Call for support on UK co-ops and mutuals bill ahead of its second reading

Campaigners say the bill will “help mutual insurers, friendly societies and co-operatives compete on a more even playing field”

Co-operators are being urged to voice their support for the Co-operatives, Mutuals and Friendly Societies Bill, which is due for its second reading in the House of Commons next month.

The private members’ bill, which passed its first reading on 15 June, was developed by advocacy organisation Mutuo and Preston’s Labour and Co-operative MP, Sir Mark Hendrick, and covers four key areas of reform long sought by the co-op movement.

Firstly, it would make changes to share capital arrangements for co-ops, enabling them to raise more money through perpetual, non withdrawable shares. The bill’s campaign website states that “co-operatives are at a disadvantage to their shareholder-owned competitors in relation to how they raise and retain capital”, and that “further legislative reform is now needed in the UK, so that co-operatives have new options to access the finance capital that they need for growth.”

The bill would also confirm that mutual insurers and friendly societies that issue mutuals deferred shares would not be disproportionately impacted when paying corporation tax. The Mutuals Deferred Shares Act was passed in 2015, allowing mutual insurers and friendly societies to issue share capital for the first time.

An option for legacy reserves to be made indivisible for co-ops, mutual insurers and friendly societies is also proposed as a disincentive to demutualisers. The bill’s website references the recent attempt to demutualise LV= in its argument for the provision: “As witnessed with LV= in 2021, mutuals remain a target for asset stripping demutualisers, attracted by the legacy assets built up over generations”, adding that legislative safeguards such as this would “disincentivise asset raids, and to help to preserve mutual ownership and corporate diversity”. Most co-ops currently include non-distributable capital surplus provisions in their rules, but according to a statement made by Co-operatives UK, this often falls short of the permanent legal guarantee sought by co-op investors.

Related: After LV= escapes demutualisation, what does it – and the mutual sector – do next?

Also included in the bill are changes to the Friendly Societies Act 1992, which the campaign says is “desperately out of date in a number of areas”, imposing “unnecessary restrictions on ambitious friendly societies and … problems that the Companies Act has overcome in the intervening period”.

It adds: “Friendly societies need to be able to conduct business in a modern and facilitating environment, such as that enjoyed by their corporate counterparts.”

The campaign supporting the bill is led by Mutuo, Co-operatives UK and the Association of Financial Mutuals (AFM). The Co-operative Party and the All Party Parliamentary Group for Mutuals are key supporters of the campaign, and the bill team is being advised by co-op lawyer Cliff Mills of Anthony Collins Solicitors and John Gilbert, friendly societies legal expert.

AFM CEO Martin Shaw said: “Mutuals and co-operatives diligently serve many millions in the UK, including many of the most hard-pressed in our population. Yet they do this most of the time with one hand tied behind their back, forced to operate within outmoded legislation. This important bill will help mutual insurers, friendly societies and co-operatives compete on a more even playing field.”

In his summer update, Co-operative Party chair Jim McMahon said the bill “reflects the call within our movement to open up investment in the sector, give greater support to co-operatives and mutuals, and provide a vital means by which they can continue to grow and develop”.

Mutuo has launched a website to enable individuals and businesses to find out more and write to their MPs backing the bill, and are encouraging supporters to get involved and join the campaign before the bill’s second reading on Friday 28 October.

Mutuo’s managing partner Peter Hunt said: “‘The second reading is a crucial parliamentary stage for a private members bill. It is the opportunity to outline the scope and purpose of the bill and to demonstrate the level of support that it has among parliamentarians and from the co-operative and mutual business sector.”

Co-operatives UK’s head of policy, James Wright, said: “From consultations with our members, we know these measures enjoy widespread support within the co-operative sector. Now it’s essential that MPs and ministers hear this directly from co-operatives themselves. 

“Private members’ bills like this one only pass when MPs and ministers know there’s strong support.”