Tue | Apr 7, 2020

Legal process slows revamp of provident society oversight

Published:Sunday | August 22, 2010 | 12:00 AM
Finance Minister Audley Shaw ... introduced legislation to revamp oversight of cooperatives.

The Registrar of Co-operative Societies (RCS) was granted oversight of industrial and provident societies under an amendment to the law in February, but is yet to assume its new responsibility.

Registrar Errol Gallimore says the regulations, which will establish the rules for monitoring, are still being drafted.

That process must be completed before the portfolio is transferred.

The societies remain under the jurisdiction of the Companies Office of Jamaica, which says there are 273 societies on its roll.

The RCS already regulates 500 co-operatives.

A co-operative is an autonomous association of people, usually of limited means, who join together on a voluntary basis to achieve a common objective, usually to market products, to purchase supplies, or to provide services such as housing, credit, irrigation and domestic water.

Pool skills and resources

To achieve this objective, the people form a business organisation which is democratically controlled, through which they pool their skills and resources.

Categories locally include agriculture, community, consumer, credit unions, culture, development, federation, fishermen, housing, industry, plus irrigation and water.

There are also co-operatives based on religion and transport as well as thrift societies.

The February amendment to the law affecting industrial and provident societies includes the raising of the ceiling for members' shares in the societies, moving them from a dollar value to a percentage of the total shares.

As a result, the J$400 requirement per member is being changed to 20 per cent of the total shares.

The rationale for this change is that it will prevent the need for periodic adjustments of the dollar value through amendments to the legislation.

The act has also been amended to allow a society to appeal on refusal of an application by the registrar. The registrar is obliged to notify the society within 30 days of the refusal.

Additionally, some societies are currently registered under other acts, including the Agricultural Credit Board, which will be discontinued.

Under amendments, all such societies will now be registered under the Registrar of Co-operatives Act.

All societies which are agricultural entities will now fall under the Industrial and Provident Societies Act.

The procedures for dissolving a co-operative have also been changed. The registrar is either required to first hold an inquiry, or act upon the receipt of an application of three-quarters of the members of the society.

The society cannot be wound up without an order by the registrar.

Fines have also been amended.

During debate on the legislation, Finance Minister Audley Shaw noted that many industrial and provident societies, including people's co-operative banks, operate similarly to credit unions, but are not regulated by the Bank of Jamaica and run the risk of failure and misuse.

Others, formed for the purpose of providing members with housing, have suffered from high delinquency rates, as in the case of the inner-city housing project, with 37 per cent of the owners unable to service their loans - which is more than seven times the five per cent rate -which is the industry standard among credit unions and commercial banks.

Gallimore said that after a process of investigation during which members often cannot be found, he removes as many as 10 co-operatives from the registry each year.

Twelve were removed in 2009.

Among those culled from the RCS list this year were Richmond Cocoa Growers, the Port Royal Fishermen Co-operative Society Limited, and the St Jago Lodge Number Five.

The decision regarding Port Royal related to its "working and financial condition", while Richmond Cocoa Growers membership had fallen to less than 10.

St Jago, Gallimore said, had been dormant since the 1980s.

The orders for removal take effect two months after public notice if no appeal by members is submitted.

Outstanding liabilities

According to Gallimore, many of those removed have no assets, but where assets exist, these will be handed over to a liquidator who will honour outstanding liabilities, pay back shareholders, and apportion the remainder.

In Jamaica, a group is only regarded as being ready to be registered and to commence trading as a body corporate when it can meet at least the minimum requirements, which include a steering committee and suitable management of the co-operative.

The group must be able to show that it can conduct a viable business operation by convincing the Department of Co-operatives that it has sufficient capital, or can raise sufficient capital to finance the enterprises.

Additionally, an appropriate accounting system will have been prepared and implemented.

There must also be a secured office with relevant furniture and adequate facilities.