The term Industrial and Provident Society (IPS) covers two main business formats; a Bona Fide Co-operative (commonly called simply a Co-op) and a Society for the Benefit of the Community (often called a Ben Comm).
Although there are technical differences between the two, in practice they are extremely similar:-
Both Co-ops and Ben Comms subscribe to exactly the same international Co-operative Values and Principles (see attached summary). Hence there is no difference in the fundamental ethos and objectives of the two formats; values such as democracy, openness and fairness are fundamental, as is support for education, concern for others, and working for the good of the community as a whole.
Shareholding and Governance
Both formats enjoy limited liability status. The shareholding of an individual member is limited to £20,000 and each member has a single vote regardless of the number of shares held. A member’s investment is normally withdrawable (but only in special cases may it be transferable).
The two IPS formats also share distinctive governance structures such as being governed by a registered set of Rules and controlled by a Board of directors elected by the membership. These Rules are usually based on a set of Model Rules but may be modified to reflect the particular concerns of the project or community in question.
Much is sometimes made of the potential for Ben Comms to have an ‘Asset Lock’ designed to prevent members selling off the assets of the business for their own benefit. In practice most renewable energy Co-ops or Ben Comms are structured to return capital (at face value) to the members at the end of the project, in perhaps 25 years, if it has not been withdrawn before. Any surpluses generated by the project during its life are either used to pay share interest to the members or are allocated to community purposes under the Rules of the project. Hence whether a project is run by a Co-op or a Ben Comm, and the existence or absence of an Asset Lock normally makes absolutely no difference in practice.
These characteristics clearly set IPS co-ops apart from conventional limited companies run for shareholders’ benefit.
Technically a co-operative is run for the benefit of its members and a Ben Comm is run for the benefit of the community. This might appear to be a fundamental distinction. However in practice the two formats are often indistinguishable, especially in the renewable energy sector. For example…
Although it might be thought that a Ben Comm would typically draw its membership from a narrowly defined geographic community, in practice there is no legal barrier to a Ben Comm drawing members from anywhere; it is perfectly possible for a Ben Comm to have no members from the community it is designed to benefit. Exactly the same situation prevails for a Co-operative which will typically have many members in a local area but may also draw support from a wider ‘community of interest’ who are interested in a particular project.
This means that both Co-ops and Ben Comms are open to the theoretical problem that the interests of the membership might not align perfectly with the interests of ‘the community’ however this is defined. In practice, this is rarely if ever an issue. Most members join with motives which are more or less altruistic and with a clear understanding that the organisation (whether Co-op or Ben Comm) is committed to wider ideals in addition to providing a return to members. This has been proved repeatedly when renewable energy Co-operatives have voted to take actions which are clearly not motivated purely by financial considerations. (e.g supporting the creation of more renewable generation capacity even in unpromising financial conditions, or creating a local charity to receive a proportion of income.) In addition, even if the membership is dispersed, the activists and hence the elected directors tend to be local people closely involved with the project in question and hence in tune with local needs and wishes.
Whatever the reasons, in more than a decade of running Co-operatives in the renewables sector, Energy4All has never come across any significant conflict on these lines, and has no evidence of any differences between Co-ops and Ben Comms in this respect.
A co-operative can pay ‘share interest’ on investment and also a dividend based on any trade with the individual member. Note, however, that in the energy sector, direct trade between a co-op (or a Ben Comm) and its members is usually impossible as there is unfortunately no mechanism for supplying electricity generated by a local plant directly to local members.
A Ben Comm can also pay a return on investment, though potential members will normally be warned not to rely on any return, as the primary purpose of the BenComm is ‘to benefit the community’. However in practice exactly the same pressures apply to both IPS Co-ops and to IPS Ben Comms – i.e. it is normally impossible to raise capital without the promise of good security and some return on the investment. Hence the requirement placed on an IPS Co-op that the share interest paid must not exceed the level required to attract and retain the capital, applies equally to Ben Comms. If they cannot convince potential members that their money is safe and will earn a return at least sufficient to compensate for the risks being undertaken, then they will not be able to raise the money and the project will not proceed. The result, not surprisingly, is that Ben Comms and Co-ops tend to pay very similar returns to their members as this is the rate required to attract and retain the capital for their particular project.
IPS Co-ops and IPS Ben Comms share the same governing principles and structures that set them apart from limited companies.
The fact that Co-ops are theoretically for the benefit of their members, and Ben Comms are ‘for the benefit of the Community’ appears to be a significant difference but in practice the two formats operate in very similar ways. Both pay returns to their members sufficient to attract the required capital and both are committed to the good of the whole community. Hence whether a project is set up as a Ben Comm or as Bona Fide Co-op typically makes minimal difference in practice to the behaviour of the organisation or to the overall benefit accruing to the community.
extract from the website of the Co-op Group – these Values and Principles apply to all members of the international co-operative movement
THE CO-OPERATIVE GROUP VALUES AND PRINCIPLES
At The Co-operative we encourage new ideas to tackle issues that are important to our members – from helping the community to changing the world.
Membership is open to everyone as long as they share our values and principles. Our members show these values by working together for everyone’s benefit, and are encouraged to play a full part in the community.
Here are our underlying values and principles which influence The Co-operative Membership and the way we run all of our businesses:
OUR CO-OPERATIVE VALUES
Self-help – we help people to help themselves
Self-responsibility – we take responsibility for, and answer to our actions
Democracy – we give our members a say in the way we run our businesses
Equality – no matter how much money a member invests in their share account, they still have one vote
Equity – we carry out our business in a way that is fair and unbiased
Solidarity – we share interests and common purposes with our members and other co-operatives.
OUR ETHICAL VALUES
Openness – nobody’s perfect, and we won’t hide it when we’re not
Honesty – we are honest about what we do and the way we do it
Social responsibility – we encourage people to take responsibility for their own community, and work together to improve it
Caring for others – we regularly fund charities and local community groups from the profits of our businesses.
OUR PRINCIPLES ARE THE WAY WE PUT OUR VALUES INTO ACTION
Voluntary and open membership – membership is open to everyone
Democratic member control – all members have an equal voice in making policies and electing representatives
Member economic participation – all profits are controlled democratically by members and for their benefit
Autonomy and independence – co-operatives are always independent, even when they enter into agreements with the Government and other organisations
Education, training and information – co-operatives educate and develop their members as well as their staff
Co-operation amongst co-operatives – co-operatives work together with other co operatives to strengthen the co-operative movement as a whole
Concern for community – co-operatives also work to improve and develop the community, both locally and internationally.