Joint Committee on Enterprise, Trade and Employment díospóireacht -
Wednesday, 15 Feb 2023

General Scheme of the Cooperative Societies Bill 2022: Discussion

Acting Chairman (Deputy Richard Bruton)

I welcome to our guests. Unfortunately, a number of Deputies could not make it today, including our Chairman, Deputy Maurice Quinlivan, and Deputies Matt Shanahan and David Stanton. Their apologies are noted.

There are some basic requirements in relation to Covid-19. People are asked to take personal responsibility and to protect themselves and others. That is taken as read. Members are required to participate here in person or remotely. We have some members participating remotely from their offices within the confines of Leinster House.

Today we are considering the pre-legislative scrutiny of the cooperative societies Bill 2022. It replaces the existing Industrial and Provident Societies Acts 1893 to 2021, so this has a long history. I am delighted to welcome from Co-operative Housing Ireland, Mr. Pearse O'Shiel, chairman, and Mr. Pat Moyne, director of corporate services; from the Irish Co-operative Organisation Society, Mr. T. J. Flanagan, CEO, and Mr. James Doyle, legal and governance executive; and from the Centre for Co-operative Studies at University College Cork, Dr. Olive McCarthy, director, and Dr. Bridget Carroll, researcher.

There is a requirement in relation to parliamentary privilege which has to be stated. The evidence of witnesses physically present or who give evidence from within the parliamentary precincts is protected, pursuant to the Constitution and statute, by absolute privilege. Witnesses are again reminded of the long-standing parliamentary practice to the effect that they should not criticise or make charges against any person or entity by name or in such a way as to make him or her identifiable, or otherwise engage in speech that might be regarded as damaging to the good name of the person or entity. Therefore, if their statements are potentially defamatory with regard to an identifiable person or entity, they will be directed to discontinue their remarks. It is imperative that they comply with any such direction.

I invite Mr. O'Shiel to make his opening statement.

Mr. Pearse O'Shiel

Good morning Chairman and committee members.

The cooperative societies Bill is long-awaited and historic legislation which will not only modernise and consolidate existing co-operative law, but which seeks to enable the development of a new generation of co-operatives meeting the challenges of a modern Ireland. Co-operative Housing Ireland is pleased to have the opportunity to speak about this Bill and its potential impact. Long before the foundation of the State, co-operatives served as a powerful tool to enable our communities to take control of their own economic, social and cultural development through co-operation, self-help and social solidarity. It may be of interest to the committee to know that the history of co-operatives in Ireland reaches back to 1831, with the formation of the Ralahine co-operative in County Clare – one of the first, if not the first, co-operatives in the world.

The model has been most prominent in farming and agriculture, community finance and housing, and has seen widespread use by communities investing in their own rural and community development. This year marks Co-operative Housing Ireland’s 50th anniversary. We are proud to have supported small housing co-operatives throughout Ireland to deliver 3,000 owner-occupier homes. In the late 1980s, we introduced the co-operative approach to social-rental housing, which has supported the delivery of a further 4,500 homes. It cannot be understated, however, that the latent potential of the model has been dampened considerably by an increasingly unfavourable environment in which to establish and sustain co-operatives in Ireland. Remarkably, the size of the co-operative sector has remained stable over the past 50 years despite the barriers that exist. However, it has not grown relative to the growth of other forms of enterprises.

It is reasonable to assert that the decline in the co-operative movement’s role within the economic, social and cultural lives of our communities has been as a result of the increasingly anachronistic nature of the Industrial and Provident Societies Acts, when compared to the Companies Acts, which have been modernised and maintained as fit-for-purpose.

This proposed legislation is commendable, and we thank the Department of Enterprise, Trade and Employment for engaging with the co-operative movement. However, we wish to highlight some aspects for the benefit of the committee. The proposed legislation places an appropriate focus on preserving the internationally recognised principles and identity of co-operatives. This is crucial to ensuring that the co-operative model's unique, principle-based approach is not lost during this modernisation of corporate governance to align with best practice. We welcome that the Department of Enterprise, Trade and Employment has sought to reduce the many administrative burdens that co-operatives must contend with that are not faced by companies and other bodies corporate.

It is proposed that the minimum number of members be reduced and that audit exemptions be introduced on an equivalent basis alongside a host of other smaller but welcome measures. This will be of considerable benefit to our member co-operatives.

We welcome that the Department of Enterprise, Trade and Employment has also sought to safeguard the essential democratic nature of co-operatives through the requirement for a minimum of three directors, the introduction of a legal reserve for all co-operatives, and the requirement for co-operatives to respect the principle of one member, one vote. Finally, the removal of the antiquated and burdensome restrictions on the ability of co-operatives to raise funds from both their members and the wider community represents an exciting opportunity for co-operatives in Ireland to thrive in more capital-intensive areas of development, including housing.

We recommend that the committee gives further consideration to some aspects of the legislation with which we have some concern. Community, social and not-for-profit co-operatives, along with their support organisations, have strongly advocated for the inclusion of optional provisions for a statutory co-operative asset lock. This would allow communities to utilise the co-operative model more readily in the area of rural and community development, and to draw down national and European funding targeted at growing the social and solidarity economy. A co-operative asset lock would serve as a safeguard for stakeholders, ensuring that assets acquired through the co-operative remain within the community, and that they cannot be sold for individual gain.

Although the proposed legislation places co-operative identity at its core, many of these provisions could be merely attested to nominally or adopted superficially by some co-operatives. We recommend that the committee seeks submissions from stakeholders, specifically on what other legislative mechanisms could ensure that all co-operatives uphold minimum standards regarding their democratic and co-operative character.

We have many concerns on technical matters that we have included in our written submission to the pre-legislative scrutiny. The proposed legislation is long overdue, and once passed, it has the potential to unleash the full potential of the co-operative model.

The proposed legislation is long overdue and, once passed, will have the potential to unleash the full potential of the co-operative model. We look forward to its swift passage and hope future legislation will further level the playing field for those seeking co-operative solutions to our collective challenges.

Acting Chairman (Deputy Richard Bruton)

I thank Mr. O'Shiel. I call Mr. Flanagan.

Mr. T.J. Flanagan

I thank the committee for the invitation and the opportunity to participate in the pre-legislative scrutiny of the general scheme of the Bill.

The Irish Co-operative Organisation Society, ICOS, serves and promotes co-operative businesses and enterprises across multiple sections of the Irish economy, making it the leading organisation in Ireland for registering new co-operatives and reliable, experienced advisers on co-operative rules and governance. Our core business is to provide leadership to the co-operative movement. We use our collective voice to put the needs of the movement and member co-operatives to the forefront of what we do. We draw upon the pioneering and innovative spirit of our founding members to help strengthen our co-operatives operating in today's ever-changing and competitive world.

Starting from the agricultural co-operative path set by our founding president, Sir Horace Plunkett, in 1894, ICOS today has evolved to serve the co-operative sector in seven core categories, namely: multipurpose dairy co-operatives, including large organisations like Lee Strand, Drombane, Mullinahone, Dairygold, Lakelands and, indeed, Ornua; livestock sector co-operatives, which are mostly livestock marts; store, trade and wholesale co-operatives; service-related co-operatives; community-oriented, culture and leisure co-operatives; food, fishing, forestry and beverage co-operatives; and advisory and education-related co-operatives.

