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Letter D

Demutualisation

This is the term given to what building societies and mutual life companies do when they float on the stock market or just sell out to another company.

Building societies and mutual life companies are owned by their members ie their customers.

In the case of Building Societies membership is normally dictated by having a mortgage or having a shares account. In the case of a life company this can normally be demonstrated by having a with profit policy.

If the building society or life company wants to demutualise the members or a majority of them have to vote in favour of it. If this happens the members can benefit from a lump sum payout but they no longer have a stake in the organisation as they have essentially sold it. As such they can no longer vote at annual general meetings from then on, unless they hold shares in the new organisation and then they can vote as ordinary shareholders.