Industrial and Provident Societies
The principal legislation for industrial and provident societies is the Industrial and Provident Societies Act 1893. The entities are body corporates with separate legal identities. They have a separate legal liability from their members, which is accordingly limited.
Industrial and provident societies are registered by the Registrar of Friendly Societies. Certain returns and documents must be lodged with the registrar. These include applications to register and form societies, amendments, annual returns, special resolutions, change of name, transfer of engagements, appointment of receivers, dissolutions instruments, winding up resolutions and other documents.
The forms of return are prescribed by the registrar. The registry is open to inspection. Copies may be obtained.
The society can be registered for the carrying out of any business, industry or trade specified by its rules. It may be wholesale trade or services. There are special provisions applicable to societies which carry on banking.
A Society may not be registered unless it is shown to the satisfaction of the registrar that it is a bona fide incorporated society. It must be shown that the activity is intended to be conducted mainly for the benefit or the purpose of improving the living conditions and promoting the well-being of members of particular groups or communities. It must be shown that there are good reasons to register under this legislation as opposed to as a company.
A cooperate society does not include a society which carries on business with the objective of making profits, mainly for the purpose of dividends, bonus on interest on monies invested or deposited with the society.
The society must have at least seven members. It may comprise of other registered societies or it is that there must be at least two.
A society may not be registered with a name which the registrar considers to be undesirable. The word limited must be in name of every society unless the registrar is satisfied that it is established for purposes which are wholly charitable or benevolent.
The application to register must be signed by seven members and the secretary. Printed copy of the rules must be sent to the registrar.
Upon registration the society becomes a body corporate with its own legal identity. Upon being satisfied that the society has complied with the statutory provisions for registration the registrar issues an acknowledgment. This is conclusive evidence of the existence of the society. The registration may be suspended or cancelled. If the registrar refuses to register other than on certain grounds there is an appeal to the High Court.
Rules of Society
Certain provisions are required in the rules. Other provisions may be adopted to avoid the statutory default applying.
Rules for the protection of the society may be invalid if they impose an unnecessary restraint of trade that’s not reasonably necessary for the purpose. The registration of the society does not prove that the rules did not offend the restraint of trade doctrine or competition law.
There are certain mandatory rules which must be provided. They include
- Applicant’s name and registered office.
- Terms of admission of members including conditions for investing funds.
- Holding in meetings and voting rights.
- Manners of changing rules
- Appointment on removal of committee of management
- Appointment and removal of managers and officers and the respective.
- Powers and remuneration of officers and managers
- Determination of interest on shares
- Determination whether shares are transferrable and form of transfer and registration.
- Provisions regarding withdrawal from membership provision for appropriation of profits
- Determination of an investment of capital
- Inspection of societies’ books
- Use of the society sales.
- Investment of capital
- Inspection of societies’ books by registrar
- Appointment of inspector
- Voluntary dissolution
- Delivery of demand of corporate rules
- Annual audit of accounts
- Appointment and removal of auditor
- Making of annual returns
- Inspection of books and accounts by members
- Some model sets of rules have been published.
The rules of the registered society are binding as between all members. They are deemed to have the same effects as if each person had subscribed to an agreement executed as a deed.
There is no statutory mechanism for amending the rules. The rules themselves usually provide for their amendment. It appears that the amendments must be broadly withing the scope of the original rules such as were in the contemplation of the original rules on incorporation.
It is not enough to pass the meeting resolution at a general meeting. The amendments must be made in good faith for the benefit of the members as a whole. It must not be aimed at or penalise existing members. It must not be contrary to existing rights and not be inconsistent with the nature of the society itself.
The amendment must be registered with the registry. An application to register an amendment must be made by the secretary and supported by a statutory declaration showing the amendment. The copies of the new rules must be filed.
A register society can change its name by resolution at general meeting. This does not affect the underlying entity. The same principles that apply to the original name, apply to a change of name.
The Friendly Society must display same at every office or place where it carries on business. Its name must also appear on business letters, bills of exchange promissory notes advertisements, cheques and orders for money or goods purporting to be signed on behalf of the society. It must be used on invoices, receipts, letters of credit in respect of the society. Failure to do the above is an offence subject to summary prosecution.
Every registered society must have a registered office. Any changes must be registered with the registrar.
Communications and notices are sent to the registered office. Copies of the balance sheet in order to report must be retained there together with certain statements. The register of members and officers must be retained there. Certain summons against the society may be served at the registered office.
The rules may make provision for shares, numbers of shares, their withdraw ability and transferability. In the case of certain type of societies, there are statutory limitations on the value of shares which an individual may hold or withdraw.
A share may entitle a member to withdraw a value from the society. The terms of withdrawal would be specified by the rules.
The rules provide for issue of shares. This may include provision for instalment costs, payment of balance et cetera. The rules may provide for classes of shares. There may be preferred or deferred shares. Rules may have special rights attaching.
There need not be share certificates. Sometimes they may be provided.
The ability of a society to borrow depends on its rule. There is no provision for registration of charges with the registrar.
The rules must provide for the appointment of a committee of management or equivalent officers. Their powers and remuneration must be provided for. There must be a secretary. Provision may be made for officers or equivalent as may be desired.
It is not necessary to notify the registrar of appointments. Particulars must be kept on registers kept at the registered office. The annual return must contain details of members of the committee, and persons in charge of money.
The committee of management has functions laid down by statutes and byelaws. In certain cases, an offence is committed by the society and may be deemed to be committed by members of the management committee.
Where, as will commonly would be the case, the control of the business and affairs of the society is vested in the committee of management. The members in general meeting cannot exercise that authority. It is likely that same broad principles applicable to boards of directors in the context of companies will apply.
Officers of societies who have received or are in charge of money may be required by the rules to give security for the due execution of their office. This may be required by way of bonds from an insurer.
An officer of the society who has received or in charge of money may be required to render account of monies paid and received. If he fails to do so the society may take action or enforce the bond or security he may have given.
The mechanism for resignation and removal of an officer must be provided by the rules. Officers may resign.
The rules of the society will provide for rights of members. A registered society must keep a register of members with their names and addresses, statements of shares held, amounts paid or agreed to be paid in consideration, statements relating to loans, deposits held by each, date of entry as a member and date of cessation.
A register of officers must be kept with the name and address of officers and the dates on which they assumed and ceased office. The register may be kept in the form of a bound book or other written forms.
The registrar or persons authorised by him may inspect any details in the register at all reasonable hour. The registers are presumptive evidence of certain of the information contained in it.
Rights of Members
Members have individual rights set out in the rule. They may not be changed by amendment. They include rights to demand a copy of the rules, rights to inspect one’s accounts, rights to inspect the books of account, rights to see the annual return, rights to have certain disputes determined under the rule by the nominated persons, who takes his or her shares after death.
Other rights belong to the members collectively. The members collectively may apply to appoint an accountant to examine the society’s books. They may apply to the chief registrar to appoint an inspector to permit enquiry into the society’s affairs. They may require him to call a special meeting of the society. Collectively they may execute or administer the dissolution and winding up of the society.
Members are only liable for the liabilities of the society to the extent that monies unpaid in the shares while a member owe within one year. Their liability to subscribe shares or capitals cannot be increased by amendment of the rule.