I want to impress upon members the degree of experience and expertise that ICOS has developed over almost 130 years. The vast majority of the approximately 1,000 co-operatives registered under the Acts have ICOS rule books. We have the marks on our backs from working with communities and groups to form co-operatives, amend rules, merge and consolidate co-operatives, and sometimes even wind them up. We believe we are unique in this respect. Our experience is hard earned and our views need to be considered.

Let me give an overview. The co-operatives in the ICOS affiliate network represent and serve the interests of 175,000 individual members and feature a workforce of more than 11,000. The co-operative sector comprises a range of societies, from the large business co-operatives operating in the agrifood space to the smaller community-service-focused co-operatives. All are vital to their members and play significant social and economic roles in their stakeholder environments.

The large co-operative societies are mainly positioned in the dairy industry and now produce, process and market produce on a global level. Four of these generate turnovers in the multibillion-euro territory, with three others reporting turnovers of €500 million to €1 billion. There are several dozen societies generating a turnover of at least €10 million, and these co-operatives serve their members and local economies exceptionally well. There are several hundred small societies that are just as important as the larger societies to their members and the local communities they serve. These are typically community based and provide central services to their local communities.

With regard to the economic contribution, our network of co-operatives generate an estimated total of €9.7 billion in annual turnover. A significant proportion of this is circulated in the Irish economy through employee wages, payments to suppliers such as farmers and other small rural businesses, and payments or dividends paid to the 175,000 co-operative members.

In addition to delivering economic and social benefits, co-operatives place great emphasis on enhancing the skills of co-operative staff and management. They do this via the ICOS Skillnet training programmes. It allows co-operatives of all sizes to avail of a wide variety of training resources to develop the skills of personnel. Furthermore, this demonstrates the genuine application of the International Co-operative Alliance co-operative principle of learning, education and training.

I will now comment on the general scheme. We note that, in recent months, the Department of Enterprise, Trade and Employment published a general scheme of a Bill to modernise and consolidate the statutory framework governing co-operative societies in Ireland. We commend this development given the somewhat archaic and piecemeal nature of the existing industrial and provident societies legislation. ICOS has commenced – but, to be fair, has not entirely completed – its analysis of the scheme document. On the committee's request, we submitted our initial comments on the scheme for its consideration by letter dated 13 January. We continue to review the scheme and consult our members on its implications, and we look forward to communicating with lawmakers and policymakers on the development of this important legislative initiative.

The following are some of our initial observations. The first relates to Companies Acts concepts and the cross-application of provisions. The scheme cross-applies several procedures – for example, on liquidation and audit exemption – from the Companies Acts, with necessary modifications. We believe strongly that co-operatives and their members deserve specific and accessible legislation, in a dedicated Act. These procedures should be installed with modification in the Bill.

In addition, the scheme removes several co-operative concepts that members are very familiar with, such as that of a special general meeting, with new terms synonymous with companies, such as the term "extraordinary general meeting". Co-operative members are used to terminology around special general meetings. Member familiarity and co-operative culture should be enhanced, not undermined, especially where the gains of this proposed homogenisation are not apparent. ICOS calls for the retention of these terms as per the current law and practice.

On the amendment of rules of society by special resolution, the scheme proposes that, for a co-operative to amend or alter its rules, the support of 75% of members present, entitled and voting would be required. Currently co-operative societies determine their rule amendment thresholds in their rules, not in the law. ICOS's experience is that the widely practised two-thirds threshold strikes the correct balance between sufficiency of mandate and realising effective reform. In Appendix A to our written statement, we have detailed cases where this balance has proven itself in the context of actual co-operative member issues that have been proposed for adoption in general meetings. ICOS calls for the retention of co-operative autonomy to determine the threshold or alternatively to insert the two-thirds threshold in statute, as opposed to the proposed 75%.

With regard to legal reserve, the scheme proposes compulsory reservation of funds of the society. The purpose, necessity and scope for confusion of this measure are of serious concern. We wonder what the basis is for such a high level of financial regulation when it does not apply to companies doing similar business. Due regard has not been afforded to the prevailing and successful means by which members determine that funds are to be reserved. These are detailed in Appendix B of our document. The actual limitations to be imposed on funds that would be reserved has not been addressed in the scheme and this gives rise to grave concerns that co-operative autonomy could be fettered.

Furthermore, the scheme requirement that a society would determine the "adequacy" of the reserves is open to interpretation. It would generate confusion in respect of compliance and could discourage producers or service users from choosing the co-operative model. ICOS notes the shift to a compulsory reserve from an optional mechanism in the 2022 public consultation.

I shall now refer to approval thresholds for amalgamations and transfers of engagement. The scheme proposes a worrying overhaul of the current procedures concerning how societies may consolidate. These actions would now require two special general meetings, with support levels of 75% and above 50%, respectively. The current law does not require a second meeting where 75% has been secured. For proven reasons concerning the securing of a sizeable mandate and moving with efficiency to deliver on the will of members, ICOS submits that the current standard works. The proposed change could have serious unintended consequences in the context of service users and their livelihoods.

The current legislation also allows for two or more co-operatives to consolidate where they each attain simple majority support, on the caveat that in those circumstances a second "confirmatory" meeting approves the proposal, at above 50%. This has secured continued service provision in rare cases. ICOS members have grave concerns about this development and call for the retention of the current mechanisms in the new framework.

The scheme proposes a reduction in the minimum number of natural persons who may form a co-operative from seven to three. Co-operatives are established and sustained where scale and service needs combine. The co-operative principles are supportive of the scale theme, as are the challenges of economic and service delivery.

ICOS acknowledges there are several sectoral exceptions that might justify a lower threshold but respectfully submits that the seven-member minimum has served as a reasonable starting point for collective endeavour and should prevail in the statute. From our experience, and certainly to my knowledge, we have never failed to support the registration of a new society for lack of special members.

Audit exemption is the last point I will refer to. The scheme introduces audit exemption for small co-operatives. ICOS has long called for this initiative and we support this positive development. The cost of the financial audit can be burdensome in relative terms for small community focused co-operatives. However, the scheme proposal, in head 169, falls short of devising a solution that safeguards the unique member stakeholder imperatives in a co-operative. Prior ICOS submissions to public consultations demonstrate the member control proposals we have considered, designed and offered. We have grave concerns on the unintended consequences of introducing what is otherwise a very positive concept for co-operative application. I will be happy to take the committee through our concerns in more detail in due course. Fundamentally, however, our concern is that the proposal does not provide for member approval of an application for audit exemption. Our preference is that audit exemption could be applied for if the members at the general meeting approved it. We also do not think societies should be able to continue forever without having an audit. There should be an audit perhaps at least once every five years.

I will answer questions on other points if the members wish to ask questions on them. I thank the Chair.

Acting Chairman (Deputy Richard Bruton)

I thank Mr. Flanagan very much indeed for that comprehensive brief. I call Dr. Carroll.

