The Laws of Kenya

Point in Time

Act No: No. 12 of 1997

Act Title: CO-OPERATIVE SOCIETIES

[ Date of commencement: 1st June, 1998. ]

[ Date of assent: 22nd December, 1997. ]

Subsidiary Legislation

Arrangement of Sections

PART I – PRELIMINARY
PART II – OFFICERS
- 3.Commissioner, Deputy Commissioners, Registrar, Deputy Registrar and other Officers
- 3.Commissioner and other officers
PART III – REGISTRATION OF CO-OPERATIVE SOCIETIES
PART IV – PRIVILEGES OF A REGISTERED SOCIETY
- 12.Co-operative society to be body corporate
- 13.By-laws to bind members of co-operative societies
PART V – RIGHTS AND LIABILITIES OF MEMBERS
PART VI – DUTIES OF CO-OPERATIVE SOCIETIES
PART VII – MANAGEMENT OF CO-OPERATIVE SOCIETIES
PART VIII – AMALGAMATION AND DIVISION OF CO-OPERATIVE SOCIETIES
PART IX – RIGHTS AND OBLIGATIONS OF CO-OPERATIVE SOCIETIES
PART X – PROPERTY AND FUNDS OF CO-OPERATIVE SOCIETIES
PART XI – CHARGES BY CO-OPERATIVE SOCIETIES
PART XII – INQUIRY AND INSPECTION
PART XIII – DISSOLUTION
PART XIV – SURCHARGE
PART XV – SETTLEMENT OF DISPUTES
PART XVI – GENERAL
SCHEDULE [Section 64.]
Subsidiary Legislation

PART I – PRELIMINARY

1.	Short title This Act may be cited as the Co-operative Societies Act.

Interpretation

In this Act, except where the context otherwise requires—

“agricultural produce” means any produce or article produced or obtained by the work or industry of members of a co-operative society or marketed by a co-operative society, whether the produce be of agriculture, animal husbandry, forestry, fisheries, handicrafts or otherwise;

“apex society” means a co-operative society the membership of which is restricted to co-operative unions and includes a society established to serve the co-operative movement by providing facilities for banking, insurance and the supply of goods or services;

“bonus”, in relation to a member of a co-operative society, means that member’s share of the surplus of the society which is divided amongst it members, calculated by reference to the proportion which that member’s volume of business with the society bears to the total volume of business done by the society;

“by-laws” means the by-laws made by a society and registered under this Act and includes any registered amendment of such by-laws;

“Commissioner” means the Commissioner for Co-operative Development appointed under section 3(1).

“Committee” means the governing body of a co-operative society to whom the management of its affairs is entrusted, and includes a board of directors;

“contributor” means a person liable to contribute to the assets of a co-operative society in the event of its being wound up and for the purposes of any proceedings for determining and before the final determination of the persons who are to be deemed contributors, includes any person alleged to be a contributor;

“co-operative society” means a society registered under section 4;

“co-operative union” means a co-operative society whose membership is restricted to primary societies;

“date of dissolution” means the date on which the Registrar's order canceling the registration of a co-operative society takes effect;

“district co-operative union” means a co-operative union whose membership is restricted to- primary societies having their headquarters in a particular district;

“dividend”, in relation to a member of a co-operative society, means that member’s share of the surplus of the society which is divided amongst its members, calculated by reference to the proportion which that member’s share capital bears to the total share capital of the society;

“limited liability” means limited by shares or limited by guarantee, according to the nature of the liability prescribed by the by-laws of the co-operative society;

“member” includes a person or a co-operative society joining in the application for the registration of a society, and a person or co-operative society admitted to membership after registration in accordance with the by-laws;

“Minister” means the Minister for the time being responsible for Co-operative development;

“officer” includes a chairman, vice-chairman, secretary, treasurer, committee member, employee or any other person empowered under any rules made under this Act, or by-laws of a co-operative society, to give directions in regard to the business of the society;

“personal representative” means any person who, under law or custom, is responsible for administering the estate of a deceased person;

“primary society” means a co-operative society whose membership is restricted to individual persons;

“Registrar” means the Registrar of Co-operative Societies appointed under section 3 of this Act, and includes the Deputy Registrar of Co-operative Societies and such other officers as are appointed under that section.

“secondary society” means a co-operative society whose membership is comprised of primary societies.

“special general meeting” means a general meeting, other than an ordinary general meeting, of which at least fifteen clear days written notice of the resolution and of the date, time and place of the meeting has been given to each member;

“Tribunal” means the Co-operative Tribunal established under section 77;

“winding up” means all proceedings subsequent to the dissolution of a co-operative society.

Interpretation

In this Act, except where the context otherwise requires—

“apex society” means a society formed at the national level by the co-operative movement in Kenya and registered under this Act to promote co-operative development and represent the interests of co-operative societies locally and internationally;

“by-laws” means the by-laws made by a society and registered under this Act and includes any registered amendment of such by-laws;

“capital” means the permanent members equity in the form of common stock and includes all disclosed reserves, retained earnings, grants or donations;

“Commissioner” means the Commissioner for Co-operative Development appointed under section 3 and includes any person on whom any of the powers of the Commissioner have been conferred in accordance with this Act;

“Committee” means the governing body of a co-operative society to whom the management of its affairs is entrusted, and includes a board of directors;

“co-operative society” means a society registered under section 4;

“co-operative union” means a co-operative society whose membership is restricted to primary societies;

“date of dissolution” means the date on which the Commissioner’s order canceling the registration of a co-operative society takes effect;

“deposit” means a sum of money paid on terms under which it shall be repaid, with or without interest or premium, and either on demand or at a time or in circumstances agreed by or on behalf of the person making the society to receive it at the risk of the society receiving it;

“district co-operative unions” deleted by Act No. 2 of 2004, s. 2;

“limited liability” means limited by shares or limited by guarantee, according to the nature of the liability prescribed by the by-laws of the co-operative society;

“Minister” means the Minister for the time being responsible for Co-operative development;

“personal representative” means any person who, under law or custom, is responsible for administering the estate of a deceased person;

“primary society” means a co-operative society whose membership is restricted to individual persons;

“Registrar” deleted by Act No. 2 of 2004, s. 2;

“secondary society” deleted by Act No. 2 of 2004, s. 2;

“share” means the amount represented by a member’s portion in the equity of a society as a co-owner;

“special resolution” means a resolution passed by two thirds of the members present and voting at a general meeting of a society;

“supervisory committee” means an oversight committee elected at a general meeting;

“Tribunal” means the Co-operative Tribunal established under section 77;

“winding up” means all proceedings subsequent to the dissolution of a co-operative society.

