Law Commission proposes consolidating Friendly Societies law and modernising regulation

# What happened

# Why this matters

The Commission describes the current legal framework as complex, fragmented and outdated. Repealing the 1974 Act and consolidating all societies under the 1992 Act is aimed at simplifying rules, enabling societies currently without separate legal personality to incorporate, and aligning governance and regulatory tools with modern standards. The proposals also respond to a government objective to grow the mutuals sector.

# Main recommendations

• A transition period: repeal would take effect three years after the Friendly Societies (Amendment) Bill becomes law, with a one-time three-year extension available to HM Treasury. The FCA has indicated it will offer support for re-registration or conversion. Any society still registered at the end of the transitional period would have its registration cancelled.

• New FCA powers: the Commission proposes giving the FCA an effective toolkit to manage serious non-compliance beyond the current limited powers. The framework would include procedural steps such as issuing warning notices, proposed cancellation notices with time to rectify, rights to make representations, and appeal rights to the court. Cancellation would also be available where a society has fewer than three members.

• Alignment with company law: the report recommends allowing disqualification for persistent breaches, bringing certain enforcement tools closer to those available for companies.

• Insurance and reinsurance scope: the report recommends expanding permitted insurance purposes to cover the full range of insurance activities regulated under FSMA, subject to limited exceptions and PRA authorisation for specific activities. Current reinsurance restrictions would be removed, allowing societies to reinsure business that may otherwise be transferred to them, subject to regulatory permissions and FSMA supervision.

• Administrative simplifications: statutory declarations for rule or memorandum amendments would be removed while keeping the FCA's role to check compliance before amendments take effect. Friendly societies would be permitted to form and hold subsidiaries without prior memorandum amendment and FCA registration.

# Practical implications for societies and regulators

Existing 1974 Act societies must plan to re-register or convert within the transitional window or risk cancellation. Societies will face clearer statutory duties for management committees and new mandatory rules they must adopt. The FCA gains stronger enforcement powers but must follow prescribed procedural safeguards. Expanded insurance and reinsurance capabilities will be available only with PRA/FCA authorisation and oversight.

# Next steps