Friendly Societies

Table of Contents

Overview

Friendly societies are a species of corporate body with 19th century origin. They are part of a group of voluntary benefit and saving societies which include building societies, trade unions, cooperative societies, and some industrial and provident societies. The governing legislation is still the Friendly Societies Act 1896 which allows six classes of societies, one of which is a Friendly Society.

Most friendly societies accumulate funds by contributions or levies on members and returns on investment. They are generally are constrained to apply funds for the benefit of the members.

A nonregistered friendly society is an unincorporated association of individuals. The members are entitled enjoy the property and funds. They are usually vested in trustees. Certain limited statutory provisions apply to unregistered friendly societies.

Six classes of societies may be registered under the Friendly Societies Act. The most important is a friendly society itself.

Purposes

The purpose of friendly society legislation is to encourage savings and better management of affairs and protection of fund. Under earlier legislation of friendly society rules were approved by Justices of the Peace and the Quarter Sessions. Eventually the Registry of Friendly Societies was established in 1875.

Friendly societies may be registered or unregistered. The permitted objects and purposes of registered friendly societies are defined by statute. Unregistered friendly societies may exist for purposes other than those as defined. A friendly society may or may not be a charity. It must otherwise qualify as a charity. See the separate sections on charity.

Societies may be registered as friendly societies for

the purpose of providing by monthly subscription with or without donations one or more of the following purposes:
relief or maintenance of members, the family members in relation to sickness, injury, old-age, mental incapacity, widowhood, minority.
insurance money to be paid on the birth of a child or death of a member or spouse.
relief or maintenance of unemployed or persons in distressed circumstances and
entitlements to members on marriage and fire insurance
monies to be paid by way of life insurance in certain circumstances.

Variants

Friendly societies include slate club and tontine societies which divide cash amongst members after payment of outgoings periodically. In in other types of societies there is no division but the accumulated funds are appropriated to the members’ accounts at the year-end.

There may be a deposit society in which the contributions form a common fund as the part and a personal account as to other part. Benefits may be paid from each part depending on the amount of risk sharing across members. A balance in the account is typically payable on death or other events to members.

Certain friendly societies are collecting societies Collectors collect moneys from time-to-time. These societies which where a feature of the mid-20th century, early to mid-20th century are regulated under Industrial Assurance legislation. Friendly societies carrying on this business must register under that legislation. They are rarely found in modern times.

There is a monetary cap on the level of assurance contracts by friendly societies which is relatively low. A declaration may be required by a person for the total amount which a person is entitled to from one or more such societies or branches does not exceed the statutory minimum.

Apart from friendly societies, the friendly societies legislation allows registration of the following categories of societies.

cattle Insurance Societies (covering life of animals from diseases),
benevolent Societies for charitable purposes,
working Men’s Clubs for the purpose of social activity, mutual help, mental and moral improvements, rational recreation,
Old Peoples Home Societies for providing homes for members in old-age (which may be over 50),
Specially authorised societies.

Branches

Friendly societies may have branches.Branches may be registered separately. In the United Kingdom, a branch may be registered as a separate body on production of a certificate from the society that the body has seceded up and expelled.

A branch may be under the control of a particular body with its own members and funds. They may be banned to contribute to the fund under the control of the central body. Each branch is separately registered.

Branches may secede from society. Subject to the provisions of the rules and legislation. They may only be dissolved with the consent of the central body. The relationship is one of an affiliation rather than agency. Other types of branches may be in the nature of branches or parts of the main body which cannot be separated. In this case the local entity is an organizational matter.

Powers & Rights

Registered societies are granted certain rights including

right to hold property in the name of trustees,
passing to successors / trustees without transfer
right to bring and take legal actions in the name of the trustee,
admission of a member from birth with parents and guardians being entitled to give valid discharges,
simplified requirements for officers who can deliver property,
allowing settlements of legal disputes according to their own rules,
the nomination of benefits to members on death.
distribution without grants and probate in certain level,
certain tax exemption.

Registration

The Registrar of Friendly Society is generally a legally qualified individual having experience as a solicitor or barrister. The registrar has a range of administrative and investigatory functions.

A range of documents including amendments of rules, accounts, appointments of trustees, returns, valuations, special resolutions must be registered with the registrar. Prescribed fees are payable. The provisions are analogous to those applicable to the companies.

