I move: "That the Bill be now read a Second Time."
The activities of friendly societies are governed by the Friendly Societies Acts, 1896 to 1953. The Registry of Friendly Societies Act, 1936, vests in the Minister among other matters power to appoint the registrar of friendly societies. This Act also lays down the qualification necessary for the position of Registrar which is that he must be a barrister of not less than ten years' standing.
The purposes of the Bill now before the House are first, having regard to the change in the value of money, to up-date the financial limitations imposed by the Acts; secondly, to improve the controls on the operation of societies; and thirdly, to replace the existing requirement that the registrar should be a barrister with a provision enabling the Minister for Industry and Commerce to prescribe the qualifications required for the appointment. I propose to deal with these matters separately, starting with the measures affecting the activities and responsibilities of friendly societies, and their branches.
Societies registered under the Friendly Societies Acts may be divided into three main groups, which are one, friendly societies and branches, two, benevolent societies and three, specially authorised societies.
The kind of activities carried out by these societies is not often understood, or indeed appreciated, in terms of their social overtones. I will, therefore, provide a very brief outline of their functions.
Before doing so, however, I should like to draw a clear distinction as between these societies and societies which are known as industrial and provident societies. The latter are generally, though not always, co-operative enterprises formed under the industrial and provident societies code. Agricultural co-operatives, for example, and indeed credit unions, are industrial and provident societies. These bodies have legal personality unlike societies registered under the Friendly Societies Acts. Though, historically, co-operatives were rooted in legal provisions enacted for what were called friendly societies, a distinct division in law has evolved as between co-operatives and friendly societies, despite the fact that friendly societies often embody the social motivation that generally characterises co-operatives.
I have mentioned the three main groups of societies which are registered under the friendly societies legislation. Friendly societies themselves are generally for the relief of members in sickness or in old age and for payment of sums to meet the funeral expenses of members and their wives and children. Benevolent societies, too, provide benefits but they do so in respect of persons other than members. Specially authorised societies are a different kind of operation but they, too, have a pronounced social awareness in their objects. The biggest grouping within this class is that known as the specially authorised loan societies which were formed for the purpose of creating funds by monthly or other subscription to be lent out to or invested for the members or for their benefit. Examples of other kinds of specially authorised societies are those which have been registered for the promotion of literature, science and the fine art, and for the promotion of education.
Although there is not what one would call a national awareness of the existence of these societies, the following details in relation to their operations may be informative. As at 31st December, 1974, which is the last year for which completed annual returns are available, there was a total of 177 of these societies on the register maintained by the Registrar of Friendly Societies. Total membership for the same period exceeded 150,000 persons and the total benefits paid out in respect of the year 1974, whether as sickness, mortality of other benefits, came to more than £600,000. These figures will, I hope, act as indicators of the scale and usefulness of the societies we are dealing with under this Bill.
The measures proposed in the Bill deal with two aspects of their operations for most societies and imposes a new obligation, under section 4 of the Bill, on the conduct of their business by specially authorised loan societies. I will now proceed to enunciate the principles behind each section of the Bill.
All of these societies and their branches are permitted, under section 46 of the Principal Act of 1896, to accept deposits from, and to make loans to, members, subject to certain restrictions. Section 2 of the Bill now before the House is intended to allow the Minister to alter these restrictions, by regulation.
The restrictions on the operation of a loan fund by a registered society are very limited. Some of them take the form of financial limits, while others are more of a procedural nature. All of them, however, were fixed on the making of the Principal Act in 1896, and they have not been changed since, mainly because until recently there was no evidence that changes were necessary.
In recent times, however, it has been represented to the Minister that those restrictions which consist of financial limits, represent an unrealistic constraint on the operations of certain societies. The money limits concerned are a maximum investment of £200 which a member may hold in a loan fund of a society, while, as regards its lending operations, a society may not make any loan which together with any money owing by a member to the society exceeds £50. Having regard to the decline in money values since 1896, when these limits were fixed, they now bear no relationship to their original value and there is a justifiable case for their revision upwards.
It is proposed, therefore, to increase the limits to more realistic levels and section 2 of the Bill now before the House will enable this to be done by regulation. Rather than prescribe any specific new limits in the Bill, the value of which could again be undermined long before another legislative change is effected, the medium of regulation has been chosen to achieve this end, with a view to ensuring that any new limits now fixed can be reviewed at more regular intervals, and if appropriate, adjusted more frequently, in the future.
