Section 56 - Becoming an industrial and provident society
263.This section makes provisions about the conversion of a CIC to an IPS. Companies can convert to an IPS under the Industrial and Provident Societies Act 1965, but under subsection (1) CICs are to be prohibited from doing this until such time as regulations remove the prohibition. If the prohibition is removed, regulations may also amend section 53 of the Industrial and Provident Societies Act 1965 to ensure that conversion takes place in a particular manner (subsection (2)).
264.The section prohibits conversion because IPSs do not currently have an asset lock, so that the ability to convert to an IPS would allow CICs to circumvent the asset lock (see note on section 53 above). The section makes provision for regulations to remove the prohibition because the Co-operatives and Community Benefit Societies Act 2003 includes a power for the Treasury to introduce an asset lock for community benefit societies, which are a sub-set of the IPS corporate form (see section 1(1) and (2) of the Industrial and Provident Societies Act 1965). It is intended that regulations under subsection (1) will only be made in the event that the Treasury enacts secondary legislation to introduce an asset lock for community benefit societies. If such regulations are made, they will only allow CICs to convert to community benefit societies that have such a lock, and not to a community benefit society without an asset lock, or to any other type of IPS. It is anticipated that in this event, regulations would need to be made under subsection (2) to enable a seamless transition from CIC to IPS status, ensuring that the organisation’s assets remain protected from distribution at all times.
