CUA modernises its constitution

CUA is proposing to drop its A$10 membership fee, among a series of amendments to its constitution that it will put to members at an extraordinary general meeting today.

The mutual also plans to introduce stricter voting qualifications and a provision that would allow it to raise capital by issuing non-voting shares.

Under CUA's current constitution, a new customer must contribute a one-off membership payment of $10 before being eligible to purchase any CUA product or service. The payment is usually made at a branch.

After making a significant investment in its technology over the past couple of years, including a new core banking platform and a new online service, CUA management has found that the $10 fee hinders new customers who want to deal with the mutual though digital channels.

Its view is that the fee involves unnecessary administrative effort and cost, it detracts from the customer experience and creates an impression of CUA as old-fashioned.

The proposal being put to members is that the cost of membership be reduced from $10 to zero. As a result new customers will no longer be required to visit a branch to become members.

Existing members will be able to request the repayment of their membership fee and receive a nil value membership share in its place. CUA has 400,000 members and would be up for a $4 million payout if every member took up the offer.

This provision has raised some questions. Why is the refund voluntary and not automatic for all current members? And why is the refund $10 and not some other value reflecting the change in the value of membership?

CUA chief executive Chris Whitehead said the refund was voluntary due to a technical issue in the Corporations Act. The law does not allow a company to force a shareholder to sell a share.

As to the value of the refund, Whitehead said the member shares were purely membership fees, without any entitlement to dividends or capital gains. Their value was constant.

CUA is also proposing the introduction of qualifications for voting rights. Members must hold a current deposit account or loan account.

Whitehead said: "Some customers are no longer active and we felt that, as a governance issue, for the purposes of the controlling the organisation voting rights should be for active members."

The third proposal for change is the introduction of a provision allowing for the issue of non-voting shares with dividend entitlements. The idea is to have a mechanism that would allow CUA to raise capital.

Whitehead said the mutual had no plans to use the funding mechanism and already had provisions that allowed it to raise such funds.

The purpose of the current proposal is to clarify the rights of members and the rights of non-voting shareholders.

"This change is about protecting the mutuality of the organisation," he said.