What's a Mutual Capital Instrument?
Mutual companies are member-owned, public companies. Members are customers, who are also owners of the Mutual.
Mutual Capital Instruments (MCIs) are a form of share that an investor can own in a Mutual company. In 2019, Part 2B of the Corporations Act 2001 (Cth) was amended to provide regulation to the MCIs.
- MCIs are long-term, stable-term investments and are used to provide additional capital to Mutual organisations, on top of membership and product fees.
- MCIs can be offered to Members of a Mutual and, to external investors. They are subject to the same requirements of disclosure and information as ordinary shares.
- MCI investors may receive dividends payments from their investment, as determined by the Mutual’s constitution.
- MCIs do not compromise a Mutual’s member-owned status.
- It is possible to have a secondary market for MCIs.
- There are various other rights, such as voting rights, which can be designed into a particular MCI issue.
Before MCIs, Mutuals could only raise additional funds through borrowing from the big Banks or attracting new members. This restricted the ability of Mutuals to grow and compete, often in the same market as the big banks.
With 80% of Australians being members of a Mutual or a co-operative*, ensuring they are competitive and robust is vital.
MCIs are used by member-owned organisations to increase growth, fund innovation and compete with publicly listed companies.
MCIs have been heralded as ‘modernisation without corporatisation’ and allowing Mutual organisations to invest in growth and services – all for the benefit of customers.
* Measuring the value created by Australia’s cooperatives and mutuals, Monash University, 17 November 2017.