Lessons to be learned from Hastings

There is some very painful news from Hastings, where the community benefit society running Hastings Pier was forced some months ago to go into Administration.  Funds raised through the high-profile community share issue were lost.

That’s bad enough, but what’s really upsetting is what has just happened now. The community dusted itself down, rallied round, used crowdfunding, and came up with a very strong rescue package for the pier.  New hope for a really good end result, you’d think.  Yet what has transpired is that the Administrator has disregarded the community’s rescue proposal and has made a deal to dispose of the business to an entirely commercial operator. Administrators can, of course, do this.

I would strongly encourage you to read the moving blog which Jess Steele from Hastings has just posted. What I think is particularly important is Jess’s comments about the need for a different process of Administration for community benefit societies.  As she says, “It is wrong to use a commercial administration process for a civic/community asset, applying private property sector ‘solutions’ to a civic problem that the community is capable and willing to solve for itself given half a chance.”

She goes on to propose a Community Administration Act, for use where a community asset is at stake.  Supportive backbench MPs are being sought to try to bring this forward.

Here’s her final thought: “The two Battles for Hastings Pier (2006-13 and 2017-18) stand in deadly stark contrast to each other. In one a very active community was eventually empowered by public funds to achieve the renovation of a derelict structure. In the other, the fully-restored asset was removed secretly from 5,000 shareholder-owners and then subjected to a commercial process that led, unfathomably, to where we are now.”

An unlevel playing field for co-operatives?

In recent years I’ve been involved in two local community projects and have in each case taken on the responsibility for arranging for them to be legally incorporated. The first we registered as a charitable company limited by guarantee, using the model articles of association which the Charity Commission makes freely available on their website and adapting them slightly to meet our own requirements. We sent off the forms to Companies House together with, I think, a £15 cheque, and all was done and dusted very quickly.

This time we chose to register under the Co-operatives and Community Benefit Societies Act as a community benefit society (‘bencom’) and the experience has been altogether different. It cost very much more, and we had to make do with model rules which ideally we’d have slightly altered. And the process of registration as a charity with HMRC (bencoms do not fall under the Charity Commission’s remit and have to be separately registered with HMRC) was exceptionally tedious, taking in the end over seven months.

I’ve drawn (although only indirectly) on these personal experiences for a piece in this week’s issue of Co-operative News, which has come out with the headline The co-operative disadvantage: why the movement needs a level playing field. My opening sentences were designed to be provocative:  who would voluntarily choose to register a new co-operative business or a new community organisation under the Co-operative and Community Benefit Societies Act when other legal models are arguably simpler, cheaper and more flexible?”

I expect my piece may be controversial with some, and I’m looking forward to seeing what letters come through in reply to CN.  You can always start a debate here too, by commenting on this blog

On the frustrations of incorporating a new coop

Four years or so back I undertook myself the legal incorporation of a new member-run community organisation (a local development trust), established under the Companies Act as a charitable company limited by guarantee.  The process was a doddle and pretty well cost-free.  We were able to use model rules provided by the Charity Commission, which we amended to meet our needs.

Now I am trying to incorporate a new charitable community benefit society (a local community land trust I’m involved in) under what was the old Industrial & Provident Societies Act and is now the Co-operative and Community Benefit Societies Act.  It is a very much complex, costly and lengthy process, despite the best efforts of various people to speed things along.  A doddle?  Absolutely not.

I’m afraid one reason for this is that Co-operatives UK obtains a useful income stream from incorporations of new cooperatives and community benefit societies undertaken using its model rules (as most are).  This is a practice it inherited from the old Industrial Common Ownership Movement, and ICOM’s reliance on income from incorporations was in my opinion highly regrettable.  I am sympathetic to Co-operatives UK’s funding difficulties, but ultimately this has to change.  We need equality in Britain between Companies Act and Co-operative and Community Benefit Societies Act incorporations.