What does the Law Commission’s consultation on community benefit societies mean for RPs?

The Law Commission has proposed a change to mandate open membership of a CBS, with one vote per member. Ultimately, this is a principle that could make the decision-making process unwieldy for RPs.

Engaging a broader member base for annual general meetings would be challenging, and even more so for significant decisions such as mergers. This may slow down operational efficiency significantly, posing a challenge particularly for larger entities with hundreds, or even thousands, of residents.

“Requiring CBSs to be registered with the Charity Commission would impose considerable administrative burdens and compliance challenges”

Perhaps one of the most significant changes proposed by the consultation is mandatory registration with the Charity Commission. Alongside being RPs, housing associations are often also registered as CBSs with the Financial Conduct Authority, the financial regulator. This emphasises their mission to provide greater social benefits than private businesses.

However, they currently cannot register with the Charity Commission, although they do have charitable status and have to comply with charity law. This could be about to change.

Requiring CBSs to be registered with the Charity Commission would impose considerable administrative burdens and compliance challenges. Additionally, if CBSs aren’t given some relief from the Charity Commission’s application process, it could face an overwhelming number of applications.

And with stricter requirements around organisations’ objectives and public benefits, RPs could face another level of scrutiny that they currently avoid.

The proposal to align directors’ duties with the Companies Act 2006 may be a relatively straightforward update, but it’s definitely more than just a bureaucratic check box.

This shift is about solidifying governance practices that many RPs already excel at, translating high standards into formalised duties. Under current law, board members of any entity defined as a CBS are required to act in the interests of the organisation. As a result, most RPs will already have a code of governance that arguably has stricter board member duties than those set out in the Companies Act.

The proposed amendment changes these standards from expectations to obligations, so there may be a small number of RPs that need to catch up.

“The government is clearly pushing for CBS law to be modernised and aligned with charity law, but certain provisions, particularly registration and membership, may still be influenced by the consultation responses”

Exactly what form any law changes take depends on consultation feedback. The government is clearly pushing for CBS law to be modernised and aligned with charity law, but certain provisions, particularly registration and membership, may still be influenced by the consultation responses.

If enacted, these proposals could alter governance, accountability and financial management in the social housing sector significantly. While many RPs already maintain high standards, formalising these practices through legislation is an additional layer of complexity, requiring more resources for adjustments. If the consultation proposals become law, RPs need to prepare thoroughly.

A few steps they can take include reviewing and streamlining governance frameworks and board member duties to align with the Companies Act requirements, being prepared to adapt swiftly to new membership and voting rules, and familiarising themselves with Charity Commission regulations to ensure smooth transitions.

Ideally, we’d like to see a balanced approach that recognises the unique position of RPs within the CBS and charity sectors, and that they operate differently to private property companies, other CBSs and charities.

As the consultation progresses, the sector must stay informed and ready to adapt, ensuring its voice is heard and its operations remain resilient amid change.

Jo Loake, consultant solicitor for the social housing team, Weightmans