Parliament gives first reading to Lord Naseby’s Bill
The Bill, brought forward by the experienced Peer, Lord Naseby, was read for the first time in the House of Lords on Monday 22nd July.
The Mutuals’ Redeemable Shares Bill seeks to make the necessary legislative changes to permit co-operatives, friendly societies and mutual insurers to access additional capital whilst safeguarding their mutual purpose and status. This legislation will facilitate growth in the mutual sector and increase competition with proprietary businesses. It takes forward a key recommendation of The Ownership Commission (Chaired by Will Hutton which reported in 2012.)
By their very nature, mutuals are limited in how they can raise capital. Like all businesses, they can retain profits and can borrow against future earnings, but they have no equity shareholders so do not have access to this type of prime capital.
Mutuo Chief Executive Peter Hunt said:
“The challenge has been to amend the capital regime in mutuals to permit the injection of external capital, whilst safeguarding both the core purpose and mutual integrity of the business. We can point to existing examples of where this has been achieved in other countries such as Canada and The Netherlands.
Lord Naseby’s Bill offers a radical step for UK mutuals which are keen to take advantage of their high levels of trust among customers and members.”
New shares would be created which provide an option for institutions and individuals seeking to diversify their investment portfolio.
The shares will be fixed term shares, commonly not transferable but redeemable by the issuing mutual. Mutuals may in due course construct internal trading schemes for some types of shares to promote greater liquidity.
Notes to Editors
Mutuo has produced this draft Bill with the assistance of leading co-operative and friendly society/mutual insurer lawyers, Ian Snaith of DWF LLP and John Gilbert of Hogan Lovells LLP.
Redeemable Shares would entitle the holder to:
· membership of the mutual
· one vote as a member, however many shares were held
· such level of interest as was payable under the rules
· repayment of the capital at par at the end of the term, or sooner if the society was wound up
In summary, the Bill will:
· Create an optional new and additional class of redeemable share through which specified mutuals can raise additional funds.
· Provide consequential rights to specified mutual society members.
· Restrict the voting rights of certain members who hold only redeemable shares, so that they cannot participate in any decisions to transfer, merge or dissolve the mutual.
On 22 July, Rt Hon Lord Naseby presented the Bill in the House of Lords as the first stage in its Parliamentary journey. Lord Naseby is a long standing supporter of mutuals in Parliament, current Vice Chairman of the All Party Parliamentary Group for Mutuals and a former Chairman of Tunbridge Wells Friendly Society.
Mutuo is now leading a campaign for all-party support for the Bill.
All enquiries: Peter Hunt 07785 223846 Mark Willetts 07525 630007