United Credit Union Ltd has moved to change its constitution so members have more power to voice their views in the case of any proposed demutualisation – including funding for legal advice and provision of a website.
United Credit Union Ltd has moved to change its constitution so members have more power to voice their views in the case of any proposed demutualisation – including funding for legal advice and provision of a website.
The Subiaco-based mutual has acted after the long-running saga of its rival, StateWest Credit Society Ltd’s, planned merger with Home Building Society Ltd.
StateWest had to rerun the whole process after dissident members, funded by United, won a key legal battle over disclosure.
However, United chief executive Ian Williams said the move to strengthen members’ rights was not a reaction to the StateWest demutualisation process and involved a series of initiatives that reflected changed practices across the industry during the past three years.
“In general terms it is additional protection and looking to see there is informed and open debate about what are the fundamentals of the structure of the entity,” Mr Williams said.
He said corporations law was very much structured around listed companies, where shareholders’ economic interest was reflected in the voting power, against a mutual where it was simply one-member-one-vote.
“It is almost regulatory failure,” Mr Williams said.
“What we say is the obligations of directors and boards at any time are high, but are even higher when you are dealing with one-member-one-share businesses.”
Among the proposed changes in the United constitution in the event of a demutualisation proposal are:
• benefits must be assigned to charity in the first year of membership;
• members given opportunity to make and distribute written submissions;
• provision of a website facility for comment;
• funding (subject to undisclosed limits) for member groups to obtain professional advice; and
• establishment of a mediation procedure to deal with members’ complaints or disputes.
Mr Williams said these clauses would only take effect if a demutualisation proposal was put on the table, which was not the case at present.
He said typically for a demutualisation process to go forward it would be backed by the board and therefore the proposal’s advocates would have the financial support of the entity.
“That would mean there is all the resources to ensure the ‘for’ case is argued,” Mr Williams said.
“It [the proposed constitutional change] is a focus on that; it is not about obstacles to members making choices.”
United is a similar-sized operation to StateWest but considerably smaller than another key industry rival, Police & Nurses Credit Society Ltd, or the former mutual Home.
Last financial year, United reported $550 million in loans under management compared with StateWest’s $632 million, P&N’s $1.3 billion and Home’s loans (on and off-balance sheet) of $1.1 billion.
In profitability terms, though, United struggles to compare.
In 2004-05, StateWest reported net profit of $7.2 million, a drop of almost 12 per cent, which did not include one-off gains in 2004 from the sale of investments.
United’s net profit for the period was just $1.3 million, a fall of almost 23 per cent despite booking a profit on the sale of its head office building. The accounts show a significant rise in operating expenses.
P&N reported a $10.2 million net profit for the year ended June 2005, a rise of 32 per cent, while Home increased profit by 24 per cent to $7 million, helped by another increased contribution from its extensive land development activities.
