Co-operative Legislation In Kenya

The three main sources of co-operative laws applicable to the co-operatives in Kenya are:

  • The Co-operative Societies Act (Cap 490 of the Laws of Kenya)
  • The Co-operative Societies Rules 2008
  • The Sacco Society Act 2008
  • The Sacco Societies Regulations
  • The registered By-laws of the co-operative society

Other sources include government policies issued from time to time in form of circulars (commissioners circulars) and resolutions passed by members in validly convened and conducted general meetings.

The co-operative Societies Act

This is an Act of Parliament relating to the constitution, registration and regulation of co-operative societies. It is the supreme law relating to the operations of the co-operative societies. Like any other law, the provisions of the Act do not in any way conflict the constitution of Kenya.

The Act is one of the documents that should be available in every co-operative society office and should be thoroughly understood and referred to by the officials from time to time in the conduct of the society business.

The Co-operative Societies Act provides the following areas

  • registration of co-operative societies
  • privileges of a registered co-operative society
  • rights and liabilities of members
  • duties of co-operative societies
  • amalgamation and division of co-operative societies
  • rights and obligations of co-operative societies
  • property and funds of co-operative societies
  • inquiry and inspections
  • surcharge
  • dissolution
  • settlement of disputes
  • offence under the Act, the rules and penalties

The Act has broad provisions and does not specify how certain issues shall be implemented. Section 91 of the Act therefore gives the Minister power to make rules for the better carrying out of provision and purpose of the Act.

The Sacco Society Act, 2008

This Act of Parliament makes provision for the licensing, regulation, supervision and promotion of Sacco societies, to establish the Sacco Society Regulatory Authority and connected purposes. This Act is divided in seven parts as follows:

  • preliminary
  • the Sacco Societies Regulatory Authority
  • licensing of Sacco societies
  • regulation Act and supervision of Sacco societies
  • the deposit guarantee fund
  • miscellaneous
  • schedule-conduct of the affair of the board

The Co-operative Societies Rules

The rules are subsidiary legislation made by the Minister. The Minister derives powers to make rules under Section 91 of the Act. The current rules were made and became effective from November  2004. Being subsidiary legislation, the Rules do not conflict with the Act.

The rule is another document that society should keep in the office and should be referred to and used by the society officials from time to time.

Important provisions in the rules

  • the procedures and forms used in the registration of co-operatives
  • the procedure for making and amending the by-laws of co-operatives
  • the procedure for admission of members in the co-operative societies
  • the procedure of general meeting of members and powers of members
  • the appointment, suspension and removal of committee members
  • the formation and maintenance of reserve fund
  • the procedure for appeals to the Minister
  • the returns to be submitted by the co-operative societies
  • the procedure to be followed in liquidation of societies

The Act and the Rules cannot give adequate details on how each individual co-operative society should be internally governed. Internal regulations are made by each society, because not all aspects are the same in all societies. The rules therefore provide for every society to make by-laws to serve as internal regulations (Rule 7).

The registered By-laws of co-operative societies

The By-laws are internal regulations made by each co-operative society to bind and govern its members. The By-laws are only effective if they are registered by the Commissioner for Co-operative Development. Important areas covered in the By-laws include:

  • name and postal address of the society
  • area of operation and membership common bond
  • the objects for which the society is formed
  • the purpose for which its funds maybe applied
  • the disposal of accumulated funds
  • the qualifications for membership, the terms and mode of admission
  • the withdrawal and expulsion of members
  • the rights, liabilities and obligations of members, including minimum shareholding
  • the transfer of shares or interest of members
  • the manner of raising funds
  • the procedure and quorum of general meetings
  • the appointment, suspension and removal of members of the committee
  • the duties of the management and supervisory committee
  • the period of its financial year
  • the authorization of officers to sign documents
  • the settlement of disputes
  • the condition for issuing of loans

By-laws maybe amended by members in a validly convened and held general  meeting. At least fifteen (15) clear days notice of the proposed amendment must have been given to all members.

Any amendment of the by-laws of a co-operative society shall only be valid if the amendment is registered with the Commissioner of Co-operative Development. When Commissioner registers an amendment of the by-laws of a co-operative society, he issues to the society a copy of the amendment certified by him as evidence that the amendment of the By-laws has been registered. This copy should be kept in the society office for use.

The By-laws of a co-operative society are subordinate to the Act and Rules. They should not contradict any of the above.

Copies of the registered By-laws should be acquired by each member of the society so that they are conversant with each provision there-in. This can be through suitable arrangement with the society officials.

The by-laws binds only members of the respective co-operative society. They bind all members irrespective of when they joined the society. They should therefore be obeyed by all members and be observed by the society officials in the conduct of all business of the society.

