to say in the chat Dave and and then I can um I can ask the panellist so I can make the point that you wanted to make just I noticed someone's point out in the chat Emma which is at the point I was going to make um which is that uh in terms of housing co-ops which are uh housing providers where they are owned and managed by the tenants um is actually right there's there's a mixture of housing co-ops that are registered um with uh the regulation of social housing and are therefore subject to the um uh the modified administration processes as Ian said and I'm I'm dealing with one of those at the moment um there's then a series of housing co-ops that aren't registered with the regulator and therefore would not be subject to that specific regime but will be subject to um the um the normal regime that applies to societies that aren't registered because the key issue is it applies to those organisations which are registered providers of social housing thanks David we do have a question here apologies Joseph if I can't pronounce your name properly but Joseph and Najuna um does the community nature of these societies warrant um a larger role for national apex organisation so COPSI K in winding up and what is the status and scope according to the experts here so James right you might want to comment on that but David or Ian do you have any thoughts on that um John sorry Joseph has mentioned as well in there um around because of the um co-ops tend to nurture reserves uh parts of which ought to be indivisible which one can which one can interpret off the benefit of the community so does anyone have any comments on that question perhaps if I can start on that yeah I mean there's two points there really and and Bob has already mentioned one of them in the context of the work around protecting community assets and there is an argument I think that um if if we could find a way of defining what a community asset is everybody can agree with um then I think there is an argument that um where there's been significant public investment or quasi public investment into community asset that there ought to be a kind of special carve out to the normal processes um if only to to make sure that those assets aren't lost to the community in the way that happened with with Hastings Pier um and and on the um the point about indivisible reserve yeah I mean there's been conversations in in the co-op movement about and I don't know to come in on this um about the whole question of whether um we should actually legislate for there being an indivisible reserve which is which is the property of the society itself and not the property of its members and not the question whether that should be a certain amount of creditors or not but I think that's uh um something that's certainly been under discussion for quite some time um I guess Emma and James will talk about the role of um Apex and Sector Body because they know that better than I do. James do you want to come in? Yeah um sorry sorry James sorry no no no I don't really have anything to ask to be honest in so go ahead okay well I was just going to say yeah I mean clearly that would be helpful if if that those possibilities existed I mean it just reminds me and I'm I hate to be the old man going on about the past but um there was a time when consumer society shares were subject to a kind of deposit protection scheme which was mutual among societies and that was you know that made sure people got their money back from their withdrawal shares problem was that when the biggest society started becoming almost instalvent it was evident it was unsustainable and you couldn't do it um and this goes to David's point that sometimes withdrawal shares are a bit like deposits and if you had deposit money in a bank there's the financial services compensation scheme that protects up to 80 000 so if you come into a lot of money never put more than 80 000 in one bank because you get that back if the bank goes bust but not anymore um and um if it's like a deposit maybe you should have something like that but the problem is they are also shares and therefore now at present they're subject to the general rule their equity they they're wiped out and creditors prevail over them but maybe we do need to move away from that purely kind of financial thing um and think of ways of trying to do that You're on me, Tenor. Just put that out. Now we've got the question from Dave Boyle so he's noting that there is provision for withdrawal shares to be reclaimed up until the end of the financial year in which they were paid is this something that would be exercisable by administrators, the board or a combination of both? Well without having anything in front of me in terms of text but um just it's it seems to me that shares are subject to a contract in other words the deal in the rules and so on about the rights of the all the shares is as it is in the rules of the society normally or any other contract that exists and um the difficulty is that if you say well all of this is set aside as soon as there's insolvency well all everything you know is subject to insolvency so really um people are not um going to be entitled to get money back from their shares if creditors are not going to be paid and that does seem reasonable if it's risk capital and if people are told that at the beginning I think um but there are also rules that say you've put yourself on me I have you can um you can um be asked to pay more money in up to the limit of you know the shares shares nominal value um within you know a period before the insolvency that is uncommon because normally people have paid the full value of the share in advance but there are those other possibilities as well. Can I just jump in on that for a second I wasn't sure exactly whether Dave's question was rather around the fact that there's guidance that states that even once I've withdrawn my share and the society has paid me that money for my share I am actually still liable for the value of that share for up to 12 months from that point which is why when we issued guidance on recovery share offers there was suggested that you stop all withdrawals like if the society is at risk of insolvency you shouldn't allow your shareholders to withdraw capital because if you go into insolvency in the next 12 months and they've withdrawn it they're still liable for it and that's a nightmare so that's more sort of preemptive guidance that we've produced and I think that's more what Dave was saying actually who exercises that is it the board or is it the administrators and that's why. The answer that last question therefore is that um once administrators are appointed they effectively take over the role of the board so once administrators are in place they would exercise that right because they effectively act in place of the board. That makes sense okay and it's the role of the board to try and make sure the administrators don't have to exercise that right if they've been prudent in not allowing the strolls up to that point. So just also maybe worth just just saying that um the right of the board to stop withdrawals either indefinitely or for a fixed period by suspending them is a key element in all society most society rules and that is one of the reasons its equity and not debt you know that is part of international accounting provisions I think which allow for that. Thanks Ian. Have we got any more questions there aren't any in the chat um if you want to tap any in there I'll give you um a