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12 Aug 2013

IPS To Benefit From Insolvency Scheme

A proposal has been made by the Treasury to make formal insolvency procedures available for co-operatives, or industrial and provident societies (IPS). This could be beneficial for them as it would facilitate their access to the Pension Protection Fund (PPF), according to legal professionals.

The proposal is part of an open consultation, started by the government in July and aimed to foster growth in co-ops. Currently, this class of mutual societies have no option to go into administration and therefore are ineligible for aid from the PPF, even though they pay £2 million worth of taxes to the fund.

The PPF regulations do feature events that count as insolvency for IPSs and would give an IPS access to the fund´s aid schemes. However, according to legal advisers, these events are rare. An example of such an event is the dissolution of a co-op by consent of all its members, says Dawn Heath, partner at international law company Freshfields. Yet such a dissolution would require voting by all members at an annual general meeting, which is unlikely to happen, according to legal adviser Richard Kandler from Linklaters. He added that the Pensions Act from 2004 does include a list of options to make mutual societies eligible for PPF assessment, but this list is insufficient.

The government consultation shows that the growth potential of the IPS sector is recognised and efforts are being made to provide it with the necessary conditions to fulfil its potential.

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