A legal identity for mutuals: distinguishing between profit and purpose

In 2017, the Australian Government agreed to implement corporate law reforms recommended by the Hammond Review, including inserting a definition of “mutual entity” in the Corporations Act and introducing a special equity instrument allowing mutuals to access investor capital without risking demutualisation. This article considers the reasons why mutuals have lacked a distinct legal identity – and the implications of the proposed definition of a “mutual entity”. Australia’s “one size fits all” regulatory approach has not well accommodated the member-owned business model. The article distinguishes a mutual from an investor-owned company. It also argues that if mutuals are given the power to issue equity instruments to investors as a separate class of member, there should be statutory recognition and protection of the intergenerational nature of equity in a mutual fund.