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July 17, 2013

Customers and membership of mutuals

From time to time we are asked whether all customers of a mutual must be members.

One of the factors that ASIC may take into account in determining whether a company is a mutual is whether each customer of the company is required to be a member of the company.

This depends on the the history, structure (as set out in the Constitution) and circumstances of the company.

In ASIC RG147 (“Mutuality – financial institutions”) ASIC accepts that while the requirement for all customers of a financial institution to be members is a relevant factor in determining whether the financial institution is a mutual, it does not see it as fundamental to the concept of mutuality and considers that a company can be a mutual without that feature (RG 147.53).

But care needs to be taken as membership changes to an existing constitution could trigger a demutualisation.

ASIC has 2 mutuality tests: the economic relationship test and the governance test.

The factor which is critical is whether each member (or joint membership) has only 1 vote.

ASIC cautions mutuals in setting membership qualifications to make sure that member qualifications do not effectively advantage a minority (ASIC expects no more than a small percentage of members, such as 10%, to be excluded as a result of membership or voting qualifications).

ASIC makes it clear that while "one member, one vote" is the most common and clearest way to achieve member control over the way their company is governed a company does not cease to be a mutual merely because it has membership or voting qualifications.

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Posted 17th July 2013 by David Jacobson in Uncategorized

October 11, 2008

About Langes+

Langes+ is a national commercial and corporate law practice specialising in financial services and insurance law, with a strong emphasis on the mutuals sector.

Each of the partners have been working with credit unions and mutuals for a long time. We've got a lot of experience and some very good ideas which we'd like to share with you.


Richard Farago: Email
Richard Joice: Email
Compliance: Email

L6, 60 York St Sydney NSW 2000
T: 02 9299 7577
F: 02 9299 8577


Shannon Adams: Email
Rob Surman: Email

Level 4, 117 King William Street, Adelaide SA 5000
GPO Box 2606
Adelaide SA 5001

T: 08 8168 9600 08 8168 9600

F: 08 8168 9666.


David Jacobson: Email

PO Box 1282 Indooroopilly QLD 4068
T: 07 3878 5098 07 3878 5098
F: 07 3102 0355

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Posted 11th October 2008 by David Jacobson in Legal, Uncategorized