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Industrial Co-operation:

THE STORY OF A PEACEFUL REVOLUTION.

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CHAPTER XI.

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Objects and Rules of Retail Societies.

EARLY RULES

A CO-OPERATIVE SOCIETY established prior to the passing of the Industrial and Provident Societies Act, usually gathered round itself a certain individuality which found expression in the formula adopted for its “objects” and rules, and to some extent in its buiness methods and the adaptation of them to local circumstances. But with the progress and adoption of legal safeguards, certain formulae required by the Acts brought greater uniformity, and perhaps the loss of some personality, into the concrete expression of the co-operative faith as set forth in accepted rules and statutes.

For example, the rules of Upperby Society, established in 1829 [1] state that —

The objects of this Society are to lay the foundations of a capital to keep all the members in constant employment at their respective trades, and for their mutual benefit; to diffuse the principles of Union and Co-operation; and to form a community of independent labourers. The association shall be composed of persons of good character, who are desirous to coalesce for the attainment of the equal enjoyment of the necessaries and conveniences of life, which are to be possessed by industry and moral rectitude; and to secure the same to their children by conforming their minds to principles of co-operation.

A favourite formula with societies established in the fifties was as follows:—

The object of the society is to improve the social and domestic condition of its members, and encourage amongst them a spirit of honesty and fair dealing by carrying on in common the trades of bakers, grocers, corn and provision dealers. [2]

Upon the passing of the Act of 1862 the Pioneers of Rochdale issued a set of model rules to which was prefixed an address to co-operators.
[3] After enumerating the benefits the Act conferred upon co-operative associations, the address proceeds:—

Let us consider a little the consequences which may follow from these powers. lt is not too much to say that the future prosperity of the working men of Britain now lies in their own hands, if they observe the simple rules following:—

(1) Use your own consumption — your eating and drinking, and shoeing, and clothing — to save up capital for yourselves.

(2) Use your capital to set yourselves to work.

(3) Use the profits of your work to obtain for labour generally a fair share in the profits of all capital, by giving it a fair share in the profits on your capital.

(4) Use the accumulation of your profits to make yourselves powerful by your united strength if you cannot be powerful by your separate strength.

By the time the Acts were consolidated in the Act of 1876, the rules of societies had become to a large extent stereotyped, and, since the preparation by the Co-operative Union, of Model Rules couched in terms of legal uniformity with the amended Act of 1893, there has been little, if any, variation in the rules adopted by newly formed societies.

Large numbers of the older societies amended their old rules and adopted the model rules, which, while they give no scope to expressions of ideals, are found to lend themselves best to due uniformity with the orderly conduct required by law.

The rules of the Rochdale Equitable Pioneers’ Society have now been brought under the present Act, the objects of the society being stated in the following terse phrases:—

The objects of the society are to carry on the trades of general dealers, both wholesale and retail, and of manufacturers of any article dealt in or used by the society, also of builders, and the business of insurance against loss by fire; and it shall have power to purchase, hold, sell, mortgage, rent, lease, or sublcaso land of any tenure, and to erect, pull down, repair, alter, or otherwise deal with any building thereon.

Some of the propagandist spirit of the old Pioneers still lingers in the rule book, however, for on the last page are found twelve items of “Advice to Members of this Society.” See Appendix (B). These axioms have been extensively copied by societies as a useful appendix to their formal rules.

PRESENT DAY DISTRIBUTIVE CO-OPERATION

We pass now to consider in detail some features of present day Distributive Co-operation.

As we have seen in Chapter IX., the advantages conferred upon co-operative societies by the Industrial and Provident Societies Acts of 1852 and 1862 were most important, the later Acts of 1876 and 1893 added to and completed the legal protection afforded by the law, and, with few exceptions, the existing co-operative societies in the United Kingdom are registered under the lfndustrial and Provident Societies Act, 1893.

REGISTRATION

A few societies are registered under the Companies Acts, and most of the agricultural co-operative banks in Ireland are registered under the Friendly Societies Act.[4]

Registration under the Industrial and Provident Societies Act, as under the Friendly Societies Act, is optional and involves no expense to the society. Unlike the Friendly Societies, however, a society registered under the Industrial and Provident Societies Act is a corporate body with limited liability, and with a common seal, and on registration any property held on its behalf is vested in the society without formal transfer or rcconveyance. The society can sue and be sued in its own name, and has a special remedy in the courts of summary jurisdiction against an officer or any person convicted of withholding books or other property of the society, or wilfully applying any part of such property to purposes not authorised by the rules or by the Act. Any number of persons, being not less than seven, may apply for registration of a society having for its object the carrying on of any “industry, business, or trade” — and in these terms is expressly included dealings of any description in land. Subject to certain special provisions of the Act, a society may also undertake the business of banking.

The Act also limits the amount of shares that any person may hold in a society to 200, but does not limit the holding of loans above this amount, nor the amount of capital a society may accept. Therefore the shares, which are usually of 1 value each, are always at par, and may be withdrawable.

A society can, however, invest an unlimited amount of money in another society, and receive as corporate members any society registered under the Act, or other body corporate, if its rules so allow.

To obtain registration there are certain provisions which the rules of a society must set forth, touching the name and seal of the society; admission oi members; mode of holding meetings and election of committees; capital, profit, audit, &c., and no rules can be amended or altered, and no new rules made, without the consent of a specified majority — prescribed in the model rules as two-thirds — of the members voting at any special general meeting. No amendment of rules is valid until registered.[5]

An important provision. of the Act (Section 24) relates to the exemption of co-operative societies from the charge to income tax under schedules C and D.