[Act No. 2 of 2004, s. 2.]

PART II – OFFICERS

Commissioner, Deputy Commissioners, Registrar, Deputy Registrar and other Officers

(1)	There shall be a Commissioner for Co-operative Development who shall be responsible for the growth and development of co-operative societies.

(2)	There shall be such number of Deputy Commissioners for Co-operative Development and other officers as the Minister may deem fit, to be appointed by the Public Service Commission.

(3)	There shall be a Registrar of Co-operative Societies.

(4)	There shall be a Deputy-Registrar of Co-operative Societies and such number of Assistant Registrars as may be necessary for the purposes of this Act.

(5)	The Commissioner and the Registrar appointed under this section shall be public officers designated by the Minister for that Purpose.

(6)	The Minister may, by notice in the Gazette, and without prejudice to the power of the Registrar or the Deputy-Registrar to exercise such powers or perform such duties, delegate any of the powers or duties conferred or imposed on the Registrar by or under this Act, to any Assistant Registrar.

Commissioner and other officers

(1)	There shall be a Commissioner for Co-operative Development whose office shall be an office in the public service.

(2)	There shall be such number of officers, including Deputy Commissioners, as may be necessary to assist the Commissioner in the administration of the provisions of this Act.

(3)

The Commissioner shall be responsible for the growth and development of co-operative societies by providing such services as may be required by co-operative societies for their organization, registration, operation, advancement and, dissolution and for administration of the provisions of this Act.

[Act No. 2 of 2004, s. 3.]

PART III – REGISTRATION OF CO-OPERATIVE SOCIETIES

PART IV – PRIVILEGES OF A REGISTERED SOCIETY

12.

Co-operative society to be body corporate

Upon registration, every society shall become a body corporate by the name under which it is registered, with perpetual succession and a common seal, and with power to hold movable and immovable property of every description, to enter into contracts, to sue and be sued and to do all things necessary for the purpose of, or in accordance with, its by-laws.

13.

By-laws to bind members of co-operative societies

The by-laws of a co-operative society, shall, when registered, bind the co-operative society and the members thereof to the same extent as if they were signed by each member and contained covenants on the part of each member for himself and his personal representatives to observe all the provisions of the by-laws.

PART V – RIGHTS AND LIABILITIES OF MEMBERS

14.

Qualification for membership

A person other than a co-operative society shall not be qualified for membership of a co-operative society unless—

(a)	he has attained the age of eighteen years;

(b)	his employment, occupation or profession falls within the category or description of those for which the co-operative society is formed; and

(c)	he is resident within, or occupies land within, the society’s area of operation as described in the relevant by-law.

15.	Limitation of holding share capital No member, other than a co-operative society, shall hold more than one-fifth of the issued and paid-up share capital of any co-operative society.

17.

Membership of co-operative society

No member of a co-operative society shall exercise any of the rights a member unless he has made such payment to the society in respect of membership, or has acquired such interest in the society as may be prescribed under this Act or under the by-laws of the society.

18.

Limitation of membership to one society

No person shall be a member of more than one co-operative society with unlimited liability and, no person shall be a member of more than one co-operative society having the same or similar object:

Provided that a person who—

(i)	is a member of a co-operative society; and

(ii)	carries on business on land or at premises outside the area of operation of that co-operative society,

may be a member of a co-operative society in whose area of operation that land or those premises are situate, notwithstanding that its objects are the same as or similar to those of the first-mentioned society.

19.

Voting rights of members

Each member of a co-operative society shall have one vote only in the affairs of the society, irrespective of the number of shares he holds:

Provided that a co-operative society which is a member of a co-operative union or an apex society shall have as many votes as may be prescribed by the by-laws of the co-operative union or apex society of which it is a member, and may, subject to such by-laws, appoint any number of its committee members, not exceeding the number of such votes, to exercise its voting power.

20.

Transfer of shares

(1)	The transfer or charge of the share or interest of a member in the capital of a co-operative society shall be subject to such conditions as to maximum holding as are laid down in section 15.

(2)

In the case of a co-operative society registered with unlimited liability, a member shall not transfer or charge any share held by him or his interest in the capital of the society or any part thereof, unless—

(a)	he has held such share or interest for at least one year; and

(b)	the transfer or charge is in favour of the society or a member of the society.

21.

Rights of members

A member of a co-operative society shall have the right to—

(a)	attend and participate in decisions taken at all annual, general, and special meetings of the society and vote;

(b)	be elected to organs of the society, subject to it’s by-laws;

(c)	enjoy the use of all the facilities and services of the society subject to the society’s by-laws;

(d)	all legitimate information relating to the society, including: internal regulations, registers, Minutes of general meetings, supervisory committees, reports, annual accounts and inventories, investigation reports, at the society’s head office.

21.

Rights of members

A member of a co-operative society shall have the right to—

(a)	attend and participate in decisions taken at all general meetings of the society and vote;

(b)	be elected to organs of the society, subject to it’s by-laws;

(c)	enjoy the use of all the facilities and services of the society subject to the society’s by-laws;

(d)	all legitimate information relating to the society, including: internal regulations, registers, Minutes of general meetings, supervisory committees, reports, annual accounts, inventories and investigation reports, at the society’s head office. [Act No. 2 of 2004, s. 10.]

22.

Member’s rights vis-a-vis the co-operative society

A member of a co-operative society shall have the obligation to—

(a)	observe and comply with all the society by-laws and decisions taken by the relevant organs of the co-operative society in accordance with the by-laws of that society;

(b)	buy and pay up for shares or make any other payments provided for in the by-laws of the society;

(c)	meet the debts of the society in case of bankruptcy in accordance with the provisions of this Act and the by-laws of the society.

PART VI – DUTIES OF CO-OPERATIVE SOCIETIES

24.

Society to keep a copy of the Act and by-laws at registered office

Every co-operative society shall keep a copy of this Act and of the rules made thereunder and of its own by-laws and a list of its members (excluding details of nominees and shareholdings) at its registered office and shall keep them open for inspection by any person, free of charge, at all reasonable times during business hours.