Dr. Bridget Carroll

By way of introduction, the Centre for Co-operative Studies is a university research centre based at UCC which promotes education, training, independent research and consultancy in all aspects of co-operative organisation, social enterprise and local development. Dr. McCarthy and I research and teach in the areas of co-operative organisation and business across a range of sectors, including agriculture and credit unions.

We thank the Chair and the committee for the invitation to discuss this general scheme. In this opening statement, we intend to comment specifically on the overall intent and thrust of the general scheme of the Bill, and then to focus on a number of key provisions.

We warmly welcome the publication of the general scheme of the Bill to make provision for the formation, operation, governance and regulation of co-operative societies. The distinctive nature of co-operatives vis-à-vis other business models requires distinctive legislation. The drafting of the general scheme of the Bill aligns with international trends on co-operative legislative reform which have seen many countries, such as Australia, Japan and the UK, drafting or enacting new co-operative legislation, or significantly updating existing co-operative legislation, that reasserts the distinctive nature of co-operatives as member-owned businesses. Enactment of legislation specific to co-operatives in Ireland will help to preserve the integrity of the co-operative form and make the model more attractive to individuals and groups by addressing deficiencies in the existing legislative framework and introducing a modern approach to corporate governance, financial reporting and compliance. It is also likely to make the co-operative model more visible and attractive to entities seeking a suitable legal structure within which to carry out their activities. This may include social enterprises, which currently lack any distinct legal form in Ireland. Co-operative legislation will support the socioeconomic value that co-operatives can deliver by giving greater legitimacy, legal certainty and visibility to the model.

The general scheme addresses International Labour Organization, ILO, recommendation 193 which recommends that "cooperatives should be treated...on terms no less favourable than those accorded to other forms of enterprise and social organization"; that "governments should provide a supportive policy and legal framework consistent with the nature and function of cooperatives and guided by the cooperative values and principles"; and "establish an institutional framework with the purpose of allowing for the registration of cooperatives in as rapid, simple, affordable and efficient a manner as possible".

We will now address a number of key provisions. Regarding heads 1 and 2, we welcome the use of the term "co-operative" in the title and content, vis-à-vis the Industrial and Provident Societies Acts, and the use of the internationally agreed definition of "co-operatives" as adopted by the ILO and the International Co-operative Alliance, ICA.

Under head 8, we welcome the proposal to reduce the current minimum number of seven persons to form a co-operative to three. There is some evidence that a requirement to have a minimum of seven members is high for those wishing to operate as a co-operative and it is likely to be higher than the average numbers involved in start-up companies and social enterprises. Consequences of the requirement to have seven members at the outset for such co-operatives may include the potential for co-operatives to choose other models of incorporation which may not align with the co-operative ethos or practice or the ideals of the owners, as well as the use of proxy members. The co-operatives unit of the ILO collates the minimum number of co-operative members required to register a co-operative across member states. Of these, the minimum number ranges from three to ten, with the following having a requirement of three members: the UK, Canada, Italy, Spain, Germany, Finland, Japan, Belgium, Czechia and Uruguay. Slovakia and Slovenia do not specify a minimum number. The general scheme, as currently drafted, sets the minimum number at three, but individual co-operatives we believe maintain the ability to set the minimum number at a higher level in their rules, if they so choose. That is our reading of this text.

In the context of head 9, we welcome the broadened provision for co-operative societies to "carry on any activity". Equally welcome, as called for in many submissions to the public consultation, is that this activity be "on the basis of the co-operative principles". These are based on the distinctive ethos and values of co-operatives and act as guidelines by which co-operatives put their values into practice. We welcome this.

Turning to heads 18 and 19, we welcome the stipulation that the name of a co-operative society shall include the term co-operative or co-op or comharchumann or comhar and that bodies or individuals not registered as co-operatives may not use these terms in their registered name or trading name. This should apply to all entities, including those registered before the commencement of the Bill.

Under head 50 then, we endorse the concept of the introduction of legal reserve provision and that the manner in which it is operated is determined in the rules of a society. Good practice also suggests that legislation should require the establishment of other reserves, including reserves for education and development purposes. The presence of reserves introduces considerations around the use of an asset lock. The purpose of this is to ensure that any retained surplus or residual value cannot be appropriated for private benefit of members, removing the scope for members to make speculative capital gains resulting from the dissolution, disposal or conversion of the society into a company. The asset lock requires any such assets to be used for purposes deemed appropriate by the co-operative, such as public or community benefit. This general scheme affords flexibility to co-operatives to decide how reserves are treated in the rules.

Regarding heads 96 and 97, we welcome the flexibility afforded to the holding of annual general meetings, AGMs, virtually or in person or both. This might help to reduce the costs of holding an AGM and increase attendance. The introduction of the ability to cast a vote before or during the AGM is also welcome, allowing for more inclusive voting. Both measures align with increasing the democratic accountability of the co-operative to its members.

Moving to head 111, we welcome a special resolution to wind up a co-operative society requiring a 75% majority vote at a first meeting and confirmation of the vote by a simple majority at a second meeting of the co-operative society. This allows for close and careful consideration of, and reflection on, such an important decision.

Turning quickly then to head 169, this meets with almost universal approval, notwithstanding ICOS having some concerns around it, as well as perhaps some other bodies. We welcome the provision for an audit exemption for smaller co-operatives. Again, this requirement can be a costly and administrative burden on small societies and can be a deterrent.

Regarding heads 14 and 244, a co-operative society must refer to the European Union’s nomenclature of economic activities, NACE, system for the classification of economic activity for the purposes of statistics on co-operatives. An issue of concern to us is the availability and standard of data on co-operatives for the purpose of research and analysis. We suggest consideration of a co-operative-specific system of classification by the registrar and reporting on a wider range of statistics, including, and not limited to, number of members, number of employees and total assets.

We conclude by commending the approach being taken in the general scheme of the Bill, that of a general law which is balanced in its approach and seeks to accommodate a wide range of type and size co-operatives. We acknowledge and commend the very considerable work expended on the general scheme and related consultations to date. We reflect that there have been calls over many years to update the legislation and getting it over the line now would be a very positive step and we urge legislators to do so. I thank the committee.

Acting Chairman (Deputy Richard Bruton)

I thank Dr. Carroll again for her presentation. I will open the meeting to members.

We have a few members online who are not members of the committee. The two speakers from Sinn Féin will have 14 minutes between them. Then the Fianna Fáil speakers will have 14 minutes between them. Senator Crowe, being the Fianna Fáil member, can decide how to divide the 14 minutes between three speakers.

Deputy Louise O'Reilly

I thank the witnesses for the very valuable information they have provided. I will apologise in advance because I must go to the Chamber to speak so I will not be able to stay for the entire session but I can look back on it. During pre-legislative scrutiny on the general scheme officials from the Department told us they were not considering the re-establishment of the co-operative development unit, CDU, in the Department of Enterprise, Trade and Employment. We were told there was not a particular need for the re-establishment of this unit. We were also told that between ten to 15 co-operatives are established in the State every year. I fundamentally disagree with the Department and I very much see the need for the CDU. Do our guests agree or disagree? Do they have a view on how the CDU performed previously? If it were to make a comeback could it come back better? Is there something that could be done? Overall what is their view of the CDU? I ask the witnesses to speak in any order they choose.

