Investopedia explains 'Mutual Company'
The mutual company structure is commonly found in the insurance industry, as well as in savings and loans associations. In addition, many banking trusts and community banks in the U.S., and credit unions in Canada, are also structured as mutual companies.
The term "mutual" is believed to arise from the fact that in an insurance mutual company, for instance, a policyholder is both the insured party (as the company's customer) and the insurer (as part owner).
Most institutions that are structured as mutual companies are private entities rather than publicly traded companies. In recent decades, many mutual companies in the U.S. and Canada have opted to change from the mutual structure to a joint stock corporate structure, a process known as demutualization.
|