25.

Society to keep audited books of accounts

(1)

Every co-operative society shall keep proper books of accounts which shall be prepared in accordance with generally accepted accounting standards and which shall be necessary to give a true and fair view of the state of affairs of the society and to explain its transactions including—

(a)	all sums of money received and paid by the co-operative society and the reasons thereto;

(b)	all sales and purchases of goods by the co-operative society; and

(c)	all assets and liabilities of the co-operative society.

(2)	The books of account shall be kept at the registered office of the co-operative society and also at such other place as may be determined by the co-operative society and shall at all times be available for inspection by any member of its supervisory committee and the auditor.

(3)

(a)	It shall be the duty of every co-operative society to cause its accounts to be audited at least once in every year by an auditor appointed at an annual general meeting of the society held three months before the end of the financial year.

(b)

Where at an annual general meeting no auditor or auditors are appointed or are deemed to be re-appointed, the Commissioner shall convene an annual general meeting of the co-operative society concerned with a direction to appoint a person to fill the vacancy and his or her remuneration to be borne by the co-operative society.

(c)	The remuneration of the auditor shall in all cases be fixed by the co-operative society in an annual general meeting or in such manner as the society may determine.

(4)

The audited accounts referred to in subsection (3) shall include—

(a)	a balance sheet;

(b)	a surplus and loss account; and

(c)	cash flow statement,

and shall be approved by the members of the Committee and authenticated by at least three office bearers, including the treasurer of the co-operative society, in accordance with the by-laws of the society.

(5)

Every auditor appointed under sub section (3) shall submit the audited accounts and balance sheet to the members in an annual general meeting convened by the co-operative society three months after the end of the accounting period and shall include his opinion as to whether or not the co-operative society's business has been conducted;

(a)

in accordance with the provisions of this Act and, whether the books of accounts kept. by the co-operative society are in agreement therewith and give a true and fair view of the state of the affairs of the society; and operative society are in agreement therewith and give a true and fair view of the state of the affairs of the society; and

(b)	in accordance with the co-operative societies' objectives, by-laws and any other decisions made by the society in a general meeting.

(6)	The auditor shall at all times have the right of access to the accounting records and all books and documents of the cooperative society and may demand such information and explanations from every officer and employee of the society as he may deem necessary in performing his duties as an auditor.

(7)

The auditor shall at all times have the right to attend any general meeting of the co-operative society, receive all notices and other communication relating to any general meeting which a member of the society is entitled to receive and to be heard at such meeting on any part of the business which concerns him as an auditor.

(8)

The auditor shall have power where necessary—

(a)	to summon at the time of his audit any officer, agent, servant or member of the co-operative society whom he has reasons to believe can give information in regard to the transactions of the society or management of its affairs; or

(b)	to require the production of any book or document relating to the affairs of, or any cash or securities belonging to the co-operative society by the officer, agent, servant or member having custody or possession of such book, document, cash or securities.

(9)	Every co-operative society shall, at such time and in such form as may be prescribed, file with the Registrar any annual return together with a certified true copy of the audited accounts and balance sheet of the society for each period of twelve months.

25.

Account and audit

(1)

Every co-operative society shall keep proper accounts which shall—

(a)	be prepared in accordance with International Accounting Standards;

(b)	reflect the true and fair state of the co-operative society’s affairs; and

(c)

explain the co-operative society’s transactions including—

(i)	all sums of money received and paid by the co-operative society and the reasons thereto;

(ii)	all sales and purchases of goods and services by the co-operative society; and

(iii)

all assets and liabilities of the co-operative society.

(2)	The books of accounts shall be kept at the registered office of the co-operative society or at such other place as may be determined by the co-operative society and shall at all times be available for inspection by members of its supervisory committee and the auditor.

(3)	It shall be the duty of every co-operative society to cause its accounts to be audited at least once in every financial year by an auditor appointed under subsection (4).

(4)	The auditor shall be appointed at the annual general meeting from a list of auditors approved by the Commissioner, in consultation with the Institute of Certified Public Accountants of Kenya.

(5)	Where at an annual general meeting no auditor is appointed, the Commissioner may appoint a person to fill the vacancy and the remuneration of the person so appointed shall be borne by the co-operative society.

(6)

The accounts referred to in subsection (3) shall—

(a)	conform with International Financial Reporting Standards;

(b)

include the following records—

(i)	a balance sheet;

(ii)	an income and expenditure account; and

(iii)

a cash flow statement;

(c)	be approved by the Committee; and

(d)	be authenticated by at least three Committee members including the chairman of the co-operative society.

(7)	No auditor shall present the audited accounts of a co-operative society to the members at a general meeting unless the accounts have previously been submitted to the Commissioner in such form as may be prescribed.

(8)

The auditor shall submit the audited accounts to a general meeting within four months after the end of the accounting period and shall include his opinion as to whether or not the co-operative society’s business has been conducted—

(a)	in accordance with the provisions of this Act and, whether the books of accounts kept by the co-operative society are in agreement therewith and give a true and fair view of the state of the affairs of the society; and

(b)	in accordance with the co-operative society’s objectives, by-laws and any other resolutions made by the society at a general meeting.

(9)

The auditor shall have the right to—

(a)	attend any general meeting of the co-operative society and be heard on any matter which concerns him as an auditor;

(b)	receive all notices and other communications relating to any general meeting which a member of the co-operative society is entitled to receive;

(c)

access, at all times, any accounting records, books or documents of the co-operative society as may be necessary for the purpose of carrying out his duties as an auditor and may at the time of his audit—

(i)	summon any officer, agent or member of the co-operative society for the purpose of obtaining information on the transactions of the co-operative society or management of its affairs;

(ii)	require the production of any book, document, cash or securities relating or belonging to the co-operative society by any officer, agent, trustee or member having custody of such book, document, cash or securities;

(iii)

demand such other information or explanation from any officer of the co-operative society as may be necessary for the performance of his duties as an auditor.

(10)	Every co-operative society shall, at such time and in such form as may be prescribed, file with the Commissioner an annual return together with a certified true copy of the audited accounts and balance sheet of the society for each period of twelve months.

(11)

Where a co-operative society fails to cause its accounts to be audited within the prescribed period in respect of its business for the previous financial year, members of the Committee shall automatically lose their positions at the next general meeting and shall not be eligible for re-election for three years unless the Commissioner is satisfied that the failure was due to circumstances beyond their control.