Dr. Olive McCarthy

I am happy to take this. The CDU we had in Ireland was founded in the 1990s or thereabouts, at a time of very high unemployment. It was designed to support, in particular, family businesses in transition. I am no expert on family business but we know we have many family businesses in Ireland. Approximately 64% of all of the businesses we have here are family businesses. One of the biggest issues that family businesses have is succession. In the 1990s the co-operative development unit was very much involved in trying to support family businesses that had issues with succession to convert to worker co-operatives. It was quite successful in this. Quite a large number of co-operatives were formed at the time. This was with the support and help of the co-operative development unit.

Our view is that legislation is critical to the development of the co-operative movement but it is only one part of the picture. Of course there will need to be other supports, including policy, for co-operatives to develop. With regard to what this should look like, there are different approaches in different countries. We have seen Glasgow City Council very much driving the co-operative development unit there. In other countries we have more co-operative-led approaches. For example in the UK there is a wide range of organisations but Co-operatives UK is driven by the co-operatives themselves. In the US the National Cooperative Business Association is driven by the co-operatives. In Canada there is almost a two-tier approach in terms of the co-operatives themselves and the State.

Over time there will be a need for more support. What we have seen over the years is that often when an organisation goes to a solicitor or an accountant the co-operative model is not seen as the first obvious choice. There will definitely be a need for much more education and training more generally on the co-operative approach. Perhaps there could be something like a co-operative development unit but there would need to be some consideration as to whether it should come from the sector itself or whether it should be a more State-driven initiative. We have representative bodies for co-operatives such as ICOS which are very strong this area. Perhaps it could be almost an expansion of the role of the representative bodies.

Mr. Pat Moyne

We do not have an opinion on the CDU.

Deputy Louise O'Reilly

That is fair enough.

Mr. T.J. Flanagan

In general terms we would welcome more involvement and support from the State. We are not entirely convinced that the CDU in itself would be the answer but we would certainly not turn down more involvement and more support from the State.

Deputy Louise O'Reilly

I want to ask Dr. Carroll and Dr. McCarthy about worker co-operatives as a distinct entity. I am a fan of worker co-operatives. They put the worker at the centre and sustainability is one of the core objectives. We should be doing more of it, if you ask me. The legislation does not recognise or protect worker co-operatives as a distinct legal entity. Do they believe this is a missed opportunity? Is there scope for worker co-operatives to thrive, even within the legislation, without a specific designation?

Dr. Olive McCarthy

My understanding of the Act and my interpretation of the general scheme is that it is intended to accommodate all types of co-operatives. It is not specific to any particular type. I see no reason, particularly if the minimum number of members is reduced to three, that it would not support the development of worker co-operatives.

Deputy Louise O'Reilly

I have a concern they would potentially get swamped if they do not have protection. They are a very particular form of enterprise and a very particular form of working. Does Dr. McCarthy think that by not recognising any particular type there is scope to recognise them all? How does she feel the general scheme of the legislation addresses this?

Dr. Olive McCarthy

Would it be a bit unusual to call out one particular type of co-operative as opposed to all of the other types that are there? We probably have five or six different types of co-operative and to call out one form over and above any other might be a bit unusual, I would think.

Deputy Louise O'Reilly

Even if it were your favourite? I am only joking.

I have one more question after which I will pass over to my colleague, Senator Gavan. We were told in our hearings that the principles have not been updated since the 1980s and that they cannot be amended to include a clause that will insist on co-operatives respecting and upholding workers' rights as a principle. I disagree with this because I believe there is a lot of scope for us in domestic legislation to do what we feel we need to do. I want to ask our guests whether they feel that an additional point should be added to the annex to include a provision for co-operatives respecting and upholding workers' rights as a principle.

Mr. T.J. Flanagan

In general terms the world is moving anyway towards corporate social responsibility and environmental, social and corporate governance. This is throwing a light on workers' rights anyway. I know the co-operatives in our network are having a very intensive debate about how we embrace the expectations of society, and workers' rights are paramount in this. I am not entirely sure whether it is needed in this legislation. I believe it will apply to every body corporate.

Deputy Louise O'Reilly

I dearly wish it did.

Mr. Pat Moyne

Like ICOS we would be happy that it would be across all forms of employment and not just co-operatives.

Deputy Louise O'Reilly

And so we all should be but we are dealing with co-operatives this morning.

Dr. Bridget Carroll

I was not aware of something proposed on workers' rights. I am inclined to concur that there is a societal move to pay great attention to this area with a lot of eyes on it. This may be as valuable as anything.

Deputy Louise O'Reilly

I thank the witnesses and I will hand over to my colleague.

Senator Paul Gavan

I thank all of the speakers for their presentations. They are all very welcome. I want to revisit the issue of worker co-operatives because the lack of progress on worker co-operatives in this State is in stark contrast to that in other states, such as France, Spain and Italy, where they do have specific legal definitions of worker co-operatives. I know our colleagues in UCC are familiar with research from De Barbieri, Corcoran and Wilson, and Nolan who outline how important a legal definition of a worker co-operative would be. I will direct this question to our colleagues from UCC in particular. Will they point to a country that has successfully developed a worker co-operative sector without having a legal definition of a worker co-operative?

Dr. Bridget Carroll

I cannot answer that definitively-----

Senator Paul Gavan

Sure.

Dr. Bridget Carroll

-----in terms of every country. The development of co-operatives is complex. We are speaking about all kinds of influences. We have countries with a long history and process of education and culture of co-operatives along with wider societal developments, such as industrialisation, policy developments and legislative developments, that will lead to the development of co-operatives in a particular sector in any given country. It is probably not surprising that we have had agricultural co-operatives develop in this country. Industrialisation occurred later in this country than elsewhere. Just having legislation may not be enough. When people are thinking about setting up co-operatives the first thing they jump to is not necessarily whether there is a legal definition.

Senator Paul Gavan

I hear Dr. Carroll and I want to develop the question a little further. To be honest, for me it is not a coincidence that those countries with a legal definition of a worker co-operative have thrived in terms of developing them whereas, frankly, we have not. Let me ask this. Have Dr. Carroll and Dr. McCarthy encountered in their research any evidence of key institutions not understanding what worker co-operatives are? I am thinking about banks or accountants who might be perplexed at their legal structure.

Dr. Bridget Carroll

Yes, certainly.

Anecdotally and through research done in the late 1990s and early 2000s that indicated that the ports of first call for people establishing businesses are solicitors and accountants who would not be familiar with co-operative forms, worker or otherwise. It was similar with banks to a certain extent, although that probably moved on. If you had a strong business case and a feasibility study and so on over time that probably changed somewhat. Certainly the ports of first call have been less familiar with the co-operative model for all types of co-operatives including worker co-operatives.

Senator Paul Gavan

What sort of difficulties did that lack of awareness of the legal entities pose?

