Industrial and provident society

An Industrial and Provident Society (IPS) is a legal entity for a trading business or voluntary organisation in the United Kingdom or the Republic of Ireland. It is used for organisations such as various forms of co-operatives, some social enterprises, mutual investment companies, friendly societies and housing associations.

Unlike a company limited by guarantee, an IPS generally has a share capital. However, in a not-for-profit IPS the share capital may be limited to a nominal amount. It may be withdrawable share capital, an unusual form of finance which is treated as equity but may be withdrawn subject to specified conditions, and is relatively cheap for small co-operatives to raise as it is exempt from certain regulations applicable to conventional share issues regarding the publication of a prospectus. However, an IPS with withdrawable share capital is not allowed to carry on a banking business, presumably because a withdrawable share capital would make it impractical to ensure capital adequacy requirements are continuously met.

Industrial and provident societies must be one of two types: a bona fide co-operative, which exists to benefit its members, or a society for the benefit of the community, which exists to benefit the wider community.

Some industrial and provident societies of the second type are charitable. Under British law they are exempt charities and do not need to register with the regulator for charities (in England and Wales the Charity Commission). The registrar for IPSs is the Financial Services Authority (FSA). Note that IPS registration is quite separate from the FSA's function of regulating financial institutions.

Such businesses have been controlled in the past by the Industrial and Provident Societies Partnership Act 1852, Industrial and Provident Societies Act 1893. The legislation in the Republic of Ireland is based on modifications of the UK Industrial and Provident Societies Act 1893 - see the DETE website.

Nowadays in the UK they fall under The Industrial and Provident Societies Act 1965 and subsequent legislation to the present day such as The Friendly and Industrial and Provident Societies Act 1968 (Audit Exemption) (Amendment) Order 2006 - Statutory Instrument 2006 No. 265 (which increased the audit exemption threshold level for industrial and provident societies to £5.6m).

Recent UK legal developments include The Co-operatives and Community Benefit Societies Act 2003 which introduced the concept of an asset lock which an industrial and provident society can introduce to prevent specified assets being used for unintended purposes.