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Dáil Éireann debate -
Thursday, 26 Jun 2014

Vol. 845 No. 3

Friendly Societies and Industrial and Provident Societies (Miscellaneous Provisions) Bill 2013 [Seanad]: Second Stage (Resumed)

Question again proposed: "That the Bill be now read a Second Time."

As the Deputy who was in possession is not present and as no other Members are offering, I am obliged to call the Minister of State to reply to the debate.

I thank Deputies for their contributions to the debate on the Bill. It is clear that many of them have a significant interest in the co-operative sector, in particular, which is testament to the important role co-operatives have played in Irish society during the past century. The Bill is designed not to solve all issues affecting the co-operative sector bur rather to address the particular problems which have been identified by the sector as the ones of most pressing concern. There is a need to update the legislation which governs co-operatives. As matters stand, the legislation does not define what is a co-operative and does not even include the term "co-operative". When the Companies Bill is enacted and the new arrangements for companies are up and running, the Government intends to turn its attention to the non-company forms such as co-operatives and friendly societies and put in place a new, modern structure for these entities.

I thank Deputies for their generally positive contributions and welcome for the general thrust of the Bill. While welcoming the Bill, Deputy Peadar Tóibín was somewhat critical of the Government's role in the development of co-operatives. I remind Deputies of the significant reduction in fees charged by the Registrar of Friendly Societies introduced during 2012, the UN-designated International Year of Co-operatives. These reductions - up to 70 % in some instances – mean that the issue of financial cost as an obstacle to establishing a business as a co-operative rather than as a company has been removed.

We viewed this as a first step in the process of assisting the development of the co-operative model.

Reference has been made to the active promotion of co-operatives. It is my Department's role to provide the legislative framework within which business entities can operate. The co-operative model is one of several legal options available to those considering establishing in business and the various models have distinct characteristics. In the case of co-operatives my Department's role is to facilitate their development, rather than actively encourage or promote them. We do not promote one co-operative over another. It is up to each individual operation to choose the model that best suits the nature of the business and the desired ethos of the entity. Other Departments, however, have more direct engagement with co-operatives and the co-operative movement and often have an interest in promoting the co-operative model in a particular area. For example, the Department of Agriculture, Food and the Marine deals with many of the larger agricultural and dairy co-operatives, while the Department of the Environment, Community and Local Government deals with housing and water schemes which make up one third of all co-operatives registered, as well as community-based co-operatives. The Department has been strongly supportive of the UN resolution on co-operatives in social development, indicating that it envisages a key role for the voluntary and co-operative sector in the delivery of social housing in the future.

Deputies Michael Moynihan, Peadar Tóibín and Finian McGrath all raised the issue of our intentions in respect of friendly societies. I reiterate our rationale for the changes proposed, principally the proposal to close the registration of new societies. The lack of demand for the friendly society model is evident. The nature of the activity carried out by these societies in recent years has, by and large, moved from the self-help and membership-based models to a more commercial field of mainstream insurance. The benevolent and charitable societies now fall under the regulatory wing of the Charities Act 2009 which was recently commenced, while social and recreational clubs in recent years are registering in greater numbers under the company model which allows them to avail of limited liability, an option which is not a part of the friendly society structure.

It is a fact that the current legislative regime does not provide for prudential supervision of friendly societies by any public authority. This is a source of concern in that there is a potential risk to the interests of certain members of the public where societies offer financial services. There seems to be some concern that we are treating friendly societies unfairly when they have been relatively stable versus some of the other financial institutions. The reality, however, is that we are simply recognising that where financial services are being offered to members of the public, there should be some prudential supervision of that offering. While we have been relatively lucky with our friendly societies in Ireland, some Deputies may recall that only a few years ago in Northern Ireland the Presbyterian Mutual Society collapsed at significant cost to its members and, eventually, the United Kingdom Government. No one can afford to be complacent about financial probity in these times.

The issue of a suitable prudential supervision regime has been considered and it is intended that it will be examined further with the Central Bank and the Department of Finance. The powers to exercise such supervision are not provided under either the friendly societies legislation or the Central Bank legislation; therefore, appropriate powers must be put in place - there are no existing powers which can simply be transferred. It is considered best to address this matter under the Central Bank Acts, in which the powers of financial prudential supervision already reside, rather than under the Friendly Societies Acts. In the interim, we have no wish to see new societies move into this unregulated area.

I thank Deputies for their time and attention and look forward to hearing their views in the future consideration of the Bill as it progresses through the House.

Question put and agreed to.
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