Demutualization

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Demutualization

Refers to the process that has come about as the result of many not-for-profit exchanges (mutual companies owned by groups of members) converting to for-profit and then shareholder companies in order to go public.

Demutualization

The process by which a mutual company becomes a publicly-traded company. A mutual company is a company owned by its members or users for the benefit of those members or users. In demutualization, the members give up their rights and receive shares in the company in return, which the (now former) members may then sell. Demutualization happens most often when a stock exchange owned by its members goes public.

As an aside, a mutual company should not be confused with a mutual fund.
References in periodicals archive ?
"Standard Life will not demutualise unless eligible members vote for the proposals at a special general meeting planned for May or June 2006.
However, many building societies have got wise to the opportunists and now require new members to donate their windfalls to charity when they demutualise.
Mr Bailey told Ministers that he kept his money in the West Brom wich Building Society, one of the few major building societies which refused to demutualise. It was still going strong, he said.
To demutualise, so distributing "free" shares to policyholders, could seem superficially attractive, but it would mean profound changes in the running of the company.
This is a question which is being asked more and more as pressure increases on insurance companies and building societies to demutualise.
He said: "We have a clear and emphatic vote of confidence in our proposal to demutualise, and this decision is an excellent outcome for the future of Standard Life."
-STANDARD Life, our largest remaining mutual insurer, is pressing ahead with plans to demutualise next year.
I'VE been told my Standard Life endowment would not qualify for a windfall if they decided to demutualise. Could you explain why?
The financial giant has 2.4 million eligible members in 146 countries around the world who may be eligible for payments should the company demutualise. However, 75 per cent of members must vote in favour of the proposal for this to happen.
If Standard Life does demutualise there would be only a handful of mutual life insurers left, including Equitable Life, which is closed to new business.
Standard Life members are in line for average windfalls of around pounds 1,700 after the insurer released details of its plans to demutualise today.
However, to deter carpetbaggers, new policyholders will not now be entitled to any pay-out if the company is forced to demutualise in the first three years of their contract.