Dr. Bridget Carroll

In the first instance I suppose just their knowledge, advice and pointing these groups and individuals in the direction of what kind of legal structure to adopt. If they are not very familiar with the IPS or with the co-operative structure the suspicion is that they may be inclined to say "Go a different direction, use the conventional means of the Companies Act or whatever". That is one way. Also, general advice and support might be lacking.

Senator Paul Gavan

The point I would make is surely a legal definition would help to solve that particular issue. I will extend that question. How familiar are any of the folks here in regard to the really successful developments in Scotland over the past number of years? How important have both the existence of their own development units and their own legal definition of an employee-owned enterprise been? They went on a big piece of work educating key supports structures such as solicitors and accountants in terms of what those legal entities mean. How important has that awareness been in regard to helping Scotland to succeed in developing worker co-operatives in particular?

Dr. Olive McCarthy

The report about the co-operative development unit, CDU, in Glasgow, the name of which I am not sure about, points to the fundamental role that was played by the CDU in that context. However, that city council appears to have designated the city as a co-operative city so it is very much a root and branch feeling. The bigger culture around co-operatives that Dr. Carroll referred to earlier certainly seems to have played an important role even though that report acknowledges that a large proportion of the co-operatives there are actually credit unions but there has been a good deal of recent development of new co-operatives in Glasgow which they are putting down to the existence of that co-operative development unit.

Senator Paul Gavan

As I am running short on time I will fire in one last question across all parties. Two witnesses have raised the issue of asset lock, which currently is not proposed in legislation. Sinn Féin supports the legislation but wants to see where it can be strengthened further. One aspect we believe is a legal definition of a worker co-operative but a second is that which the two parties have raised, the asset lock. Will they talk about why that is important? Will they have any particular objection to an asset lock being added to legislation?

Mr. Pat Moyne

From our perspective we look at it as being an optional facility within the rules that would be introduced to protect the co-operative from itself and to stop members' assets from being stripped as personal gains. In other words, you would retain the earnings within the co-operative for the objects of the co-operative rather than for personal gain. We see it as being an optional thing but it would be to protect the co-operative from itself.

Senator Paul Gavan

Is it important?

Mr. Pat Moyne

Obviously it would be optional. Do we think it would be important for some of our co-operatives? Yes, it would.

Senator Paul Gavan

I have not given an opportunity yet to others in regard to that question.

Mr. T.J. Flanagan

We certainly see no benefit in the context of the couple of hundred co-operatives in our network because to be fair our co-operatives are commercial entities that come together to achieve scale in order to do their business, whether they are farmers, service providers or otherwise. I do not think it would have any provision. It would be a drag on the sector. I do not believe it would be appropriate but that does not mean it is not suitable for other sectors.

Senator Paul Gavan

If the Chair does not mind I will ask for an answer from the Centre for Co-operative Studies before I finish.

Dr. Bridget Carroll

We welcome the legal reserve and the flexibility of co-operatives to decide how reserves are treated in the rules. That was our approach to it. While there are arguments about the asset lock, and the potential to be stripped and so forth, co-operatives are autonomous organisations so if we can give them the autonomy and flexibility to decide how reserves are used then that is a good way to go.

Senator Paul Gavan

I thank the Chair. Please do.

Mr. Pat Moyne

Just bear in mind that many co-operatives are not for profit as it were. It is important in a not-for-profit environment, as opposed to a profit environment, that the assets are protected.

Senator Paul Gavan

That is an important point, I thank Mr. Moyne for that.

Senator Ollie Crowe

With the agreement of the members I will let Deputy James O'Connor go first. He is a member of the committee also. We will have five minutes at the end and I will then go in the middle if that is agreeable.

Acting Chairman (Deputy Richard Bruton)

That is fine. We can let Senator Crowe in for another seven minutes after Senator Garvey so that he will not be time constrained.

Senator Ollie Crowe

I thank the Acting Chairman.

Deputy James O'Connor

I appreciate the insightful information. I have a couple of questions. From a practical point of view co-operatives come in all shapes and sizes. They are different in each region. In particular the farming and agriculture sector is an area I have an interest in. I live on a farm and many people with whom I engage on a daily basis from across our community are involved with co-operative movements. The proposed changes under consideration are naturally going to cause some interest. Naturally in an organisation that has a large group of people, the majority goes from a higher to a lower level where there might be a simple majority for processing decisions around amalgamations and mergers. There is a natural thinking. I am trying to tease this out to see what the attendees have to say on it. It may not necessarily be a good idea to have that simple majority for these decisions on potential amalgamations to be pushed through because naturally there may not be full attendance for voting. The voting delegates would have a vote in such a decision. In addition there is a school of thought that having two joint meetings at 50% is the way of addressing it. However, is the status quo something that seems appropriate to continue from the viewpoint of the ICOS? Perhaps also from the academic side. I would love to get an insight on that. It has been raised with me. I believe it is a fair ask and a fair request. Coming from the position that if you were dealing with a company that might have hundreds of millions worth of revenue - and there are co-operatives in Ireland that are at that scale, there are co-operatives dealing with more than €1 billion in revenue per annum now in Ireland particularly in the dairy industry - two meetings and a decision with 50-50 voting or a 50% plus one majority is a major undertaking. I am not trying to undermine the decision-makers and the stakeholders but want to get a flavour from what our participants at today’s meeting have to say because they are the experts on it. I will ask the ICOS its view on that, and from the academic side as well, I would appreciate some feedback on that.

Mr. T.J. Flanagan

Shortly over 100 years ago there were about 1,000 agricultural and dairy co-operatives in Ireland, that were buying milk. There are currently about 20. That is a process of ongoing consolidation over 100 years. Our co-operatives come together and merge. Principally they merge. That is a process that has to happen because it is about achieving scale. While we have large organisations in Ireland now, large dairy co-operatives, there will still be consolidation and mergers along the road. Some of those will get bigger and there will be fewer on the pitch. The current legal provision is that if you want to merge, which is a serious bit of business, you have a special general meeting at which members who are entitled to vote attend, and if you have a quorum, if you get 75% of those present and voting, the merger happens. If you fall short of the 75% but have a simple majority, that is something between 50-point-whatever and 75, you must come back again in a fortnight and get a simple majority again.

That is something that has existed for the 100 years we have been doing mergers. It is something people are comfortable with.

Deputy James O'Connor

Mr. Flanagan feels it works.

Mr. T.J. Flanagan

It works. Again, we have presided over those mergers for that 100-year period and have never had a complaint. Every ICOS co-op rule book has a provision for arbitration. If a member is unhappy with something they come to us for arbitration. To my knowledge - and I can pretty much stand over this - we have never had an arbitration request over somebody who felt the process was wrong. Members understand it is either 75% the first day or if you get a simple majority you come back a second day to get a simple majority again. These take place and are highly publicised. It is not as if there is a sneaky meeting in a hall some night and the business is done. What is being proposed is that even if you get 75% the first day you must come back for a second vote a fortnight later to get a simple majority. The fear of our members is you may not get the people out the second day. They are saying the status quo works, that is, get 75% the first day and you are through. There is absolutely no reason to change it, certainly for our members. In 100 years of running these consolidation meetings we have never had a single complaint from a member.

