Earlier this week, NTUC Income (Income) announced that the company intends to convert its current legal structure from a co-operative to a company that would be governed by the Companies Act.
If you don’t already know, the National Trade Union Congress Enterprise, or NTUC Enterprise as more of us know it, is the holding entity and single largest shareholder of the NTUC Enterprise group of social enterprise. These consist of companies including NTUC FairPrice, NTUC First Campus, NTUC Foodfare, NTUC Health, NTUC Income, Kopitiam, NTUC LearningHub, NTUC Link, Mercatus & MoneyOwl.
Moving forward, NTUC Income will no longer be a co-operative, and instead, will be converted into a company governed by Companies Act – Income Insurance Limited.
Why Was NTUC Income A Co-operative In The First Place?
To understand why NTUC Income wants to become a corporate entity, we first need to understand the reason why Income was a co-operative in the first place.
Formed by the Labour Union, NTUC was created with the primary purpose of serving workers and their families. According to NTUC Enterprise, the idea of social enterprises was first conceived in 1969 to meet the needs of the Singapore community in areas such as life insurance and essential consumer goods. Like companies, social enterprises must compete against other companies in the market and generate profits to remain viable. However, they also have to contend with more regulations as opposed to a private company. At the same time, they have a social objective that is incorporated into their core objective as an enterprise.
At this point, it’s important to note that NTUC Income is a co-operative. As a co-operative, this means that it’s owned by its members, as opposed to just an individual or a small group of individuals. While it’s not-for-profit, co-operatives should not be confused as charities or government-linked entities.
And that was how NTUC Income was created from day one – to serve a societal need of providing insurance coverage, possibly during a period where not everyone can get easy access to affordable life insurance coverage.
However, it is important to note that a social enterprise need not be a co-operative. Post-corporatisation, Income will remain committed to its mission and purpose. NTUC Enterprise will also remain the majority shareholder of the new company, which will continue to be part of NTUC Enterprise’s network of organisations.
Read Also: What is the Difference Between a Charity and a Social Enterprise?
Unlike in 1970 when Income was first set up, modern Singapore today is no longer short of insurance players wanting to offer great deals to consumers. Whether it’s established insurers like AIA, Great Eastern and Prudential, or new players like Singlife, consumers today have plenty of choices when it comes to deciding who they wish to buy their life insurance policies from. Thus, it’s understandable why Income sees “corporatisation as a strategic and essential pivot for Income to scale its business quicker locally and regionally, invest in growth channels and markets, as well as digital capabilities to effectively compete more equitably with other insurers.”
Read Also: Complete Guide To Understanding What Are Co-Operatives In Singapore And How Do They Work
In contrast, a corporate entity will have more leeway to make business decisions as and how its deemed fit by its management and shareholders. For example, they can make business decisions that may require large initial investments that may not necessarily benefit their members, but would be vital in helping the business with its expansion in other markets and to stay competitive. They can also choose to raise funds from external investors if they want, or choose to borrow from financial institutions to fund more risky expansion plans in overseas markets.
Will More Co-operatives Be Converted To Corporate Entities?
While unexpected, the move to convert Income from a co-operative to a corporate entity perhaps isn’t a complete surprise either given the fact that Income has been competing in the same challenging market as many large private insurers in Singapore with the co-operative model serving no discernible commercial advantage in an increasingly competitive insurance space.
Perhaps a question would be whether we could see a trend where more co-operatives take a similar path and opt to corporatise their entities in the future.
Photo by Isabel Lee on Unsplash
Subscribe To The DollarsAndSense Business Pass
Enjoy what you are reading and want more? Join The DollarsAndSense Business Pass and unlock access to valuable tools, exclusive networking opportunities, and tap into the wisdom of industry experts to fuel your business expansion!