Government Policies/Commissioners Circulars 

The government issues policy circulars from time to time. Such circulars are normally issued by the Commissioner for Co-operative Development and are meant to be implemented and their purpose is to assist in the growth and development of the societies, and in the administration of the provisions of the Act and rules.

General Meeting Resolutions

Members do pass resolutions in general meetings. These resolutions, as long as they are passed in validly convened and conducted general meetings and do not contradict any of the By-laws of the society, form part of the society’s internal rules and regulations. Once the resolutions have been passed by the required majority, they bind all members whether they were present or not, and whether they voted in favor of the resolution or not.

Any resolution passed  in a general meeting should have a proposer and a seconder. Where there is division, the issue should be decided by vote and the majority vote is recognized. Resolutions passed in a general meeting should not contravene any provisions in the Act, Rules and the society By-laws. However a special resolutions requires 2/3 majority of the members present and voting at duly convened general meeting.

Compliance Issues as per the Act and Rules

The latest revised Act and the new Rules of November 2004 have introduced amendments and provisions which should be complied with by all co-operative societies. The compliance issues that affect societies include:-

  • every co-operative society shall hold its annual general meeting within four months after close of its financial year (by 30th April for Sacco Societies)
  • every co-operative society shall present to members its audited accounts and balance sheet for each year within four months after close of financial year. The audited accounts shall be displayed in a conspicuous place for members to read at least two weeks before they are presented to members in a general meeting.
  • the audited accounts and balance sheet shall be presented to the Commissioner for registration before they are presented to members in a general meeting
  • borrowing powers shall be fixed by members in a general meeting subject to approval by the Commissioner.
  • every co-operative society with employees shall have terms and conditions of service for staff. The terms and conditions shall be approved by the commissioner.
  • the manager shall be a counter signatory to all documents and contract of the society.
  • all society committee shall file an indemnity-Form V of the Co-operative Societies Act shall be signed by the management committee members agreeing to uphold the values of accountability, honesty and transparency in dealing with the affairs and resources of the society and accepting liabilities arising from lack of upholding such values. This is done within fourteen days after being elected, and if they do not, they will automatically lose their positions. The indemnity figure shall be fixed by members in a general meeting.
  • all committee members shall fill wealth declaration forms within thirty days after elections, and if they do not, they automatically lose their positions.
  • supervisory committee should write periodic reports (quarterly) and table their findings at management committee meetings. It shall also submit its reports to the commissioner present the report to the general meeting.
  • committee members shall be elected for three years, subject to one third retiring annually but being eligible for re-election.
  • every society shall have members funds separated into shares and deposits.
  • every society shall maintain a reserve fund where one fifth of the net surplus in any years shall be credited. An account should be maintained for the fund.
  • no co-operative society shall invest its funds in non-core business except with the approval of the Commissioner and the general meeting through a special resolution.
  • estimates of income and expenditure shall be prepared and presented to members for approval in a general meeting at least three months before the end of the preceding year.
  • every member of a co-operative society shall appoint a nominee or nominees, who shall inherit his/her shares or interest in the society upon his death.

Relevant Policies for Co-operative Societies

Societies are expected to carry out certain business operations according to their established policies. The purpose of policies is to establish procedures for carrying out certain aspects of the business of the society. The By-laws of the society should normally provide and give power to the society officials to formulate such policies as may be necessary from time to time. Some of the policies relevant to co-operative societies include:

  • The loan policy-this is an internal regulation document that guides and regulates loan granting and loan administration. The loan policy should be known, understood and adopted by members, as it affects them.
  • The investment policy-a document that guides the society on areas of investment of society’s and members’ funds.
  • The human resource policy-this is a document that guides the society on issues of administration of society’s human resource, right from recruitment stages to promotion and exit stage.
  • The education and training policy-this is a document that guides the society on issues of education to members and training of committee members and members of staff.
  • The public procurement and disposal policy-this is an internal document that establishes procedures for procurement and disposal of goods and services. it should be prepared in conformity with the Public Procurement and Disposal Act and the regulations made there under.
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19 Responses

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    Co-operative Legislation In Kenya | Co-operative Movement in Kenya

  2. I am really impressed along with your writing skills as neatly
    as with the format to your blog. Is this a paid subject
    or did you customize it yourself? Anyway stay up
    the nice high quality writing, it’s uncommon to look a great blog like this
    one these days..

  3. Cool stuff.
    It helped me in finishing an assignment on “Co-operative Laws and Procedures” for one of my units in my degree course.
    Thanks.

    • You are welcomed. Cheers.

  4. Hi there, just stumbled on your blog and it has enlightened me a great deal. could you please share your knowledge on the following: Role of SACCOs in Monetary policy. greatly appreciate it. thanks.