Deputy James O'Connor

I thank Mr. Flanagan.

Acting Chairman (Deputy Richard Bruton)

Dr. McCarthy wishes to come in.

Dr. Olive McCarthy

I am very influenced by a member of a co-operative who contacted me a number of years ago. His co-operative had decided to sell itself and shut down. This member was distraught when we spoke on the phone because he had not attended the AGM and did not know what was proposed. He only found out a few days later that the co-op was now effectively gone. He was extremely upset about it. The co-op was very important to his livelihood. He came to me to know whether he had any recourse. I sent him to ICOS and am sure he received plenty of support there but the sentiment in the Bill is to protect members and especially their livelihoods. From that point of view, this section of the Bill needs very careful consideration with a view to the sentiment or principle of protecting members. That is where we have fallen down in ensuring no members are left feeling disenfranchised. It is about ensuring there is a second opportunity for them to come back, have their views heard and make their votes count as well. That is essentially where we are coming from.

Deputy James O'Connor

There should perhaps be some consideration of the scale of enterprise. I am thinking of a small co-operative dealing in the hundreds of thousands or low millions of euro versus one that has grown successfully into a business generating multiple millions or even billions annually. There is a kind of thinking that there needs to be differentiating security depending on the scale if there are changes that might be detrimental to the process there at the moment. I will close with that and might come back later. I thank Senator Crowe for the time.

Senator Ollie Crowe

I will be brief. I have just two questions as I am conscious Deputy Cahill, as Chair of the agriculture committee, wants to come in.

A number of companies might find this model more suitable but will probably need to be informed and educated about the possibilities and advantages of the transition, when it comes about. What are our guests' views on how we should address this?

The general scheme proposes audit exemptions for smaller co-ops. Generally speaking, I have no issue with reducing the legislative burden for smaller co-operatives, or indeed companies. However, given the unique nature of co-ops, is there any risk removing the audit requirement may make members who are less involved in the finance side and the books of the co-op vulnerable to being exploited to those members who are more involved in that side?

I would like brief answers to those brief questions and then Deputy Cahill will come in. I thank the Acting Chair for his co-operation.

Mr. T.J. Flanagan

On managing the transition, one of the further points in our submission is this is a big job of work to be done. Once the committee members do their jobs and we get our new Act, which we will all be delighted to get, there will then be a process by which every existing industrial and provident society, IPS, will have to register as a co-operative society under the new Act. Each will need a new rule book that complies with the new Act and that will take a lot of meetings and work. That is a huge burden large societies can handle in their sleep but for small ones it will be very onerous. We have asked the Department, in considering the mechanics of how we do this, to bear in mind the burdensome nature of that transition process and what will be involved. It is a point well made.

On the audit exemption point, we have a concern around it that reflects what Dr. McCarthy said about the rights of members. We support audit exemption. Audits are expensive and getting more expensive. However, the auditor works for the members. The auditor is the friend of the members who, on their behalf, audits the books of the society. We want to ensure the rights of members are not diminished and so we would like it to be added to a provision for audit exemption that the members must approve that the society is deciding to dispense with an audit and perhaps that it would not do it forever, in that there should be an audit maybe every five years, or at some appropriate juncture.

Senator Ollie Crowe

Okay. I wish to hand over to Deputy Cahill.

Deputy Jackie Cahill

I thank the Acting Chair for the opportunity to speak. I have been very involved with ICOS for a long number of years. I was chairman of a local dairy co-op a number of years ago and we went through a very successful merger with a neighbouring co-op that has worked out very well. Accordingly, I understand the workings of ICOS very well and have had hands-on involvement with it over many years. It is absolutely vital and has contributed hugely to the development of the agrifood industry in Ireland. Our successful co-ops owe a lot to ICOS. Whether it is livestock marts, dairy co-operatives, etc., co-ops are an integral part of the agrifood industry.

I have a few points to raise and am conscious this is still pre-legislative scrutiny. I put on record I am still a member of a dairy co-op. The legislation will require the rule amendments to get a 75% majority to be passed. That is excessive. A majority of two thirds or 66% is more than adequate to get a rule change. It should even be down as a simple majority. That is democracy. A majority of 66% is more than fair and raising it to 75% is excessive. I hope that will be addressed when we have the opportunity to submit amendments to the Bill. Requiring 75% to allow a merger to go through has already been discussed. As I said, I presided over one of these a number of years ago. I agree with ICOS that the danger is with getting the turnout for the second meeting. If we have a case where there is a majority of 75% or 80% at a first meeting then shareholders will get complacent. Getting them to turn out at a meeting two weeks afterwards will be difficult. This has stood the test of time and worked very well in practice. Once 75% vote in favour that is an overwhelming majority of shareholders from two societies proposing to merge. What has worked should not be changed. We should keep the 75% at one meeting rule in place and if there is a majority of less than that then by all means have the second meeting. That has worked so well we should have an amendment to get the legislation to reflect that.

The audit exemption is welcome for smaller co-ops. There are rural water schemes and so on that have very little money going through their books and an exemption would be good for them.

An audit exemption is good but it would be necessary for the sake of transparency that there would be an insistence, over a period of years, that every co-operative would be obliged to have an audit. For transparency for all shareholders, that should be in the legislation. Therefore the exemption should be there. To have the financial burden for smaller co-operatives to have an audit every year is wrong. It makes it difficult for some of the smaller co-operatives that have a small turnover. To spare grief into the future maybe every co-operative would have to have an audit every five years. That would be satisfactory.

The legal reserve is a new issue coming in with this legislation. I do not understand the reason for it. It will impose a legal burden if it is going to be a statutory requirement. I would like that to be looked at again to examine whether it is necessary to have that legal reserve in place for co-operatives. In regard to the number required to form a co-operative, I would not get exercised about that. At the end of the day a co-operative is bringing together a number of people to benefit a local community. Three seems to be a small number. Three would be more suitable to a partnership or a company rather than a co-operative. I believe seven would be a more realistic figure for a co-operative. However, I would not put the same emphasis on this issue as I did on some of the other points I made. Hopefully we will have the opportunity as this legislation goes through the Houses for some of the suggestions we have made to become amendments in order to get the legislation as perfect as possible. It was remiss of me to say that this legislation is long overdue. I commend the Department on bringing it to the table. Hopefully we can get it enacted into legislation as quickly as possible.

I was not asking many questions. I was making comments rather than asking questions.

Acting Chairman (Deputy Richard Bruton)

I will bring in Dr. Carroll and Dr. McCarthy because their submission has taken slightly different views on some of those issues, such as the number of three as opposed to seven, which they considered to be good for start-ups. Not to put words in their mouths, they might like to respond to Deputy Cahill's comments.

