Commentary on Sections
Section 1: Corporate members of credit unions
Section 1 amends the 1985 Order to allow a credit union to admit any of the following as a member: a body corporate; a partner acting for a partnership; and an officer or member of the governing body acting for an unincorporated association. These are referred to as “corporate members” of the credit union.
Section 1(1) inserts, into the 1985 Order, definitions of “body corporate”, “corporate member” and “partnership”.
Section 1(2) substitutes a new Article 14(1) into the 1985 Order and details who may be a member of a credit union.
Section 1(3) inserts into the 1985 Order a new Article 14A, which permits credit unions to admit corporate members when provided for in their rules, and places limits on the number of, and proportion of shares allotted to, corporate members. The Department may alter these limits by order.
Section 2: Removal of restriction on non-qualifying members of a credit union
Section 2 amends Article 14 of the 1985 Order to remove the current statutory 10% limit on non-qualifying members. A non-qualifying member is a member of a credit union who ceases to have the required qualifications for membership.
Section 3: Interest-bearing shares
This section permits a credit union to offer interest-bearing shares in addition to shares entitling the holder to a dividend.
Section 3(2) inserts new Articles 23A and 23B into the 1985 Order. Article 23A sets out the conditions which a credit union must satisfy before issuing interest-bearing shares. One of the conditions is that the credit union must have reserves of a certain level (the “threshold amount”). Article 23A(4) enables the Department to amend by order the threshold amount. Article 23B imposes duties on a credit union where interest-bearing shares have been issued, in relation to annual reporting and conversion of interest-bearing shares to non-interest-bearing shares.
Section 4: Attachment of shares
Section 4 concerns the withdrawal of credit union shares where the member’s paid-up shareholding is, or following withdrawal would be, less than the member’s total liability to the credit union. Section 4 requires credit unions to include in the terms of a loan a statement of whether, for the duration of the loan, the borrower may make such a withdrawal. This replaces the current rule that such withdrawals are permitted only at the discretion of the board of directors of the credit union.
Section 4(1)(b) substitutes Article 23(4) of the 1985 Order. The new Article 23(4) forbids the withdrawal of shares where a credit union has made a loan to a member which is treated as a secured loan by virtue of Article 28A of the 1985 Order and the member’s shareholding is, or following withdrawal would be, less than their total liability.
Section 4(2) inserts into the 1985 Order a new Article 28(1E), which requires the terms of a loan made by a credit union to a member to state whether the borrower can withdraw shares, where the loan is not treated as a secured loan by virtue of Article 28A.
Section 5: Supply by credit union of copies of its rules
This section substitutes Article 12(1) of the 1985 Order to give a member of a credit union who asks for a copy of its rules the entitlement to their first copy free of charge. It allows a credit union to charge a fee of up to £5 for the provision of rules to non-members and to members who have already received a free copy. The Department may change the fee by regulations.
Section 6: Application of surplus funds towards social, cultural or charitable purposes
This section amends Article 36(5) of the 1985 Order. That Article currently imposes a requirement that a dividend of not less than 3% is paid on all paid-up shares before a credit union can apply any of its surplus funds for social, cultural or charitable purposes (up to a maximum of 10%). The section removes the minimum amount of the dividend, although it still requires that a dividend be paid to members before surplus funds are applied to those purposes.
Section 7: Application of directors disqualification provisions to credit unions
This section inserts a new Article 25B into the Company Directors Disqualification (Northern Ireland) Order 2002 to provide for that Order to apply to credit unions.
Section 8: Registration of societies as co-operative or community benefit societies etc
This section substitutes section 1 of, and inserts a new section 1A into, the 1969 Act. The effect is to introduce the new names, co-operative societies and community benefit societies. The substituted section 1 requires all new societies to be registered as co-operative or community benefit societies. New section 1A(1) deals with the treatment of societies already registered, or treated as registered, under the old provisions (a “pre-2016 Act society”); their registration status will not be affected. It also introduces a new definition of “registered society”, so that the term covers both new societies and pre-2016 Act societies. Subsection (2) changes the short titles by which the legislation governing such societies may be cited.
Section 9: Members under 18 years old
This section substitutes section 19 of the 1969 Act to allow persons under the age of 18 to become a member of a registered society, and reduces from 18 to 16 the minimum age at which persons can hold office in a registered society.
Section 10: Removal of limit on holding of non-withdrawable shares
Section 10 amends section 6(1) of the 1969 Act to amend the £20,000 limit on the holding of withdrawable shares and replacing the previous limit with a new maximum of £100,000 per shareholding member. There will be no limit on shareholdings of shares that are non-withdrawable.
Section 11: Year of account
Section 11 amends the provision relating to annual returns and calculation of societies’ year-end by inserting into the 1969 Act new sections 36A and 36B, which specify the year of account for societies but also allow societies to choose their own year-end date by notice to the appropriate authority. New section 36A applies to societies that were registered before section 11 comes into operation. New section 36B applies to societies registered thereafter.
