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Demutualisation occurs when a private, member-owned company, such as a mutual life insurance company, legally changes its financial structure to become a publicly traded company owned by shareholders. A mutual company is a private company that is owned by its customers or policyholders. In the case of a mutual company, the company’s customers are also its owners. Insurance companies and credit unions are often structured as mutual companies. An example of a mutual company in Australia is Australian Unity (mutual health insurance company) which collects policyholder premiums from its members and disperses company profits to its members in various ways.
Prominent examples of demutualisations in Australia include Colonial Mutual (now CBA) and AMP which both demutualised in 1997, and NRMA (now IAG) which demutualised in 2000. All three companies are still publicly traded on the ASX today, with many shareholders still holding on to shares they acquired through the initial demutualisation. If you are selling shares acquired through a demutualisation, it is important to consider the capital gains tax implications of doing so, particularly the cost base of your shares as at the date of demutualisation. The cost base for shares acquired through demutualisation is usually explicitly stated. For example, if you acquired IAG shares as a result of the demutualisation of NRMA Insurance Limited, your shares are taken to be acquired on 19 June 2000 at $1.78 per share for tax purposes.