(12)	For the purposes of this section, “International Accounting Standards” and “International Financial Reporting Standards” means the standards established by the Institute of Certified Public Accountants of Kenya. [Act No. 2 of 2004, s. 12.]

PART VII – MANAGEMENT OF CO-OPERATIVE SOCIETIES

27.

Duties of the Committee

(1)

The Committee of a co-operative society shall be the governing authority of the society and subject to any direction from a general meeting of the society and the by-laws of the society, it shall direct the affairs of the society with powers—

(a)	to enter into contracts;

(b)	to institute and defend suits and other legal proceedings brought in the name of or against the society; and

(c)	to do all other things necessary to achieve the society's objects in accordance with its by-laws.

(2)

The Committee of a co-operative society shall—

(a)	ensure that any payment made by cheque has been signed by such officers as the by-laws authorize;

(b)	be responsible for the custody of all moneys belonging to the society;

(3)

The Committee of a co–operative society shall hold regular meetings at which—

(a)	the minutes of its previous meeting shall be considered and confirmed;

(b)	the accounts, bank books, and cash in hand, shall be scrutinized and checked, and the Committee’s observations thereon recorded in the minutes;

(c)	any loans due and owing to the society shall be considered and any action considered necessary in respect of such loans shall be authorized and recorded in the minutes; and

(d)	any current business shall be considered.

(4)	The Committee of a co-operative society shall send annually to the Registrar the audited balance sheet of the society and annual return in terms of section 25.

(5)

The Committee of a co–operative society shall always keep available for inspection at the registered office of the society—

(a)	the certificate of registration of the society;

(b)	a copy of the Act, Rules and the registered by-laws of the society;

(c)	a list of members; and

(d)	a list of the officers of the society.

(6)

In the conduct of affairs of a co-operative society the members of the Committee shall exercise the prudence and diligence of ordinary men of business and shall be held, jointly and severally, liable for any losses sustained through any of their acts which are contrary to the Act, Rules and the by-laws of the society or the directions of any general meetings.

27.

General meetings

(1)	The supreme authority of a co-operative society shall be vested in the general meeting at which members shall have the right to attend, participate and vote on all matters.

(2)	Subject to subsection (3) a co-operative society shall hold an annual general meeting within four months after the end of each financial year.

(3)

In the first year after registration of a co-operative society, the general meeting shall be held not later than one month after receipt of the certificate of registration of the co-operative society and during such meeting, the members shall—

(a)	elect the co-operative society’s office bearers for the ensuing year;

(b)	determine the maximum borrowing powers of the co-operative society;

(c)	consider and approve estimates of income and expenditure for the ensuing financial year or part thereof;

(d)	appoint the co-operative society’s bankers and auditors; and

(e)	receive reports and decide upon such other matters as may be necessary for the conduct of the co-operative society’s business.

(4)	A general meeting of a co-operative society shall be convened by giving at least fifteen days written notice to the members.

(5)

At the annual general meeting of a co-operative society, the members shall—

(a)	consider and confirm the minutes of the last general meeting;

(b)	consider any reports of the Committee or the Commissioner;

(c)	consider and adopt audited accounts;

(d)	determine the manner in which any available surplus is to be distributed or invested;

(e)	elect the co-operative society’s office bearers for the ensuing year;

(f)	determine, where necessary, the maximum borrowing power of the society;

(g)	appoint an auditor for the ensuing year; and

(h)	transact any other general business of the co-operative society of which notice has been given to members in the manner prescribed in the by-laws of the co-operative society.

(6)

A special general meeting of a co-operative society may be convened—

(a)	by the Committee for the purpose of approving annual estimates or discussing any urgent matter which in the Committee’s opinion is in the interest of the co-operative society; or

(b)	on receipt of a written notice for such meeting signed by such number of the members of the co-operative society as may be prescribed in the rules and stating the objects and reasons for calling the meeting.

(7)

If the Committee fails to convene a meeting within fifteen days of receiving the notice under subsection (6)(b), the members demanding the meeting may themselves convene the meeting by giving notice to the other members of the co-operative society, stating the objects and reasons for the meeting and the fact that the Committee has failed to convene the meeting.

(8)	The Commissioner may convene a special general meeting of a society at which he may direct the matters to be discussed at the meeting.

(9)	The chairman or in his absence the vice-chairman or such other person as may be prescribed in the by-laws of the co-operative society shall preside at a general meeting of a co-operative society.

(10)	The Commissioners may preside at any meeting convened under subsection (8). [Act No. 2 of 2004, s. 13.]

28.

Membership and powers of the Committee

(1)	Every co-operative society shall have a Committee consisting of not less than five and not more than nine members.

(2)	The members of the Committee shall elect a chairman and a vice-chairman from among their number.

(3)

The Committee shall be the governing body of the society and shall, subject to any direction from a general meeting or the by-laws of the co-operative society, direct the affairs of the co-operative society with powers to—

(a)	enter into contracts;

(b)	institute and defend suits and other legal proceedings brought in the name of or against the co-operative society; and

(c)	do all other things necessary to achieve the objects of the co-operative society in accordance with its by-laws.

(4)

No person shall be a member of a Committee if he—

(a)	is not a member of the co-operative society;

(b)	is under eighteen years of age;

(c)	is unable to read and write;

(d)	receives any remuneration, salary or other payment from the co-operative society save in accordance with this Act;

(e)	is a committee member in two other co-operative societies;

(f)	being a member of a co-operative society that lends money to its members, lends money on his own account;

(g)	being a member of a co-operative society which trades in goods or produce, trades either on his own account or some other person’s account in the same type of goods or produce;

(h)	has not, within thirty days of being appointed, declared his wealth to the Commissioner in the prescribed manner;

(i)	is an undischarged bankrupt;

(j)	is of unsound mind;

(k)	has been adversely named by the Commissioner in an inquiry report adopted by a general meeting for mismanagement or corrupt practices while a member of the Committee;

(l)	has been convicted of any offence involving dishonesty or is sentenced to imprisonment for a term exceeding three months;

(m)	has been convicted of any offence under this Act or rules made thereunder;

(n)	has any uncleared debt owing to a co-operative society at the end of its financial year other than in respect of a loan under the provision of any rules made under this Act;

(o)	is a person against whom any amount of money is due under a decree, decision or order or is pending recovery under this Act.