There are two other restrictions which apply to the operation of a loan fund by societies. These are, first, that a loan shall not at any time be made out of money contributed for any other purpose of the society and, second, that a society shall not hold at any one time on deposit from its members any money beyond the amount fixed by the rules and the amounts so fixed shall not exceed two-thirds of the total sums owing to the society by the members who have borrowed from the loan fund.
When it is borne in mind that the loan funds operated by societies are constituted, in part, by the deposits of members, I think the House will agree that these restrictions alone, even when taken with the financial limits I have already mentioned, are very limited. They may well have reflected the standard safeguards for depositors of their day but they fall far short of providing the kind of protection which depositors have come to expect of their investments. It is proposed, therefore, to rectify this situation and to take this opportunity to tighten up the restrictions which operate in favour of depositors in societies registered under the friendly societies legislation. Section 2 of the Bill will also empower the Minister to act in this sphere.
I might add that initially, the intention is to introduce regulations under section 2 of the Bill in respect of specially authorised loan societies only, because unlike other classes of friendly societies which operate a loan fund as a secondary activity only, specially authorised loan societies are established expressly for the purpose of creating funds by monthly or other subscriptions to be lent to or invested for the members. In other words, their sole business is borrowing and lending money.
Only 15 of these societies now exist. This is because, by virtue of the special authority dated 15th August, 1917, the only specially authorised loan societies which may now be registered are societies formed to grant loans for the purpose of agriculture, horticulture or arboriculture. Notwithstanding their small number, however, the fact that the business of these specially authorised loan societies is distinguished from the business of other friendly societies, by their exclusive concentration on a loan fund activity, emphasises the desirability that their operations should be regulated.
I should like to mention here, of course, that the measures before the House have not been motivated by any suggestion of abuse or mismanagement by societies operating a loan fund. On the contrary, I should like the House to be aware that I regard societies such as specially authorised loan societies as performing a useful social function in the credit field. Very often, they fill that lacuna that sometimes exists for certain members of our community as regards credit availability.
There will always be those members of the community who, for one reason or another, will not seek credit from, say, the conventional banking sector and this is where bodies such as specially authorised loan societies play their role. I think that their growth in scale over the years since 1917, when authority for any new registrations was abolished, can reasonably be taken as a pointer to the continued use of, and need for, this kind of society. This is particularly true in the Dublin area where the majority of specially authorised loan societies are concentrated.
Section 3 of the Bill embodies a new control in relation to the activities of friendly societies and their branches. It relates specifically to the maintaining and auditing of accounts by these societies and their branches. As the law stands at present, accounts of friendly societies can be audited by any two persons appointed by the societies, who need have no accountancy qualifications or background. In addition, existing legal requirements are silent on the form of accounts for friendly societies and their branches and it is very desirable that these accounts should conform to recognised standards.
Under section 3 of the Bill, therefore, it is proposed to take power to provide by regulation for the form of accounts and records to be kept by friendly societies and their branches, for matters relating to the audit of their accounts including the qualifications necessary for persons carrying out such auditing, and for the laying of accounts before the annual general meetings of societies by their committees of management.
I should at this point look forward to section 8 of the Bill. Sections 2 and 3 about which I have been speaking would give the Minister power to alter certain very important requirements by regulations, but the principle of Oireachtas control is fully preserved by providing, in section 8, that no regulation shall be made until a resolution approving of it shall have been passed by each House. I think these arrangements avoid on the one hand the excessive rigidity which would result from embodying provisions in legislation, and on the other hand the danger that they might be given the force of law without full and democratic examination and debate. Indeed I regard the bringing of such regulatory powers for approval before the House as of considerable importance.
I feel that it is only right that members of a specially authorised loan society should have a positive say in the running of the society and section 4 of the Bill has been drafted to meet this objective.
