MPs want to stop the capture of private capital by mutual companies

A major bill to prevent mutual companies from being taken over by private equity firms and milked for cash is making its way through Parliament.

The Co-operatives, Mutuals and Friendly Societies Bill, introduced by Labor MP Sir Mark Hendrick, is due to be introduced for second reading in the House of Commons this week.

This would help member-owned mutuals like LV Life to raise money from outside investors when they need more money.

LV, founded in 1843 to help Liverpool’s poor to bury their dead, was put up for sale to US private equity giant Bain Capital last year by its management.

They argued that LV was in desperate need of money to modernize and that it could not raise capital from its members. The deal was rejected after a campaign by the Daily Mail and The Mail on Sunday.

Backed by organizations such as the Financial Mutuals Association and consultancy Mutuo, Sir Mark now wants to make it easier for mutuals to raise money.

He said: “I want to come at it from an agenda that the government has to satisfy. Cooperatives and mutual societies are self-help. People who pull themselves together and try to continue life and business without necessarily being taken care of by the state.”

His bill has four pillars. The first will be a “fix” to the 2015 law that allows institutional investors, such as pension funds, to invest in mutual funds.

Although the law was passed, it ran afoul of the HMRC, which decided it would crack down on any organization that tried to use it with corporate tax.

Sir Mark also wants to extend the scheme to co-operatives. In addition, he believes members should be allowed to vote to protect the savings that have accumulated in mutuals over generations.

The bill would give members the ability to protect that money in perpetuity so that it can only be used for purposes specified by the business.

Finally, Sir Mark also wants to reform the outdated laws governing friendly societies.

Peter Hunt, managing partner of Mutuo, said: “Why doesn’t the government want to do this?”