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
- 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:
- the Sacco Societies Regulatory Authority
- licensing of Sacco societies
- regulation Act and supervision of Sacco societies
- the deposit guarantee fund
- 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.
Filed under: Co-operative Legislation In Kenya Tagged: | Bank, BOSA, CAK, Co-operative, Co-operative Bank of Kenya, Co-operative Societies Act Cap 490, Cooperative, FOSA, Kuscco, management committee, Ministry of Industrialization and Enterprise Development, Money, NACHU, SACCO Society Act 2008, Sasra