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Mutual Entities bill – tranche 2

Mutual Entities bill – tranche 2

KPMG’s Anetta Johnston, David Jonavicius and Matthew Darling discuss draft legislation released by the Federal Government – the second tranche to follow the Hammond report on ‘Reforms for Cooperatives, Mutuals and Member-owned Firms’.

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The Assistant Minister for Treasury and Finance Zed Seselja released for consultation, on 26 November, the exposure draft of the Treasury Laws Amendment (Measures for a later sitting) Bill 2018: Mutual entities (tranche 2) (Draft Legislation), highlighted in News in brief last week.

As the name suggests this is the second part of the government’s response to implementing recommendations from Greg Hammond’s Report on Reforms for Cooperatives, Mutuals and Member-owned Firms (Hammond Report) released in July 2017.

Recap

In October, we reported on the first tranche of legislation which had the following changes:

  1. Definition of a mutual - the definition provides that a mutual entity is a company registered under the Corporations Act 2001 (the Act) that has a constitution which provides that each member of the company has no more than one vote at a general meeting of the company.
  2. Removing the uncertainty for transferring financial institutions and friendly societies in respect of the demutualisation provisions – the disclosure requirements for a demutualisation will now be triggered when an entity that currently meets the new mutual entity definition makes a change to its constitution so that it no longer meets this definition.

The second tranche

The second tranche of Draft Legislation provides for mutual entities registered under the Act as above to issue a new bespoke capital instrument, Mutual Capital Instruments (MCIs), without risking their mutual structure or status. The Draft Legislation also provides a standard process to allow eligible mutual entities to amend their constitutions to allow them to take advantage of these reforms.

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