Mr. T.J. Flanagan:

I thank the committee for the invitation and the opportunity to participate in the pre-legislative scrutiny of the general scheme of the Bill.

The Irish Co-operative Organisation Society, ICOS, serves and promotes co-operative businesses and enterprises across multiple sections of the Irish economy, making it the leading organisation in Ireland for registering new co-operatives and reliable, experienced advisers on co-operative rules and governance. Our core business is to provide leadership to the co-operative movement. We use our collective voice to put the needs of the movement and member co-operatives to the forefront of what we do. We draw upon the pioneering and innovative spirit of our founding members to help strengthen our co-operatives operating in today's ever-changing and competitive world.

Starting from the agricultural co-operative path set by our founding president, Sir Horace Plunkett, in 1894, ICOS today has evolved to serve the co-operative sector in seven core categories, namely: multipurpose dairy co-operatives, including large organisations like Lee Strand, Drombane, Mullinahone, Dairygold, Lakelands and, indeed, Ornua; livestock sector co-operatives, which are mostly livestock marts; store, trade and wholesale co-operatives; service-related co-operatives; community-oriented, culture and leisure co-operatives; food, fishing, forestry and beverage co-operatives; and advisory and education-related co-operatives.

I want to impress upon members the degree of experience and expertise that ICOS has developed over almost 130 years. The vast majority of the approximately 1,000 co-operatives registered under the Acts have ICOS rule books. We have the marks on our backs from working with communities and groups to form co-operatives, amend rules, merge and consolidate co-operatives, and sometimes even wind them up. We believe we are unique in this respect. Our experience is hard earned and our views need to be considered.

Let me give an overview. The co-operatives in the ICOS affiliate network represent and serve the interests of 175,000 individual members and feature a workforce of more than 11,000. The co-operative sector comprises a range of societies, from the large business co-operatives operating in the agrifood space to the smaller community-service-focused co-operatives. All are vital to their members and play significant social and economic roles in their stakeholder environments.

The large co-operative societies are mainly positioned in the dairy industry and now produce, process and market produce on a global level. Four of these generate turnovers in the multibillion-euro territory, with three others reporting turnovers of €500 million to €1 billion. There are several dozen societies generating a turnover of at least €10 million, and these co-operatives serve their members and local economies exceptionally well. There are several hundred small societies that are just as important as the larger societies to their members and the local communities they serve. These are typically community based and provide central services to their local communities.

With regard to the economic contribution, our network of co-operatives generate an estimated total of €9.7 billion in annual turnover. A significant proportion of this is circulated in the Irish economy through employee wages, payments to suppliers such as farmers and other small rural businesses, and payments or dividends paid to the 175,000 co-operative members.

In addition to delivering economic and social benefits, co-operatives place great emphasis on enhancing the skills of co-operative staff and management. They do this via the ICOS Skillnet training programmes. It allows co-operatives of all sizes to avail of a wide variety of training resources to develop the skills of personnel. Furthermore, this demonstrates the genuine application of the International Co-operative Alliance co-operative principle of learning, education and training.

I will now comment on the general scheme. We note that, in recent months, the Department of Enterprise, Trade and Employment published a general scheme of a Bill to modernise and consolidate the statutory framework governing co-operative societies in Ireland. We commend this development given the somewhat archaic and piecemeal nature of the existing industrial and provident societies legislation. ICOS has commenced – but, to be fair, has not entirely completed – its analysis of the scheme document. On the committee's request, we submitted our initial comments on the scheme for its consideration by letter dated 13 January. We continue to review the scheme and consult our members on its implications, and we look forward to communicating with lawmakers and policymakers on the development of this important legislative initiative.

The following are some of our initial observations. The first relates to Companies Acts concepts and the cross-application of provisions. The scheme cross-applies several procedures – for example, on liquidation and audit exemption – from the Companies Acts, with necessary modifications. We believe strongly that co-operatives and their members deserve specific and accessible legislation, in a dedicated Act. These procedures should be installed with modification in the Bill.

