The legal costs of incorporation a coop

I’m participating later today as a panellist in the online discussion being organised by the Guardian, linked to the theme of my current series of articles Can coops compete?.

Three of this series are now up on the Guardian’s website, the latest being an assessment of whether coops are held back in comparison with conventional business by legal constraints. You’ll see that the assessment back from those I interviewed for the piece is generally an upbeat one.

I do have a residual concern, however, that it is still much more expensive to register a new cooperative or community benefit society under the Industrial & Provident Societies Act (IPSA) than it would be a  company under the Companies Act. (When I used company legislation recently to register a community-run development trust for the town where I live, I was able to do the incorporation for almost nothing by adapting the Charity Commission’s model Company Limited by Guarantee rules).

Co-operatives UK uses its management fees on new IPSA incorporations as a revenue generator, a practice it took over from the old Industrial Common Ownership Movement. (ICOM’s practice meant that many new workers’ coops joined for their first ‘free’ year and then had nothing more to do with the organisation, which didn’t really help build a strong movement.)  Even though many newly incorporating coops can get their legal fees grant-funded (for example through the Co-operative Enterprise Hub) I would prefer to see Co-operatives UK move away from ‘front-end loading’ costs on new coops in this way.

At least Co-operatives UK is now reviewing these charges. I understand that the cost of registering a new IPSA through them is about to be standardised at £250 (£500 if significant advice is required).  If incorporation is done through a cooperative business adviser, the cost will be £150.  This is a useful reform, even if IPSA registration will still remain more costly than Companies Act incorporation.

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