minute or so but from a panellys point of view is there anything else that anyone wants to to comment on at this point just before we wait and see if there's any more questions? I'm just looking at the question that's just arrived from Justin where the local authority offered a grant to a CVS towards buying the local pub which is not uncommon with CVSs however they wish to protect their investment by seeking preferential predator status and it's yeah I mean my advice to groups in that situation always is to look at the terms of the grant that are being offered um very very carefully um uh and and sometimes you know grant givers even if they're giving you this grant do you want to either secure their grant against um the property if it's in relation to a property which is one option here for the authority um in general terms it's just worth saying that it's very important you look at the terms that people are seeking to apply to their grant very carefully um because yeah I mean there are there are various options around that um and the most obvious way I think it would be to secure that grant on with a charge on the pub um and the answer is that is perfectly possible yes. Thank you David we've got a follow-up there from um from Dave Boyle so following up from this query before about if you've um paid out on um on share capital um so he's saying if that's already been paid out and as a member I don't really want to to pay it back what is the process um around that um with regards to the board or the insolvency practitioner um if that individual doesn't pay back doesn't respond to their requests Ian David have you got any thoughts on that? It's not it's not a right that I'm particularly familiar with so I'd want to look at go away and look that up I'm afraid and and I see in those the answer of what he's said. I mean I would have thought that it it would be kind of contractual liability under some combination of the rules and the legislation but as David says I'm not 100% sure of that but basically if the if you you've been handed the money and there's a requirement to pay it back by the administrator um it would be an issue you'd have to go to court over obviously and that would depend on I I'm not sure of the answer as as as David more wisely said at the very beginning I'm not sure if you do know the answer or you can find out the answer then that's something that we can send to the the attendees in the next week or so and we do have um got lots of questions coming in now so uh from Lorraine Hart Ian can you clarify the issue of the availability of the um shareholder or shareholders I think? Okay well I'm my understanding again without looking at and checking it is there is a register of members which societies that all societies require to maintain and my understanding is that any member would have a right to inspect that register of members the rules would govern that right it might say only on certain days or certain notice and things like that and that that is a right that could be used I guess to get information about who the other members are uh like names and addresses so they could contact each other I think the difficulty is that the site is probably not um not required although it would be sensible if they did perhaps to to give that information to members other than saying yeah here's the register come and inspect it I mean I think that is probably the issue and in practice it would be quite hard for members to do that I know in the company world there are specialist firms who do this you know who will supply that information in regulation the company registers but um I suspect not in the case of societies I don't know so I mean I dealt with a query on this just recently for a registered society who were asking what the rights of members were um Lorraine you're quite right there not a public available by the fca there's no central register of members um at the fca um but there at the there is a right in the 2014 act for a member to ask to inspect the register um crucially there isn't a right to request a copy of it um at the right is to come and inspect and uh and that can be for um that register can be redacted to remove the detail of other members um share capital to the point that Mark's also put in the chat does now um but um yeah I mean the question of whether it can be copied whether you can request an electronic version of it um because obviously these days most registers are kept electronically particularly by societies with larger numbers of members um the question of whether that um access to a copy of that file is something that um members have a right to is a is a vexed one I will say um one that we don't think at the moment is legally certain um sooner or later somebody's going to go to court on it and then we'll have a definitive answer um the position is more developed for with company member information and but that is because there are additional rights under the act if I may add Chris is adding some very helpful comments in the in the chat um and and all of that is right I'm no specialist on this tool all I can say is the experience of a number of examples when we went to the case that he was that they'd struggled to get that information and most contact details um and therefore weren't able to actually do it in practice um and that was really the big issue thank you and just to go back to um Dave Boyle's earlier point there's the really for those that haven't seen it there's a comment from Greg Whitehead there in the in the chat that's basically saying that an insolvency practitioner would not pursue um quite a modest amount of share capital that would have been withdrawn in the year prior to insolvency and that's just to add to the um the point that you made earlier okay so I think everything else in the chat there um is related to access to the member register so I don't think there's any outstanding questions that we haven't answered at the moment and so I think we'll bring this to a close I hope you found it really useful um as we said earlier we hope that this will be the beginning of a of a conversation about this so that we can try to pull together um some co-op friendly insolvency practitioner if that is the right term so that we can grow the understanding of insolvency practitioners to make co-ops and community benefit societies lives easier but also insolvency practitioners as well in terms of making sure that you have the right information that you need we will be sending out um a feedback form request and included on that um there'll also be um a question on that what else can we provide to you is there any guidance or support any more webinars any more information that we can provide you with um and a couple of people have offered their support as well to bob um throughout this webinar if anyone wants to get involved with COPS UK um involved with Anthony Collins and us as a network um then do let us know if it's something that would be interested in finding out more information about we would love not just to have co-op friendly insolvency practitioners but ones who really want to know about the co-op model where we can merge our knowledge of co-ops and community benefit societies and your knowledge of insolvency so um thank you again as I say we'll put a recording of this um on the website we'll also enable you to have access to the slides and please do you um fill in the feedback questionnaire as well that we send out so thanks all for attending and see you soon