(5)	The Committee may delegate any of its duties under this Act to an officer or officers of the co-operative society but, nothing in this subsection shall absolve the Committee from its responsibility to run the affairs of the co-operative society in a proper and businesslike manner.

(6)

In the conduct of the affairs of a co-operative society the Committee shall exercise the prudence and diligence of ordinary men of business and the members shall be held, jointly and severally liable for any losses sustained through any of their acts which are contrary to the Act, rules, by-laws or the directions of any general meeting of the co-operative society.

(7)	The Commissioner may suspend from duty any Committee member charged in a court of law with an offence involving fraud or dishonesty pending the determination of the matter. [Act No. 2 of 2004, s. 14.]

PART VIII – AMALGAMATION AND DIVISION OF CO-OPERATIVE SOCIETIES

29.

Amalgamation of co-operative societies

(1)	Any two or more co-operative societies (hereinafter referred to as amalgamating societies) may, by special resolution (in this section referred to as the preliminary resolution), resolve to amalgamate as a single society (hereinafter referred to as the amalgamated society).

(2)	A copy of the preliminary resolution shall be sent to all the members and creditors of each of the amalgamating societies, and to all other persons whose interests in any of the amalgamating societies will be affected by the amalgamation.

(3)	Any member of any of the amalgamating societies may, notwithstanding any by-law to the contrary, by notice in writing given to his society at least one month before the date specified as the date of amalgamation, intimate his intention not to become a member of the amalgamated society.

(4)	Any creditor of any of the amalgamating societies may, notwithstanding any agreement to the contrary, by notice in writing given to such society at least one month before the date specified as the date of amalgamation, intimate his intention to demand the payment of any money due to him.

(5)	Any other person whose interest will be affected by the amalgamation may, by notice in writing given to the concerned amalgamating society, not less than one month before the date specified as the date of amalgamation, object to the amalgamation unless his claim is satisfied.

(6)	Not less than three months after the date of the meeting at which the preliminary resolution is passed, a further special general meeting of each of the amalgamating societies shall be held to consider the preliminary resolution and any notices received under this section.

(7)

At the special general meeting held under subsection (6) provision shall be made by a further resolution of the society (in this section referred to as the secondary resolution) for—

(a)	the repayment of the share capital of any member who has given notice under subsection (3);

(b)	the satisfaction of any claims by creditors who have given notice under subsection (4); and

(c)	the satisfaction of the claims of such other persons who have given notice under subsection (5) securing of their claims in such manner as determined or directed by the Registrar.

Provided that no member or creditor or other person shall be entitled to such repayment or satisfaction until the preliminary resolution is confirmed as provided in subsection (8).

(8)	Each amalgamating society may, by further resolution passed by a two-thirds majority of the members present and voting, confirm the preliminary resolution.

(9)

(1) If, within such time as the Registrar considers reasonable, the Registrar is satisfied that the secondary resolutions of each of the societies amalgamating comply with the provision of this section, he may register the amalgamated society and its by-laws and thereupon—

(a)	each of the amalgamating societies shall stand dissolved and its registration cancelled;

(b)	the registration of the amalgamated society shall be a sufficient conveyance to vest the assets and liabilities of the amalgamating societies in the amalgamated society;

(c)	the remaining members of the amalgamating societies shall become members of the amalgamated society and will be subjected to its by-laws;

(d)	any share holders of the amalgamating societies or any other persons who have claims against the amalgamating societies and whose claims were not satisfied in accordance with the secondary resolution, may pursue such claims against the amalgamated society.

(10)	Where the Registrar refuses the amalgamation of the amalgamating societies under subsection (9) such societies may appeal against such refusal to the Tribunal.

29.

Amalgamation of co-operative societies

(1)	Any two or more co-operative societies (hereinafter referred to as amalgamating societies) may, by special resolution (in this section referred to as the preliminary resolution), resolve to amalgamate as a single society (hereinafter referred to as the amalgamated society).

(2)	A copy of the preliminary resolution shall be sent to all the members and creditors of each of the amalgamating societies, and to all other persons whose interests in any of the amalgamating societies will be affected by the amalgamation.

(3)	Any member of any of the amalgamating societies may, notwithstanding any by-law to the contrary, by notice in writing given to his society at least one month before the date specified as the date of amalgamation, intimate his intention not to become a member of the amalgamated society.

(4)	Any creditor of any of the amalgamating societies may, notwithstanding any agreement to the contrary, by notice in writing given to such society at least one month before the date specified as the date of amalgamation, intimate his intention to demand the payment of any money due to him.

(5)	Any other person whose interest will be affected by the amalgamation may, by notice in writing given to the concerned amalgamating society, not less than one month before the date specified as the date of amalgamation, object to the amalgamation unless his claim is satisfied.

(6)	Not less than three months after the date of the meeting at which the preliminary resolution is passed, a further special general meeting of each of the amalgamating societies shall be held to consider the preliminary resolution and any notices received under this section.

(7)

At the special general meeting held under subsection (6) provision shall be made by a further resolution of the society (in this section referred to as the secondary resolution) for—

(a)	the repayment of the share capital of any member who has given notice under subsection (3);

(b)	the satisfaction of any claims by creditors who have given notice under subsection (4); and

(c)	the satisfaction of the claims of such other persons who have given notice under subsection (5) securing of their claims in such manner as determined or directed by the Commissioner.

Provided that no member or creditor or other person shall be entitled to such repayment or satisfaction until the preliminary resolution is confirmed as provided in subsection (8).

(8)	Each amalgamating society may, by further resolution passed by a two-thirds majority of the members present and voting, confirm the preliminary resolution.

(9)

If, within such time as the Commissioner considers reasonable, the Commissioner is satisfied that the secondary resolutions of each of the societies amalgamating comply with the provision of this section, he may register the amalgamated society and its by-laws and thereupon—

(a)	each of the amalgamating societies shall stand dissolved and its registration cancelled;

(b)	the registration of the amalgamated society shall be a sufficient conveyance to vest the assets and liabilities of the amalgamating societies in the amalgamated society;

(c)	the remaining members of the amalgamating societies shall become members of the amalgamated society and will be subjected to its by-laws;

(d)	any share holders of the amalgamating societies or any other persons who have claims against the amalgamating societies and whose claims were not satisfied in accordance with the secondary resolution, may pursue such claims against the amalgamated society.

