The House of Lords is scheduled to debate the Co-operatives, Mutuals and Friendly Societies Bill at second reading on 24 March 2023. The bill is a private member’s bill sponsored by Lord Kennedy of Southwark, Labour’s shadow chief whip and spokesperson on Cabinet Office matters in the House of Lords. The bill has passed the House of Commons, where it was sponsored by Sir Mark Hendrick (Labour MP for Preston).
The bill would permit ministers to submit draft regulations for parliamentary approval enabling cooperatives, mutual insurers and friendly societies to adopt legal restrictions to ensure their assets could only be used for specified purposes. The option for such bodies to implement statutory ‘asset locks’ is intended to help reduce financial incentives for them to demutualise. At present, these entities can adopt voluntary restrictions on the use of surplus funds, but these are non-statutory and may be overturned. Regulations made under the bill would be subject to the affirmative procedure, meaning both Houses of Parliament would need to consent before the regulations could become law.
The bill would in effect bring arrangements for cooperatives (in England, Scotland and Wales) and mutual insurers and friendly societies (UK-wide) into line with those in place for community benefit societies, a type of cooperative which conducts its business for the benefit of the community. Existing legislation allows for community benefit societies to adopt statutory asset locks to ensure their assets cannot be used for the private benefit of members at a later date. Community interest companies are affected by similar statutory asset lock provisions.
The government supports the bill and HM Treasury supplied explanatory notes for the version of the bill introduced in the House of Commons. The bill was subject to three technical amendments at committee stage before later passing through its remaining stages with broad cross-party support.