2.6.4 Converting a society into a company
A co-operative or community benefit society can convert into a company, except for a prescribed community benefit society, which has a rule restricting the use of its assets (see Section 2.4).
A community benefit society with this rule can only convert into a company if its residual assets are transferred to another similarly asset-locked community benefit society, or registered social landlord, community interest company, charity, or equivalent body in Northern Ireland, and would require the prior consent of the appropriate regulator.
Sections 112-3 of the Co-operative and Community Benefit Societies Act 2014 set out the requirements for a special resolution to be passed by members approving conversion. These requirements state that at least half of the qualifying members of the society must vote on the special resolution to convert, either in person, or where the rules allow, by proxy, and at least three-quarters of those members who vote must be in favour of the special resolution for it to be passed. A qualifying member is a member of the society who is entitled to vote under the society’s rules. A second meeting to confirm the special resolution must be held between 14 days and one month after the first meeting. The resolution to confirm must be passed by the majority of those qualifying members who vote, and the meeting most be quorate under the society’s rules.
The wording of the special resolution should indicate whether the society is converting into a company limited by shares or a company limited by guarantee. If the society is converting into a company limited by guarantee, provisions should be made for members to withdraw or cancel any share capital they hold in the society.
A society cannot be converted into a pre-existing company. Prior to registering the special resolution with the FCA, the society must apply to Companies House to register the company, telling it that the application is being made by a society with the intention of converting into a company. The society should request that the application is not registered until a date for conversion has been agreed by the FCA and Companies House.
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