(10)	Where the Commissioner refuses the amalgamation of the amalgamating societies under subsection (9) such societies may appeal against such refusal to the Minister. [Act No. 2 of 2004, s. 15, Sch.]

30.

Division of co-operative societies

(1)

(a)	A co-operative society (hereinafter referred to as the existing society) may, by special resolution (in this section referred to as the preliminary resolution), resolve to divide itself into two or more co-operative societies (hereinafter referred to as the new societies).

(b)	The preliminary resolution shall contain proposals for the division of assets and liabilities of the existing society among the new societies in which it is proposed to be divided and may prescribe the area of operation of, and specify the members who will constitute, each of the new societies.

(2)	A copy of the preliminary resolution shall be sent to all the members and creditors of the existing society, and to all other persons whose interests will be affected by the division of the existing society.

(3)	Any member of the existing society may, notwithstanding any by-law to the contrary, by notice in writing given to the society within two months of the receipt of the copy of the preliminary resolution, intimate his intention not to become a member of any of the new societies.

(4)	Any creditor of the existing society may, notwithstanding any agreement to the contrary, by notice in writing given to the existing society within two months after his receipt of the copy of the preliminary resolution, intimate his intention to demand the payment of any money due to him.

(5)	Any other person whose interest will be affected by the division may, by notice in writing given to the existing society within two months of the receipt of the preliminary resolution, object to the division.

(6)	After the expiry of three months after the date of the preliminary resolution, a further special general meeting of the existing society shall be held to consider the preliminary resolution and any notices received under this section.

(7)

At the special general meeting held under subsection (6), provision shall be made by a further resolution of the society for—

(a)	the repayment of the share capital of any member who has given notice under subsection (3);

(b)	the satisfaction of any claims by creditors who have given notice under subsection (4);

(c)	the satisfaction of the claims of such other persons who have given notice under subsection (5) or the securing of their claims as the Registrar may determine, or direct:

Provided that no member or creditor or other person shall be entitled to such repayment or satisfaction until the preliminary resolution is confirmed as provided in subsection (8).

(8)

The society may, by further resolution passed by a two-thirds majority of the members present and voting, confirm the preliminary resolution, with or without changes as in the opinion of the Registrar are not substantial, and the decision of the Registrar as to whether any changes are or are not substantial shall be final.

(9)

If, the Registrar is satisfied within such time as he considers reasonable that the provisions of the secondary resolution and the provisions of this section have been complied with, he may, register the societies into which the existing society has been divided and the by-laws of such societies and thereupon—

(a)	the registration of the existing society shall stand dissolved;

(b)	the registration of the new societies shall be sufficient to vest the assets and liabilities of the existing society in the new societies in the manner specified in the preliminary resolution, as confirmed;

(c)	the remaining members of the existing society shall become members of one or other of the new societies, as is provided by the preliminary resolution, as confirmed; and

(d)

any share holders or creditors of the existing society and any other persons who have claims against the existing society and whose claims were not satisfied in accordance with the secondary resolution, may pursue such claims against one or other of the new societies, as is provided by the preliminary resolution, as confirmed.

(10)	Where the Registrar refuses to approve the division of an existing society under subsection (9) the society may appeal against such refusal to the Tribunal.

30.

Division of co-operative societies

(1)

(a) A co-operative society (hereinafter referred to as the existing society)

may, by special resolution (in this section referred to as the preliminary resolution), resolve to divide itself into two or more co-operative societies (hereinafter referred to as the new societies).

(b)	The preliminary resolution shall contain proposals for the division of assets and liabilities of the existing society among the new societies in which it is proposed to be divided and may prescribe the area of operation of, and specify the members who will constitute, each of the new societies.

(2)	A copy of the preliminary resolution shall be sent to all the members and creditors of the existing society, and to all other persons whose interests will be affected by the division of the existing society.

(3)	Any member of the existing society may, notwithstanding any by-law to the contrary, by notice in writing given to the society within two months of the receipt of the copy of the preliminary resolution, intimate his intention not to become a member of any of the new societies.

(4)	Any creditor of the existing society may, notwithstanding any agreement to the contrary, by notice in writing given to the existing society within two months after his receipt of the copy of the preliminary resolution, intimate his intention to demand the payment of any money due to him.

(5)	Any other person whose interest will be affected by the division may, by notice in writing given to the existing society within two months of the receipt of the preliminary resolution, object to the division.

(6)	After the expiry of three months after the date of the preliminary resolution, a further special general meeting of the existing society shall be held to consider the preliminary resolution and any notices received under this section.

(7)

At the special general meeting held under subsection (6), provision shall be made by a further resolution of the society for—

(a)	the repayment of the share capital of any member who has given notice under subsection (3);

(b)	the satisfaction of any claims by creditors who have given notice under subsection (4);

(c)	the satisfaction of the claims of such other persons who have given notice under subsection (5) or the securing of their claims as the Commissioner may determine, or direct:

Provided that no member or creditor or other person shall be entitled to such repayment or satisfaction until the preliminary resolution is confirmed as provided in subsection (8).

(8)

The society may, by further resolution passed by a two-thirds majority of the members present and voting, confirm the preliminary resolution, with or without changes as in the opinion of the Commissioner are not substantial, and the decision of the Commissioner as to whether any changes are or are not substantial shall be final.

(9)

If, the Commissioner is satisfied within such time as he considers reasonable that the provisions of the secondary resolution and the provisions of this section have been complied with, he may, register the societies into which the existing society has been divided and the by-laws of such societies and there-upon—

(a)	the registration of the existing society shall stand dissolved;

(b)	the registration of the new societies shall be sufficient to vest the assets and liabilities of the existing society in the new societies in the manner specified in the preliminary resolution, as confirmed;

(c)	the remaining members of the existing society shall become members of one or other of the new societies, as is provided by the preliminary resolution, as confirmed; and

(d)

(10)	Where the Commissioner refuses to approve the division of an existing society under subsection (9), the society may appeal to the Minister within thirty days of the communication to it of the refusal. [Act No. 2 of 2004, s. 16 & Sch.]

PART IX – RIGHTS AND OBLIGATIONS OF CO-OPERATIVE SOCIETIES

31.

