The Mutuals Deferred Shares Bill will allow member investment shares for the first time, meaning firms will no longer have to rely on raising capital through earnings.
Jonathan Evans MP, who completed the bill’s final stage, said: “The important contribution made by mutuals to both innovation and corporate diversity has been significantly undermined by their inability to raise regulatory capital other than by retaining past profits, without losing their mutuality.
“I have no doubt that many more mutual companies would still be around today if these measures had been passed three decades ago.”
The bill was devised by the think tank and consultancy Mutuo in partnership with mutual insurers and friendly societies such as LV=, Royal London, Wesleyan, Family Assurance, Engage Mutual and the Association of Financial Mutuals.
It was successfully piloted through the House of Lords by Lord Naseby as a private members bill.
Naseby said: “Our challenge was to amend the capital regime in mutuals to permit the injection of external capital, whilst safeguarding both the core purpose and mutual integrity of the business.
“I believe we have achieved that objective.”
The next step is for detailed regulations to be prepared by HM Treasury and agreed with regulatory authorities. Once adopted by Parliament, the new regime will permit firms to begin issuing shares.