Dr. Olive McCarthy

This issue has been debated for a number of years. We were here in 2019 discussing what the eventual number should be. At that time we were between three and seven and we ended up at five as a compromise at that stage. This is what we are seeing internationally, that is where we are coming from. In many countries there is a minimum of three. The idea behind that is to help organisations to get started. Sometimes seven seems to be quite a large number for a group of individuals in a community who would like to do something in that community. It is interesting that while they might start with three, of course they need to have plans as to how they are going to grow from that. We are trying to make it as enabling as possible for groups to become established as co-operatives. We have a feeling that seven is quite a lot. I understand and take on board all the points that are made about seven but given international practice and also the principle of trying to support the establishment of more co-operatives in Ireland, we want to make it as easy and enabling as possible for groups to come together. That is where we are coming from. Dr. Carroll may have something to add to that.

Dr. Bridget Carroll

We had worker co-operatives in mind as one example where there will not be the large numbers that would exist for an agricultural producer or consumer co-operative. That is the example we used previously.

Dr. Olive McCarthy

We are also seeing many social enterprises emerging now. We have a specific policy around social enterprise in Ireland. Many of them establish as co-operatives but they may start very small. We believe it might help more social enterprises to find the legal structure early on that might suit the way in which they wish to operate. We understand the legislation enables people to decide on their rules. It could be seven, if they feel seven is a more appropriate number. A bigger number again might be appropriate for particular different types of co-operatives. There should be flexibility in the legislation to allow particular types of co-operatives to decide that a larger number is more appropriate for that particular type of co-operative while leaving flexibility there for other groups that might find a smaller number to be appropriate.

Acting Chairman (Deputy Richard Bruton)

Will the witnesses comment on whether the reserves are onerous as is presented? Their submission saw merit in the reserve.

Dr. Olive McCarthy

The legislation states "as appropriate to the size and complexity of the organisation". We see this in the credit union legislation as well. In regard to reserves, the co-operative decides what happens to that reserve and what it is used for. In a sense it is the rainy day fund as no organisation can predict-----

Acting Chairman (Deputy Richard Bruton)

Does "as appropriate" mean as appropriate to the regulator's view or to the co-operatives' view?

Dr. Olive McCarthy

I would have thought to the co-operatives' view. Well, I do not know how that might work in practice. Perhaps it could be the regulator. That would have to be decided. It is quite vague in the legislation at the moment. It just says "as appropriate" at the moment so that would need to be debated. ICOS might have a view on that as well.

Mr. T.J. Flanagan

It looks reasonably benign at the moment in terms of “anybody can set up their own reserve”. We would be concerned as to where this would go. It is creating a demand a person who is trying to establish whether to set up a co-operative or a company of some sort, it does not apply to the company but it applies to the co-operative. That is going to be a block to establishing co-operatives. We have never seen a need for it. Certainly in our sphere we do not believe it would add anything. It would effectively be a drag. There is a fear of where it would go.

Acting Chairman (Deputy Richard Bruton)

Okay, so it does not apply in an company. The audit issue came up. ICOS suggest that members would approve an exemption. Senator Crowe and Deputy Cahill are saying there should be a requirement of a periodic audit every five years or so. Is there a middle ground between those views? Has anyone a particular comment on that? We can remain agnostic on that issue.

Senator Ollie Crowe

To get the views in regard to making the audit either a three-year or five-year requirement, what are the views of the guests in regard to mine and Deputy Cahill's point on that?

Acting Chairman (Deputy Richard Bruton)

They are remaining silent on the issue. ICOS have offered the option of members allowing the exemption to roll over. The others are not taking a firm position. As I understand it, they are not volunteering to answer the question or to support the position of Deputy Cahill and Senator Crowe.

Senator Ollie Crowe

Surely they have their opinion. That is why we are here, to tease it out and go through it.

Acting Chairman (Deputy Richard Bruton)

Okay, if people want to express-----

Mr. Pat Moyne

I believe we would happy that the members themselves would elect whether or not to install it. That threshold would be reasonably low. Perhaps 20% of the members would determine how long it should be.

Dr. Bridget Carroll

As we discussed, the audit requirement can be costly and it can be an administrative burden but there are clear benefits to having audited accounts in regard to transparency and trust and also in assessing elements of performance of the co-operative. Retaining the requirement for annual returns and audited accounts while allowing specific societies to apply an audit exemption, and coming up with a formula as to how often that needs to be done, would be a sensible approach.

Acting Chairman (Deputy Richard Bruton)

It will come back to the committee to make a call in our response. Senator Garvey has indicated but is not indicating at the moment. I call Senator Gavan.

Senator Paul Gavan

I thank the Acting Chairman for his patience. I have some follow-up questions. I want to revisit the issue of asset locks because as members know asset locks have been in place for credit union members for some time and have worked extremely well. We have seen many times in the US, as in most capitalist countries, how co-operatives change their status to limited companies to the detriment of members and to society in the long run. In particular, I ask our colleagues in ICOS about this because, to give an example, I would have thought ICOS might well look to develop energy co-operatives. One of the key concerns of an energy co-operative is how to stop communities from selling their co-operatives to such entities as Amazon.

An asset lock would do that. Do the witnesses not see the value of an asset lock in those circumstances?

Mr. T.J. Flanagan

Potentially, but the issue is that what we are talking about doing cuts across the autonomy of the members to do what they like with their business. In principle, we would like members to have the power to decide. A co-operative is set up by the members, for the members. If the members decide they are going to sell that business because it makes sense for them or they finally decide they cannot run the business efficiently and somebody else could do it better, who are we to say the members should not do that? I defer to experience in other sectors where an asset lock might have a role to play but it certainly does not in our sphere. Theoretically, even in an energy co-op, I would be reluctant to put something into a rule. If the members decide to put it into a rule book they can do that. Members in an Irish Co-Operative Organisation Society, ICOS, can put in a rule that does the same thing. You absolutely can do that. If a group comes to us in the morning and there are 50, 100, or 1,000 people and they want to set up a co-op in the energy sphere and they say they want to put in a rule that does x, y, z, we will draft it for them and help them get it registered and it will be legally binding, but it is the members who do that.

Senator Paul Gavan

I put it to Mr. Flanagan that if we had that attitude towards the credit union sector, we would not have a credit union sector at this point.

Mr. T.J. Flanagan

Fair enough.

Senator Paul Gavan

It would all have sold out. That is my concern. Do the other witnesses have a view on that before I move onto my next question?

Mr. Pat Moyne

A lot of it comes back to the business of the co-op and whether or not it is a for-profit business or community-based. In our industry, we provide social housing and we hope to provide the properties we own and make them available for social housing in perpetuity. We would not want the members at some stage to be able to come along and strip the assets of the co-op for personal gain. It is down to the fact that we are a not-for-profit business as opposed to-----

Acting Chairman (Deputy Richard Bruton)

Would you need a legal protection of that or is Mr. Moyne content with the rule book stating it?

Mr. Pat Moyne

It is a recognition that there is something in the legislation. We said it could be optional but that there would be something there we could adopt. As well as looking at our rules, we provide model rules for other housing co-ops that want to become established. We would like to have something like that available, backed by legislation, which we could put into the rules and states, if you are going down this route of being a not-for-profit and you are building these houses for community purposes, that would be available to them to use.