Before going on to deal with section 5 of the Bill which concerns the separate matter of the appointment of the Registrar of Friendly Societies, I should like to refer briefly to sections 6 and 7. Under section 77 of the Principal Act, the circumstances in which the Registrar of Friendly Societies may cancel the registration of a society and its branches are stipulated, while section 84 of the same Act relates to offences under the Act. It would be anomalous if, firstly, the circumstances under which the registrar may cancel the registration of a society and its branches and secondly the committing of an offence by a society or branch or an officer or member thereof did not include non-compliance with any regulations made under this Bill. Accordingly, sections 6 and 7 of the Bill will remove the danger of such anomalies by making the necessary adjustments to sections 77 and 84 of the Principal Act.
Section 5 of the Bill deals with the appointment of the Registrar of Friendly Societies. This section is relevant not just to friendly societies but to all other forms of societies, for example, industrial and provident societies and building societies that the registrar deals with. At present, the power to appoint the Registrar of Friendly Societies is vested in the Minister by section 1 (3) of the 1896 Act as amended by section 2 (2) (b) of the 1936 Act, while section 4 (2) of the 1936 Act contains the present stipulation that the registrar must be a barrister of not less than ten years' standing. I should emphasise, of course, that notwithstanding the Minister's power to appoint the registrar, the powers and functions of the registrar himself are statutorily conferred on him and are not at all subject to the Minister's influence. Generally, however, these powers and functions are largely of a mechanical and recording nature.
For example, the responsibilities of the registrar have mainly consisted of matters such as registration of rules, amendments to rules, resolutions for amalgamations and transfers of engagements, resolutions for conversion of societies into companies and vice versa and the acceptance of annual returns and other documents that must be filled. The registrar has also been involved in the settlement of a limited category of disputes involving societies and members and has in certain restricted circumstances, power to call special meetings of societies or to appoint inspectors to investigate their affairs.
The registrar is responsible for ensuring that annual returns of socities are made and are available to the public who may wish to inspect them. It has been found adequate, in the past, to fill this position on a part-time basis only.
Recent developments, however, which are altering the fundamental nature of the registrar's role, will considerably strain the continuation of this working arrangement, if not, indeed, make it impossible to operate in the future. The best example I can give of the changing nature of the registrar's role and his increased responsibilities, is the Building Societies Bill which is now before the House. Members will be aware that this Bill will endow the registrar with extensive powers to supervise the building society sector. Indeed, in keeping with the general drift towards arming the registrar with active supervisory and investigatory muscle to ensure that both the rights of members and the public interest are continuously respected by various societies, the Department are considering the introduction of measures to empower the registrar to supervise actively, as well, the affairs of societies other than build ing societies.
There is little doubt but that the registrar should be so equipped in modern times. Societies in many areas have outgrown the limited dimensions that characterised them in the past. For example, some industrial and provident societies, or co-operative societies as we know them best, would compare very favourably, in terms of, say, turnover with some of our largest companies. Credit unions, too, are growing fast, in terms of the shareholdings and deposits of members. There is, therefore, an indisputable need for an active but independent office of registrar, firstly, to ensure that all societies conduct their business in a proper fashion, secondly, to better protect the rights of members who may well be interested in the affairs of their society but who find their interest frustrated, and thirdly, to exercise greatly strengthened powers, with improved rights to oversee the affairs of societies.
The changing nature of the registrar's work, as manifested at present in the Building Societies Bill, may well lead to the need for qualifications other than legal expertise for the post. For example, the supervisory function envisaged for the registrar under the Building Societies Bill could conceivably call for a knowledge of accountancy and financial matters which could not normally be expected of a barrister. In other words, flexibility as regards the qualifications of the registrar is imperative in circumstances where the nature and demands of the position are undergoing substantial change.
Section 5 of the Bill is, therefore, drafted with a view to providing the Minister with the desired flexibility in determining the qualifications for the position of registrar to meet the evolving responsibilities of the position. It will also enable him, with the consent of the Minister for the Public Service, to pitch the remuneration for the position at a level which, if a full time official is eventually required, would attract a person of the requisite standing and experience.
In summary, the purposes of the Bill are, firstly, having regard to the change in the value of money, to update the financial limitations imposed by the friendly societies Acts on the operation of a loan fund by societies, secondly, to improve the controls on the operation of societies, and, thirdly, to enable the Minister to determine the qualifications necessary for the position of Registrar of Friendly Societies so that, having regard to the evolving nature of the position, he will have the desired flexibility to appoint a person with the kind of qualifications that events will show are most suited to the position.
I recommend this Bill to the House.