WRITTEN BY Katie Innes
Mutual enterprises have, traditionally, been restricted in the ways they could raise capital to avoid triggering the demutualisation provisions. However, on 6 April 2019 the Federal government introduced the Treasury Laws Amendment (Mutual Reforms) Bill 2019 introducing a new way of capital raising for mutual entities.
A mutual capital investment or an MCI, is a “security” or a “financial product” regulated under the Corporations Act 2001 (“Corps Act”). MCIs allow mutual entities to raise money without relying solely on debt or compromising its member owned or mutual status. As such, issuing MCIs are governed by the same provisions which apply to the issue of shares. These provisions include the fundraising and disclosure requirements of the Corporations Act.
To be capable of issuing MCIs, the entity must be a ‘mutual entity’ within the definition of s.167AC of the Corps Act, and specifically it must be an ‘MCI mutual entity’. A mutual entity will be eligible if they:
For an instrument to be an MCI the security must have certain class rights attached to it and a number of constitutional amendments are required. These amendments include (but are not limited to):
Further, for an entity which is not yet an MCI Mutual entity, there is a specific process which must be followed in order to make the necessary constitutional amendments to conform. It is important to note that there is a time limit placed on when these amendments can be made.
Once a company has passed the necessary constitutional amendments and it has registered those amendments with ASIC, it is able to issue MCIs. Depending on the nature of the offer of MCIs, a company may be required to follow certain disclosure requirements.
If you have any questions about how best to implement MCIs in your company, rules of disclosure or governance regarding dividend decisions, please contact the Business & Commercial team at BAL Lawyers.
By Katie Innes with the assistance of Nicole Harrowfield.
 The necessary amendments need to be made before 5 April 2022.