Society to have charge over member’s produce

(1)

A co-operative society which has as one of its objects the disposal of any agricultural produce, may enter into a contract with its members, either in its by-laws or by a separate document binding the members to dispose of all their agricultural produce, or such amounts or descriptions of the same as may be stated therein, to or through the society, and the contract may bind the members to produce the quantities of agricultural produce therein specified, and the contract may also provide for payment of a specific sum per unit of weight or other measure as liquidated damages for any breach of the contract, and any such sum on becoming payable shall be a debt due to the society and shall be a charge upon the immovable property of the member (subject to registration of the charge under the law under which the property is registered) and all stock then being thereon.

(2)	Any such contract as is mentioned in subsection (1) shall have the effect of creating in favour of the co-operative society a charge upon the proceeds of sale of all produce mentioned therein, whether existing or future.

(3)	A co-operative society may, on the authority of a resolution passed in general meeting, pledge the produce deliverable by members under any such contract as is mentioned in subsection (1) as security for loans made to the society, in all respects as if it were the owner of the produce.

(4)	No contract entered into under this section shall be contested in any court on the ground that it constitutes a contract in restraint of trade.

32.

Fines for violation of by-laws

(1)

The by-laws of a co-operative society may, subject to this Act and rules made thereunder, provide for the imposition of fines, not exceeding five thousand shillings, on its members for any infringement of its by-laws, but no such fine shall be imposed upon any member until written notice of intention to impose the fine and the reason therefore has been served on him and he has had an opportunity of showing cause why the fine should not be imposed and, if he so desires, of being heard with or without witnesses.

(2)	Any such fine shall be a civil debt due to the co-operative society, and shall, without prejudice to any other means of recovery, be recoverable summarily.

(3)	The whole or any part of such fine may be set off against any moneys due to such member in respect of produce delivered by him to the co-operative society.

(4)

A member shall not be taken to have infringed the by-laws of a co-operative society by reason of his having failed to deliver produce to such society, if the failure was due to the fact that, before becoming a member of the society, he had contracted to deliver such produce to some other person, and the contract had been disclosed in accordance with subsection (5).

(5)	It shall be the duty of every person applying for membership of a registered society to disclose to the society particulars of all such contracts as are mentioned in subsection (4).

32.

Fines for violation of by-laws

(1)

The by-laws of a co-operative society may, subject to this Act and rules made thereunder, provide for the imposition of fines, not exceeding twenty thousand shillings, on its members for any infringement of its by-laws, but no such fine shall be imposed upon any member until written notice of intention to impose the fine and the reason therefore has been served on him and he has had an opportunity of showing cause why the fine should not be imposed and, if he so desires, of being heard with or without witnesses.

(2)	Any such fine shall be a civil debt due to the co-operative society, and shall, without prejudice to any other means of recovery, be recoverable summarily.

(3)	The whole or any part of such fine may be set off against any moneys due to such member in respect of produce delivered by him to the co-operative society.

(4)

(5)	It shall be the duty of every person applying for membership of a registered society to disclose to the society particulars of all such contracts as are mentioned in subsection (4). [Act No. 2 of 2004, s. 17.]

33.

Society to have first charge over debts, assets, etc. in certain cases

(1)

Subject to any other written law as to priority of debts where a co-operative society has—

(a)	supplied to any member or past member any seeds or manure, or any animals, feeding stuff, agricultural or industrial implements or machinery or materials for manufacture or building; or

(b)	rendered any services to any member or past member; or

(c)	lent money to any member or past member to enable him to buy any such things as aforesaid or to obtain any such services,

the society shall have a first charge upon such things or, as the case may be, upon any agricultural produce, animals or articles produced therewith or therefrom or with the aid of such money.

(2)	The charge shall subsist for such period as the loan or value of the services rendered by a co-operative society to a member shall remain unpaid.

34.

Society to have first charge over members’ share

A co-operative society shall have a first charge upon the share or interest in the capital and on the deposits of a member or past member, and upon any dividend, bonus or accumulated funds payable to a member or past member, in respect of any debt due from such member or past member to the society, and may set off any sum credited or payable to such member, or past member in or towards the payment of any such debt.

35.

Remittance of deduction from employee’s emoluments to co-operative society and interest payable on default

(1)

Where the employer of a person who is a member of a co-operative society, having with the agreement of such member and of the co-operative society concerned made a deduction from such member’s emoluments for remittance by the employer to the co-operative society concerned, fails to remit such deductions within fifteen days after the date upon which the same was made, the co-operative society concerned shall be entitled, after having given such employer not less than seven days notice in writing in that behalf requiring immediate payment, to the file proceedings for recovery of such deduction.

(2)

The notice to be given under subsection (1) shall be in writing and require that the employer concerned shall, within seven days after the service thereof on the employer, pay the sum deducted as aforesaid to the co-operative society and shall further provide that failing payment before the expiration of the period specified in the notice, proceedings for summary recovery of the sum concerned, together with compound interest thereon, at the rate of not less than 3 per cent per month, through the courts will be filed against such employer without any further notice to the employer.

(3)	In any proceedings instituted under the provisions of this section, the society may be represented by the Registrar.

35.

Failure to remit the sum deducted

(1)

Where an employer of a person who is a member of a co-operative society has, under the instructions of the employee, made a deduction from the employee’s emoluments for remittance to the co-operative society concerned but fails to remit the deductions within seven days after the date upon which the deduction was made, the employer shall be liable to pay the sum deducted together with compound interest thereon at a rate of not less than five per cent per month.

(2)	The Commissioner may, on behalf of the society, institute legal proceedings in court for recovery of the sum owing under subsection (1) without prejudice to any other mode of recovery and such sum shall be a civil debt recoverable summarily.

(3)	The Commissioner may, by written notice, appoint any person, bank or institution to be an agent of the society for the purposes of collection and recovery of a debt owed to the society.

(4)	The agent shall pay the amount specified in the notice issued under subsection (3) out of any moneys which may, at any time during the twelve months following the date of the notice, be held by him for the employer or are due from him to the employer.

(5)

Where an agent claims to be or to have become unable to comply with subsection (3) by reason of lack of moneys held by or due from him, he shall give a written notification to the Commissioner stating the reasons for his inability and the Commissioner may—

(a)	accept the notification and cancel or amend the notice accordingly; or

(b)	if he is not satisfied with the reasons, reject the notification in writing.

