Expert Insolvency Support for Industrial and Provident Societies

Sadly, Industrial and Provident Societies (IPS) and their modern equivalents, do find themselves having to navigate through financial distress.

To add to the stress of the financial issues, mutual organisations, co-operatives, and community benefit societies exist to serve their members or communities. That can make the process of insolvency even more poignant.

Our team are experienced in offering expert, empathetic guidance, and ensuring that insolvency is handled legally, efficiently, and with the society’s mission in mind.

Insolvency for Industrial and Provident Societies

Industrial and Provident Societies (IPS) have historically been used for co-operatives and community-focused enterprises. Like any organisation, these societies can face financial difficulties due to economic downturns, funding shortages, or other factors that make them unsustainable as an organisation.

As with other organisations, an IPS becomes insolvent when:

It cannot pay its debts as they fall due (known as cash flow insolvency).
Its liabilities exceed its assets, making it financially unsustainable (known as balance sheet insolvency).

Although the definition of insolvency is the same, Industrial and Provident Societies are structured differently from standard companies. Their insolvency must be handled in line with co-operative and mutual society laws. Seeking early advice from a licensed insolvency practitioner (IP) such as Smart Business Recover can help protect trustees, members, and creditors. It will also ensure a fair and legal resolution for everyone.

What Are Industrial and Provident Societies, and How Have They Changed Over Time?

Industrial and Provident Societies were traditionally used for co-operatives and community enterprises. They worked on a unique mutual ownership model where members benefited from the organisation’s success.

Later, the Co-operative and Community Benefit Societies Act 2014 replaced the IPS structure with two modern forms:

• Co-operative Societies – Businesses run for the mutual benefit of members, such as worker co-operatives and consumer co-operatives.
• Community Benefit Societies (BenComs) – Organisations that operate for the benefit of the wider community, such as housing associations and social enterprises.

Although new societies must now register under these categories, older IPS structures still exist. They will therefore need to follow specific insolvency rules if they encounter financial trouble.

What Are the Legal Requirements of Insolvent Industrial and Provident Societies?

When an Industrial and Provident Society (or its modern equivalent) becomes insolvent, it must follow insolvency procedures under UK law. Because of the nature of their function, they must also comply with Financial Conduct Authority (FCA) regulations.

Key legal requirements include:

1. Directors’ and Committee Members’ Duties

Under the Co-operative and Community Benefit Societies Act 2014 and Insolvency Act 1986, those responsible for the society should:

• Stop trading if insolvency is likely unless advised otherwise by an insolvency practitioner.
• Prioritise creditors over members of the society’s mission to avoid wrongful trading.
• Seek professional insolvency advice to reduce personal liability risks.

2. Informing the FCA and Stakeholders

Unlike traditional companies, IPS and their modern equivalents must notify the Financial Conduct Authority (FCA) if insolvency is inevitable. Depending on the society’s structure, additional notifications may be required for:

• The Charity Commission (if the society has charitable status).
• Regulatory bodies specific to housing or financial services.

Creditors, employees, and members will also need to be informed to ensure full transparency.

3. Avoiding Wrongful Trading and Personal Liability

Committee members or directors who continue trading while knowing the society is insolvent may be held personally liable for debts under the Insolvency Act 1986.

This is one of the reasons it is important to speak to us as soon as possible. Your first consultation is free and seeking early professional guidance helps mitigate risk and ensure compliance.

What Will Insolvency Involve for Industrial and Provident Societies?

If an Industrial and Provident Society is insolvent, it must go through a formal process. The steps typically include:

1. Assessing the Financial Position

2. Seeking Advice from an Insolvency Practitioner

3. Informing Creditors and Regulators

4. Choosing the Right Insolvency Procedure

5. Distributing Assets and Closing the Society

If the society is to close the assets must be sold or transferred according to governing documents and distributed fairly to creditors. All this must be handled in line with any legal asset locks.

As you can see there are some very specific and often technically complex processes to follow. So coming to us as soon as you realise you have a problem can be a vital factor when it comes to the options available. The sooner you act, the sooner we can get things moving and protect your interests.

How Smart Business Recovery Can Help with Industrial and Provident Society Insolvency

You play a vital role in communities and member-driven enterprises are subject to very specific rules. That means you will need specialist, focused and appropriate solutions.

We provide:

• Specialist Insolvency Advice – Understanding the unique legal requirements of co-operative and community benefit societies.
• Rescue & Restructuring Support – Exploring recovery solutions before liquidation.
• Company Voluntary Arrangements (CVA) – Helping viable societies manage debts and continue operations.
• Creditors’ Voluntary Liquidation (CVL) – Ensuring a structured and fair wind-down process.
• Regulatory Compliance Support – Assisting with FCA reporting and governance responsibilities.
• Compassionate, Professional Guidance – Recognising the importance of mutual societies and offering supportive, transparent advice.

Our goal is to help societies navigate insolvency with clarity and fairness.

Your initial consultation to discuss the best solution for your organisation is free.