Section 12: Publication of unaudited interim accounts
Section 12 inserts into the 1969 Act a new section 37A(6A) to allow a society to publish an unaudited interim revenue account or unaudited balance sheet, provided that it is published with the latest audited year end revenue account and balance sheet, and clearly marked as unaudited.
Section 13: Dissolution of a registered society by an instrument of dissolution
Section 13 amends section 64 of, and inserts a new section 66A into, the 1969 Act. The changes offer a dormant society an alternative method of dissolution by a special resolution of the society.
Section 14: Review of Section 1
Section 14 places a requirement on the Department to conduct a review of the operation of Section 1, as it refers to unincorporated associations. The Department shall also be required to report on the outcome of this review, and lay the report before the Assembly. The review must commence no later than 2 years after the Act receives Royal Assent.
Schedule 1: Minor and consequential amendments
Part 1: Amendments consequential on section 1
Part 1 of Schedule 1 makes a number of amendments which are consequential on section 1 of the Act (corporate members of credit unions).
Paragraph 2 inserts into the 1985 Order a new Article 3A, which sets out how a corporate member will satisfy the common bond requirements of a credit union.
Paragraph 3 inserts into the 1985 Order new Articles 13(1A) and (1B). Article 13 deals with the minimum number of members of a credit union. New Articles 13(1A) and (1B) make provision about the membership of individuals who are members of a credit union in their capacity as a member of a partnership or unincorporated association. In these circumstances, for the purposes of Article 13, the partnership or unincorporated association will be treated as the member and this will not affect the treatment of the individual as a member in respect of any shares held by the individual in his or her personal capacity.
Paragraph 4 inserts into the 1985 Order a new Article 14(9A). This enables the voting rights of a partnership or unincorporated association to be exercised by the corporate member and ensures that an individual retains his or her own vote in respect of any shares held in a personal capacity.
Paragraph 5 inserts into the 1985 Order a new Article 16(3) which provides that the remedies available to a credit union in respect of the debts of individuals who are corporate members are subject to the rules on transfer of shares and loans.
Paragraphs 6 and 7 insert new Articles 17(7) and 18(2A) into the 1985 Order. A nomination to property in a credit union made by an individual who is a corporate member is valid when it is made to another partner (in the case of a partnership) or when the nominee is an officer or member of the governing body of the unincorporated association (in the case of an unincorporated association). Where the nominee holds shares both as a corporate member and in a personal capacity, those shareholdings are to be kept separate for the purposes of the rule in Article 18 about maximum shareholdings.
Paragraph 8 substitutes Article 23(2) and inserts, into the 1985 Order, two new Articles 23(2A) and 23(2B). The substituted Article 23(2) provides for the transfer of certain corporate shares. Article 23(2A) enables shares to be transferred by individuals who are corporate members in accordance with the rules of the credit union. The transferee must be another partner (in the case of partnerships) or an officer or member of the governing body (in the case of unincorporated associations). Article 23(2B) provides that all rights and responsibilities of, or connected with, those shares transfer to the transferee.
Paragraph 9 inserts into the 1985 Order new Articles 28(1A), (1B), (1C) and (1D). Article 28(1A) provides that a credit union may make a loan to a corporate member only if the credit union’s rules so provide and subject to a limit on loans made to corporate members. Paragraph (1B) enables the Department to amend this limit by order. Paragraph (1C) allows for the transfer of loans made to individuals who are corporate members, if the credit union rules so provide and paragraph (1D) relates to the transfer of all rights and liabilities in relation to those transferred loans.
Paragraph 10 inserts into the 1985 Order a new Article 72(1A). Article 72 deals with decisions on disputes and new paragraph (1A) provides that any person claiming through a member of the credit union or any person aggrieved will include any partner in a partnership or any member of an unincorporated association where the individual is or has been a corporate member of the credit union.
Paragraph 11 amends Schedule 1 of the 1985 Order (matters to be provided for in rules of credit unions) so that credit union rules include certain matters pertaining to corporate membership.
Part 2 Amendments consequential on Section 8
Part 2 makes consequential amendments that are required for the change of registration of new industrial and provident societies as co-operative or community benefit societies (section 8). It amends references to industrial and provident societies in a number of Acts and Orders and also makes general modifications.
Part 3 Minor and consequential amendments: general
Part 3 makes minor and consequential amendments to the 1985 Order and the 1969 Act.
Part 4 removal of obsolete material
Part 4 removes obsolete material from the 1969 Act.
Schedule 2: Transitional provision
Schedule 2 makes transitional provision in respect of section 4 (attachment of shares), section 8 (pending applications for registration of a society and appeals against decision not to register) and section 9 (members under 18).