Senator Paul Gavan

I thank Mr. Moyne. That is a useful point to add. Sinn Féin welcomes many aspects of the legislation. We are passionate about co-ops. We have a policy document that has been well developed for a few years. The legislation does not specifically deal with instances of succession planning, liquidation, administration or the sale of companies. Given there are large numbers of people expected to retire in the years ahead, we hope the legislation will give consideration to the transfer or sale of companies to worker co-operatives, as has been done in Scotland, France, Italy, Spain, etc. Studies in France, Canada and Australia have shown that well over 50% of SMEs in the next ten years will face the challenge of succession. This is an issue which will undoubtedly affect business in Ireland, where family businesses represent up to 90% of the indigenous business sector and provide around 50% of employment. In 2014, the French Government decided to introduce measures to facilitate the process of an employee's request to buy their own workplace through the worker co-op buy-out model. Do the witnesses see the failure of this draft legislation to deal with instances of succession planning, liquidation, administration and sale of companies as a missed opportunity?

Dr. Olive McCarthy

We have not given this matter particular consideration but a 2021 PwC survey showed that 41% of family businesses had a succession plan in place. More and more family businesses are thinking about succession now, which is a good thing. Perhaps now is a good time to ensure that family businesses are aware of the co-operative model and that there is a possibility for them in that succession piece, which is hugely important and difficult for many families to deal with, and family businesses in particular. Consideration could be given to building something around that and ensuring there is more knowledge and awareness of the co-operative model as an approach used in other countries successfully, as the Senator mentioned, including in North America, to enable and support families to convert to such a model. It is not something to which we have given particular consideration but it is something that perhaps should be considered.

Mr. T.J. Flanagan

The only experience we have in this sector is that one of our colleagues spends a lot of his time in co-operative development and trying to develop co-operatives in new areas. Over the last few years, particularly post-Covid-19, we devoted quite a bit of time to looking at the gig economy, which has evolved, with a view to trying to bring people stuck in that economy together to achieve the scale we did 100 years ago with dairy farmers, for example, to pool their resources and achieve something better. I do not think it was a flaw in the legislation that caused these things not to succeed, it was just brutal commercial reality. We could say the reason they did not succeed was that there is something lacking in the Industrial and Provident Societies, IPS, Act, at the time or in this new Act. It was just commerce. If the Senator is suggesting that there are other tools, whether taxation or something that could give these entities a leg up, we will defer to that. We did not find any problems in the core legislation.

Mr. Pat Moyne

I highlight that in many co-ops, particularly in the housing space, a lot of the staff who work for those co-ops are not necessarily members of the co-op. They are purely employed staff. They serve the members but they get a salary for that. The objects of the society or co-op are driven by the members. It is up to the management to make sure those objects are delivered. The staff are not necessarily members of the co-op and as such do not have potential succession rights or vested interests in the entity.

Acting Chairman (Deputy Richard Bruton)

Will the Senator clarify if his concern is that small businesses could have a succession into a co-op or is he concerned about co-ops having no succession planning and becoming ossified?

Senator Paul Gavan

That is a good point to clarify. I am concerned about what happens to small businesses when people retire. EU research has been done on this. I propose that this legislation could, perhaps in terms of taxation measures, for example, as suggested by Mr. Flanagan, play a role in encouraging businesses to survive by transferring the assets to the employees in the form of a worker co-operative.

Dr. Bridget Carroll

No doubt about it, there are thousands of viable businesses every year in Europe that close down because of a lack of successor. That is well known. Some countries have drawn attention to the potential for those businesses to be transferred to employees who played a prominent role in their success. Whether legislation is the place for that or not, I am not sure. There needs to be easily accessible information on the potential role of co-operatives in that space. Some countries use the taxation code and some have co-operatives enshrined in the constitution. Whether it is about easily accessible information and a raft of supports, as we discussed earlier, or whether it is for a place in the legislation, I am not sure. There is potential there.

Senator Paul Gavan

Does Dr. Carroll have a view on the French worker buy-out model, for example, and how that has been applied to situations of liquidation or potential administration, in terms of saving that business and keeping those jobs?

Dr. Bridget Carroll

France and other countries have supported the use of the co-operative structure to save businesses. There is potential there. That model has been looked at in many countries and supported in different ways.

Acting Chairman (Deputy Richard Bruton)

It is not about the legal frailty of this legislation, it is more that there is not a channel to make it-----

Dr. Bridget Carroll

There is not familiarity with it. There needs to be a range of support and information.

Acting Chairman (Deputy Richard Bruton)

On the other side, is there a problem with co-ops ossifying? Some go into a situation where assets remain, nothing happens, they go into disuse and there is no avenue out to rejuvenate them.

Is that an issue?

Mr. Pat Moyne

They are generally in the smaller end of provision of private housing in particular, where people in the past would have come together to build housing co-operatively. They would have consolidated their funds and built houses over a time period. However, when each of the members had their house built, the need for that co-operative would have gone away and those co-operatives would have, effectively, dissolved. Sometimes, the co-operative can be a means to an end. Once that end has been achieved, there is no need for the co-operative to continue.

Chairman

The legislation is adequate in terms of allowing the natural progression or whatever to dispose of the remaining assets. There is no problem with the legislation in that respect.

Mr. Pat Moyne

Not that I am aware of.

Mr. T.J. Flanagan

On an ongoing basis, there are about 1,000 co-ops on the register. Some of them are quite small and quite old and were established to carry out a particular purpose, perhaps in the community or voluntary space, and the volunteers got older and moved on. On an ongoing basis, there are small co-ops where the members sort of move on and suddenly there is not an audit done, so accounts are not done. Suddenly, there no is return submitted to the register, the register then just cancels them and strikes them off and that is the end of it. It is not a controlled process. The register takes control of the process.

Chairman

Before we wrap up, is there any other point to be raised? I know the submission had to be curtailed a bit. There were a number of other points. Does anyone wish to make any other wrap-up point?

Mr. T.J. Flanagan

In general terms, we totally welcome the process. We want to commend the Department on the huge amount work that it has done. We have been calling for this for 40 years. It got stuck in over the past couple of years. Unfortunately, Covid probably interrupted the personnel in question. We appreciate that they have been extraordinarily helpful and open. We totally appreciate what they are trying to achieve, which is make the co-operative model more modern, inclusive and attractive and to simplify it in many respects.

Unfortunately, one side effect brought about by a couple of the measures that we are not happy with have the effect of impeding one of the key principles in the International Cooperative Alliance, which is independence and autonomy, and the autonomy of a co-operative to set its own rules around how it changes its rules in terms of rule amendment thresholds and such matters. There is a little bit of a heavy hand on the special rule amendments, the regulation around mergers, etc., and the piece around the legal reserve. We think they are just a little bit heavy-handed. However, in general terms, we welcome the work.

Chairman

I thank everyone for their time. We will wrap it up at that. I have to read out an official closing of the meeting. This concludes the committee’s business in public session for today. I now propose that the committee goes into private session to consider other business.

The witnesses are relieved at this point. I thank them again for their time.

The joint committee went into private session at 11.03 a.m. and adjourned at 11.09 a.m. until 9.30 a.m. on Wednesday, 22 February 2023.