An industrial and provident society is an organisation conducting an industry, business or trade, either as a co-operative or for the benefit of the community, and is registered under the Industrial and Provident Societies Act 1965.

An Industrial and Provident Society, (IPS), is a legal form for trading businesses in the UK. IPSs are regulated by the Financial Services Authority, which took the job over from the Registrar of Friendly Societies, both being supervised by the Treasury.

IPSs fall into two categories:

Bona fide co-operatives - these trade for the mutual benefit of their members, and the Registrar will judge the legality of their action by reference to co-operative principles, (case law is very thin on the ground compared with that for companies);

Societies for the benefit of the community - these trade to benefit the broader community, and the Registrar will refer to charity law. Societies for the benefit of the community are granted charitable status by the taxation authority, the Inland Revenue, rather than the Charity Commission, (in England & Wales).

IPSs may in general conduct any legal business except that of investment for profit.

Consumer, agricultural and housing co-operatives, working men's clubs, Women's Institute markets, allotment societies, mutual investment companies, friendly societies & housing association usually incorporate as IPSs, as do some social enterprises.

This process is facilitated by the existence of "model rules" developed by various federal bodies, which reduce the legal costs. Credit Unions  and building societies which sprang from the same roots, are now governed by specific legislation.

Both types of IPS have a share capital, but it is usually not made up of equity shares like those in a company limited by shares, which appreciate or fall in value with the success of the enterprise that issues them. Rather they are par value shares, which can only be redeemed, (if at all), at face value.

The profits and losses of an IPS are thus the common property of the members. The share typically acts as a "membership ticket", and voting is on a "one member one vote" basis. The maximum individual shareholding is currently set at £20,000 ,although other IPSs may hold more shares than this.

Advantages

• Limited liability of members
• Incorporated organisation - can hold property and take legal action in their own name
• Legal personality - committee members are protected from personal liability under contracts and can generally be personally liable only if they:
  
  
  • Act fraudulently
  • Act in breach of trust
  • Continue to run the organisation when they ought to know that it has no reasonable chance of avoiding insolvent liquidation
  • Permanent succession and the right to own property and take legal action in its own name
  • Use a sets of rules to register with the Financial Services Authority

Disadvantages

• If the organisation does not use model rules, registration can be a lengthy, expensive process
• Annual returns and accounts must be submitted to the FSA
• Registers of members and officers must be kept and be available for public inspection
• An IPS has to pay the FSA an annual fee
• An IPS cannot register with the Charity Commission; will not receive a register charity number
• A charity IPS should submit its constitution to the Inland Revenue as charitable, otherwise it will not be able to claim tax advantages of charitable status and may have to pay corporation tax