EXEMPTION FROM INCOME TAX

So long as the number of its shares is not limited either by its rules or its practice, i.e., so long as the society is open to admit as members all persons who trade with it, so that they may join in the proportionate return of any surplus made by the society in its trade, then the society is not charged with income tax . . . . On the other hand, if the society closes the door of its membership against its customers, and refuses to allow them tlle proportionate return of surplus on their trading, then the Whole of the society’s surplus becomes subject to income tax. [6]

This exemption, however, does not prevent individual members whose incomes are over 160 per annum being liable to income tax for the income they may receive from co-operative investments. It is estimated, however, that fully 95 per cent of the membership of co-operative societies consists of persons not in receipt of taxable incomes.

It is highly important that this provision of the Act should be thoroughly understood, because attempts have been made, and are likely to be repeatedly made by the traders of the country to rescind this provision, and make co-operative societies directly chargeable with income tax in regard to the “profits” said to be derived from their trading operations.

The grounds upon which Co-operation justly bases its claim to exemption are —

(l) That in co-operative trading no commercial profit is made. See page 84.

(2) That persons individually exempt cannot be collectively chargeable.

RESTRICTION OF MEMBERSHIP

Although membership of a co-operative society is practically open to all, societies have the power to restrict membership —

(a) By excluding certain classes of persons from membership by rule or resolution.

(b) By admitting or excluding individual applicants for membership upon the approval or otherwise of the committee or of members’ meetings.

(c) By fixing the minimum number of shares to be taken up upon application or the minimum amount of purchases to be made, or by requiring entrance fee or other condition.

Examples of method (a) may be found in societies that (1) admit one member of a household only; (2) admit husband and wife to joint membership, but not to individual membership; or (3) admit husband or wife (but not both) and grown-up children. [7]

This policy of restriction has for its ostensible object the keeping of share capital within workable limits, but its wisdom has been called in question on this ground, as well as on the ground that restriction of this sort generally results in excluding women from membership. Occasionally these restrictions are not embodi.ed in the rules of the society, but are put in force by resolution of a members’ meeting.

Examples of (b) are numerous and may be typified by the comprehensive rule of the L———  Society which enacts that —

Complete lists of names, residences, and occupations of all persons who have applied to become members . . . shall be submitted to the next weekly meeting of the Committee of Management for their approval; and if any person whose name is on the said list shall be objected to by the majority of the Committee of Management then present, the name of the said person shall be erased from the list. These lists . . . shall be hung up . . . for the inspection of the members three clear days at least prior to the next monthly or quarterly meeting of members . . . and if objection be taken by a majority of the members present . . . to any of the persons named on the said lists, such person or persons shall not be admitted as members of the society; but all other persons named thereon shall be considered to be finally admitted.

Examples of (c) are found in societies which require two, three, or even live shares to be taken up before membership is complete. The requirement of an entrance fee of one shilling is common to the majority of societies, while a rule such as that of the M——— Society is frequently met with, viz.: —

No person shall continue to be a member of the society who does not purchase from the society to the extent of at least 4 per annum.

The amount fixed is frequently more than this sum.

These latter forms of restriction do much to exclude the poorest classes of workers from membership. Largely owing to the efforts of the Women’s Co-operative Guild, however, there is now a strong tendency amongst societies to abolish them. See Chapter XXIV.

An example of practically unrestricted membership is found in the following rules of the U——— Society:—

The society shall consist of its present members. and of all other persons who sign a declaration of their willingness to take out at least one share, and pay a deposit of not less than one shilling, and have been approved by the committee of management. Any person rejected by the committee may appeal to the next general meeting, by which he may be admitted.

A married woman may be admitted. a member of the society, and may hold and deal with any share or interest in the society credited to her as if she were unmarried, as is provided in the Married Women’s Property Act, 1882.

A minor not under the age of sixteen years may be admitted as a member, and execute all instruments and give all acquittances necessary to be executed or given under the rules, but may not be a member of the committee or manager of the society.


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NOTES

1.
The Upperby Co-operative Industrial Society is still in existence, but its membership has never exceeded 100, and so far as can be ascertained, the society has never been engaged in manufacture. Its “object,” as stated in the rules now in force, is “to carry on the trade or business of grocers and general dealers.”

2. Rules of Price’s Workmen’s Stores, now the Battersea and Wandsworth Co-operative Society, established 1854.

3. Co-operator, March, 1863.

4. A summary of the chief features of past legislation affecting Industrial and Provident Societies has been prepared for the Co-operative Union by E. W. Brabrook, Esq., C.B., late Chief Registrar of Friendly Societies. See Appendix (A).

5.  See Appendix (C).


6. Co-operative Societies and the Income Tax. Co-operative Union pamphlet, by J. C. Gray.

7. In an inquiry instituted by the Women’s Co-operative Guild as to the conditions of membership of 205 societies the following facts were elicited: — 145 societies had unrestricted membership, 28 admitted one member of the household, 12 admitted joint membership, 16 either husband or wife and grown-up children, 2 appeared to exclude the wife altogether, and 2 admitted any two members of a household, but no more. — 19th Annual, Report Women’s Co-operative Guild, 1901-2.