Formation

A registered society requires at least seven persons. The application must be signed by seven members and the Secretary and filed together with number of printed copies of the rules and certain other details. If the registrar is satisfied that the relevant requirements have been complied, this is acknowledged and the society is designated and classified. There is a right of appeal from refusal to the High Court.

The name must be set out in the rules and must not be identical or unduly similar to an existing society such as to deceive members of the public. Branches may have the names of the society of which they are branch. Their provisions for change of names with the approval of this registrar.

Every society and branch must have a registered office to which communications may be sent. Copies of accounts must together with other valuations and other documents must be retained there. Legal proceedings may be served, changed and the registered office must be notified to the registrar.

Matters in Rules

The registered rules provide for the terms on which they may accept contributions and conditions on which members are entitled to benefit. They may provide for fines and forfeitures. They provide generally for the rights and obligations.

The rules must provide for certain matters including

objectives,
purposes for which funds may be applied,
terms of admission of memberships,
conditions for benefits,
claims and forfeitures consequent to non-payment,
holding of meetings,
voting rights,
amendment of rules,
appointing of committee of managements, treasurer and other officers.
whether there are branches
composition of central body,
investment of funds,
keeping of accounts,
annual returns,
resolution of disputes,
if other society provides funds.

The society’s rules must provide for

keeping of separate accounts in respect of particular funds,
provision for supplying accounts and returns to a member free of charge.
in certain cases, provision for five yearly revaluations of assets and liabilities including risk
provisions of voluntary dissolution.
a provision authorizing certain proportion to apply for winding and provision
for keeping accounts and reports at registered office and
provision regarding nomination of membership on death.

Some powers are only exercisable if the rules permit. This includes power to make loans. Power to accumulate surplus of contributions for use.

Rules- Nature & Amendment

The rules comprise a contract between the members. If the rules allow for amendment, the members are bound by the amendment because it is so provided in the rules. However a member cannot be deprived of certain benefits due to him on account of the rules as they exist before amendment. The amendment can have impact upon future benefit. If there is a separate contract such as a policy then the variation of the rules may alter it.

Amendments of the rules are not valid until registered. Acknowledgment is not necessarily conclusive evidence to the legality of the rules or amendment. Upon an issue of acknowledgment of amendment, the registration procedure is presumed valid.

Management & Officers

The registered society is managed through officers. The rules must provide for a Trustee, Secretary, Treasurer and a committee of management. There must be an auditor. Other officials may be provided such as Manager, Medical Officer, Chairman and so on as the circumstances require.

The rules would provide for appointment of the officers. Trustees must be appointed by a resolution of the majority of members.

Officers having charge of the monies must if the rules require give security by way of a bond or surety. Officers having received the money must account for the monies received on demand, or notice in writing. The rules may provide for dismissal and resignation of officers.

The societies must have one or more trustees. They are removable by the members at any time. Trustees deal with the investment of funds. They may make investment only with the consent of the committee or a general meeting. Investments must be authorized.

The rules should provide for appointment or removal of a Secretary. The Secretary cannot be an officer or trustee. The secretary takes care of the administrative functions.

The rules must provide for appointment and removal of committee of management. Committee members are not officers.

Members

There is no limitation on the number of members. There must be at least seven in order for registration to proceed. The matter of terms of admission and expulsion of members is provided by the rules.

The rights and liabilities of members are conferred by the rules. A member also have certain statutory rights.

entitlement to copy of the rules.
entitlement to inspect books.
copy of last return,
rights to make nominations below certain amounts.
claims provided for on a winding up, amalgamation.
got authority to institute proceedings on the behalf of the society.
to have disputes determined under rules or by court if no permanent procedure.
right to apply to court to enforce dispute resolution decision.
members have rights collectively including the following: 1/5 of the member or certain other proportion depending on total membership may make application for appointment of an inspector to investigate the affairs of the society.
A special resolution by stipulated majority to amalgamate, transfer, engagement.

The provisions for termination of membership apply under the rules. There may be provisions for resignation, cessation of membership and expulsion. A person may be ceased to be a member where he is in arrears of contributions for certain period.

A person may be expelled if the rules provide. It must be exercised in good faith in accordance with the rules. The person must be given an opportunity for putting his case in accordance with the rules of natural justice.