    • Mmmmmh…hard one….but…all along Saccos use members saving to give out loans. Many Saccos don’t go out for external loans from commercial banks. The interest rates on loans is usually proposed by management committee/board of directors of co-operatives and approved by the membership/delegates of the society. You will remember that the high interest rates we experienced recently in the country did not affect Saccos members as much as it did to those who had loans with mainstream banks. Probably I can say in Kenya, the role of co-operatives in monetary policy is minimal but co-operative sector has been recently targeted e.g 10% excise duty and county governments finance acts/bills that plan to have Saccos pay for permits/licenses.

  5. is a share transferrable to another person? I have recently resigned my membership from a Sacco and received my contributions back (less the share amount which I did not know about).

    • Yes you can sell to another member. The problem is getting a member to sell to. The society will charge you something. Cheers.

  6. how do you go about opening a small saco if we are enough members to do so pliz advice we are realy intrested

    • I have written the procedures of registration on one of my articles on this blog. Please look here https://funnyardstick.wordpress.com/co-operative-registration-procedures/ and if you have more questions, do not hesitate to ask. Cheers.

  7. I would like to know the names and conducts of our county commissioner of cooperative development limuru district. Michael mukungu

    • Hi, Michael. Sorry for the late reply but we do not have County Commissioner of Co-operatives Development in Limuru but there is a Sub-County Co-operative Officer situated in Limuru. We do not have their contacts with us here but you can visit their offices in Limuru. Thanks.

  8. The new National Transport Safety Authority Act 2013 has allowed Matatu SACCOs to become Transport cooperatives to run public transport.PSV owners are supposed to hand over their vehicles to SACCOs and sign a franchise agreement for complete management including service,repairs and hiring of crew.Here is a directive from the government for mandatory joining of SACCOs and handing over their vehicles.Does this not infringe on the individuals freedom of association and right to property?Will the owners of the vehicles not be exploited by the SACCOs especially when it comes to repairs and spares?Wont this directive do more harm than good in the SACCO affairs in the least mistrust amongst the members?

    • Hi, Mbagara.

      It is not the National Transport Safety Authority Act 2013, there is only National Transport Safety Authority Act 2012. This is the National Transport Safety Authority Regulations 2013 on operations of Public Service Vehicles. Regulation 6(b) I think is what you are referring to which states :

      Where it is an operator of vehicles none of which it is the registered owner, have a minimum of 25 serviceable vehicles which it has assumed the responsibility to operate pursuant to contracts or franchise agreements with the registered owners.

      I think here it is referring to co-operatives as you rightly said and in this case the Matatu Saccos. Yes, I was also surprised that it means that you will hand over your vehicle to the Sacco who will employ the drivers and other staffs. But I have also learnt (after replying to your comment) that this part was removed from the draft, check the ministry’s website for the published regulations!!
      I always wondered why matatus did not challenge the directive of joining Saccos or forming companies. In the Constitution 2010 under the Bill of Rights it states: 36. (1) Every person has the right to freedom of association, which includes the right to form, join or participate in the activities of an association of any kind.
      (2) A person shall not be compelled to join an association of any kind.
      Yes on my own view it is unconstitutional and nobody should be forced to join any association.

      Yes there are possibilities of being exploited by the Sacco and the mechanics that will be under societies’ contract. Remember one of the responsibility of the management committee/board of directors is to enter into contracts and most likely they will fleece members dry if they are to collude with the mechanics. In fact running matatu business is going to turn out very expensive because this model they are trying to adopt, does not suit this country.

  9. This article is great!
    May I ask if it’s a must for saccos to replace annual general meetings with annual delegates meetings. My Sacco tells us so but we feel they are doing away with masses to miss appropriate our funds

    • Hi, membership (in an annual general meeting) will have to pass a resolution on the same and thereafter amend the society by-laws and have it registered with the commissioner of co-operatives before it is implemented. There are advantages of course of having a delegate system especially for societies that have membership drawn from across the country. I never advice for societies that are within a given locality to have a delegate system as that locks out other members from participation. Cheers.

  10. I want to ask a completely different question about the savings and credit cooperatives(Sacco’s). Now that the deposit taking Sacco’s have a regulator to supervise them(SASRA), can they also go to the clearance house like
    The banks do?

    • That’s the next frontier for Saccos with FOSAs I believe…but would still think this might involve CBK’s closer supervision and authorization and other stakeholders (mostly competitors) and also might have associated costs (cost of developing security marks on cheques i.e. machine readable routing and account information, necessary ICT investment and its associated costs, etc) that many Saccos would wish to avoid. But all in all I believe its doable especially for Mega-Saccos.
      I believe you know some Saccos are already on CRB even those without FOSA’s!!

  11. Reblogged this on newsupdateon and commented:
    great

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