In addition, the scheme removes several co-operative concepts that members are very familiar with, such as that of a special general meeting, with new terms synonymous with companies, such as the term "extraordinary general meeting". Co-operative members are used to terminology around special general meetings. Member familiarity and co-operative culture should be enhanced, not undermined, especially where the gains of this proposed homogenisation are not apparent. ICOS calls for the retention of these terms as per the current law and practice.

On the amendment of rules of society by special resolution, the scheme proposes that, for a co-operative to amend or alter its rules, the support of 75% of members present, entitled and voting would be required. Currently co-operative societies determine their rule amendment thresholds in their rules, not in the law. ICOS's experience is that the widely practised two-thirds threshold strikes the correct balance between sufficiency of mandate and realising effective reform. In Appendix A to our written statement, we have detailed cases where this balance has proven itself in the context of actual co-operative member issues that have been proposed for adoption in general meetings. ICOS calls for the retention of co-operative autonomy to determine the threshold or alternatively to insert the two-thirds threshold in statute, as opposed to the proposed 75%.

With regard to legal reserve, the scheme proposes compulsory reservation of funds of the society. The purpose, necessity and scope for confusion of this measure are of serious concern. We wonder what the basis is for such a high level of financial regulation when it does not apply to companies doing similar business. Due regard has not been afforded to the prevailing and successful means by which members determine that funds are to be reserved. These are detailed in Appendix B of our document. The actual limitations to be imposed on funds that would be reserved has not been addressed in the scheme and this gives rise to grave concerns that co-operative autonomy could be fettered.

Furthermore, the scheme requirement that a society would determine the "adequacy" of the reserves is open to interpretation. It would generate confusion in respect of compliance and could discourage producers or service users from choosing the co-operative model. ICOS notes the shift to a compulsory reserve from an optional mechanism in the 2022 public consultation.

I shall now refer to approval thresholds for amalgamations and transfers of engagement. The scheme proposes a worrying overhaul of the current procedures concerning how societies may consolidate. These actions would now require two special general meetings, with support levels of 75% and above 50%, respectively. The current law does not require a second meeting where 75% has been secured. For proven reasons concerning the securing of a sizeable mandate and moving with efficiency to deliver on the will of members, ICOS submits that the current standard works. The proposed change could have serious unintended consequences in the context of service users and their livelihoods.

The current legislation also allows for two or more co-operatives to consolidate where they each attain simple majority support, on the caveat that in those circumstances a second "confirmatory" meeting approves the proposal, at above 50%. This has secured continued service provision in rare cases. ICOS members have grave concerns about this development and call for the retention of the current mechanisms in the new framework.

The scheme proposes a reduction in the minimum number of natural persons who may form a co-operative from seven to three. Co-operatives are established and sustained where scale and service needs combine. The co-operative principles are supportive of the scale theme, as are the challenges of economic and service delivery.

ICOS acknowledges there are several sectoral exceptions that might justify a lower threshold but respectfully submits that the seven-member minimum has served as a reasonable starting point for collective endeavour and should prevail in the statute. From our experience, and certainly to my knowledge, we have never failed to support the registration of a new society for lack of special members.

Audit exemption is the last point I will refer to. The scheme introduces audit exemption for small co-operatives. ICOS has long called for this initiative and we support this positive development. The cost of the financial audit can be burdensome in relative terms for small community focused co-operatives. However, the scheme proposal, in head 169, falls short of devising a solution that safeguards the unique member stakeholder imperatives in a co-operative. Prior ICOS submissions to public consultations demonstrate the member control proposals we have considered, designed and offered. We have grave concerns on the unintended consequences of introducing what is otherwise a very positive concept for co-operative application. I will be happy to take the committee through our concerns in more detail in due course. Fundamentally, however, our concern is that the proposal does not provide for member approval of an application for audit exemption. Our preference is that audit exemption could be applied for if the members at the general meeting approved it. We also do not think societies should be able to continue forever without having an audit. There should be an audit perhaps at least once every five years.

I will answer questions on other points if the members wish to ask questions on them. I thank the Chair.