(6)	Where an agent fails to notify the Commissioner or the notification is rejected, it shall be presumed that the agent has sufficient moneys for the payment of the amount specified in the notice.

(7)

Where an agent fails to pay the amount specified in the notice within thirty days from the date of service or the date on which any moneys come into his hands for or become due to him from the employer, the agent shall be liable for the amount specified in the notification as if he were the employer.

(8)	In any proceedings for the collection or recovery of the amount specified in the notice, it shall not be a defence for the agent to claim lack of the moneys.

(9)	This section shall apply notwithstanding that the failure under subsection (1), to remit the sum deducted may constitute an offence under some other law for which the employer has been prosecuted, or is being, or is likely to be prosecuted.

(10)

In this section “employer” includes any person, firm or organization holding remuneration or payment for produce of a member of a co-operative society and the term “employee” includes any person who receives remuneration or payment for produce from such persons or firm or organization.

[Act No. 2 of 2004, s. 18.]

36.

Member’s share not subject to attachment

Subject to section 34, the share or interest of a member in the capital of a co-operative society shall not be liable to attachment or sale under any decree or order of a court in respect of any debt or liability incurred by such member, and a trustee in bankruptcy under the law relating to bankruptcy shall not have any claim on such share or interest:

Provided that, where a co-operative society is dissolved, the share or interest of any member who is adjudged a bankrupt under such law shall vest in the trustee in bankruptcy in accordance with such law.

37.

Liability of past members

The liability of a past member of a co-operative society shall be in respect of the debts of the society as they existed at the date when he ceased to be a member and proceedings in respect thereof may be commenced within a period of two years from such date:

Provided that, in the case of a co-operative society with limited liability, if the first audit of the accounts of such society after his ceasing to be a member discloses that the society is solvent, the financial liability of such past member shall cease forthwith.

38.

Liability of deceased members

The estate of a deceased member shall be liable for the debts of the co-operative society as they existed at the time of his death, and proceedings in respect thereof may be commenced within one year of the death:

Provided that—

(i)	in the case of a co-operative society with limited liability, if the first audit of the accounts of the society after the death discloses a credit balance in favour of the society, the financial liability of the estate shall cease forthwith; and

(ii)	a personal representative shall not be liable except in respect of assets in his possession or under his control.

39.

Transfer of share or interest of deceased members

(1)

On the death of a member, a co-operative society may transfer the share or interest of the deceased member to—

(a)	the person nominated in accordance with this Act and any rules made thereunder; or

(b)	if there is no person so nominated, such person as may appear to the Committee of the society to be the personal representative of the deceased member; or

(c)

if either of such persons is not qualified under this Act and any rules made thereunder or the by-laws of such society for membership, such person, specified by the nominee or personal representative, as the case may be, who is so qualified, or may pay to such nominee or personal representative, as the case may be, a sum representing the value of such member’s share or interest ascertained in accordance with any rules made under this Act or by-laws of the society:

Provided that—

(i)	in the case of a co-operative society with unlimited liability, such nominee or personal representative, as the case may be, may require the society to pay him the value of the share or interest of the deceased member ascertained in the manner mentioned in this subsection; or

(ii)

in the case of a co-operative society with limited liability, the society shall transfer the share or interest of the deceased member to such nominee or personal representative, as the case may be, being qualified in accordance with this Act or any rules made thereunder or the by-laws of such society for membership of the society, or on his application within one month of the death, to any person specified in the application, who is so qualified.

(2)	A co-operative society shall pay all other moneys due to the deceased member from the society to such nominee or personal representative, as the case may be.

(3)	All transfers and payments made by a co-operative society in accordance with this section shall be valid and effectual against any demand made upon the society by any other person.

40.

Evidence of member’s interest in society

(1)

Any register or list of members or of shares which is kept by a co-operative society shall be prima facie evidence of any of the following particulars entered therein—

(a)	the date on which the name of any person was entered in such register or list, as a member;

(b)	the date on which any such person ceased to be a member; and

(c)	the number of shares held by any member.

(2)

A copy of any entry in a book of a co-operative society regularly kept in the course of its business, shall, if certified in accordance with the rules made under this Act, be prima facie evidence in any proceedings of the existence of such entry, and of the matters, transactions, and accounts, therein recorded.

41.

Restriction on production of society’s books

No officer of a co-operative society shall in any legal proceedings to the society or liquidator is not a party may be compelled to produce any of the society’s books where the contents can be proved under section 40 or to appear as a witness to prove the matters, transactions, and accounts therein recorded, unless the court, for special cause, otherwise orders.

PART X – PROPERTY AND FUNDS OF CO-OPERATIVE SOCIETIES

42.	Application of society’s property and funds The property and funds of a co-operative society shall only be applied for the benefit of the society and, its members, in accordance with the provisions of this Act, the rules made hereunder and the by-laws of the society.

45.

Investment of society’s funds

A co-operative society may invest or deposit its funds only—

(a)	in the Post Office Savings Bank;

(b)	in and upon such investments and securities as are for the time being authorized for the investment of trust funds;

(c)	in the shares of any other co-operative society;

(d)	with any bank licensed under the Banking Act (Cap. 488);

(e)	in the stock of any statutory body established in Kenya or in any limited liability company incorporated in Kenya or in any other manner approved by a resolution at an annual general meeting of the said society.

45.

Investment of society’s funds

A co-operative society may invest or deposit its funds only—

(a)	in the Post Office Savings Bank;

(b)	in and upon such investments and securities as are for the time being authorized for the investment of trust funds;

(c)	in the shares of any other co-operative society;

(d)	with any bank licensed under the Banking Act (Cap. 488);

(e)	in the stock of any statutory body established in Kenya or in any limited liability company incorporated in Kenya or in any other manner approved by a resolution at a general meeting of the said society. [Act No. 2 of 2004, s. 20.]

46.

Declaration and payment of bonus

(1)

Subject to this section, every co-operative society shall declare each year all bonuses due to members; but, where the bonuses are required for re-investment by the society for capital development, or for the redemption of bonus certificates, the society shall issue bonus certificates to its members in lieu of cash payments, redeemable from a revolving fund established by the society for that purpose.

(2)	No co-operative society shall pay a dividend, bonus; or distribute any part of its accumulated funds without a balance sheet and audited account and report disclosing the surplus funds out of which the dividend, bonus or distribution is to be made.

(3)	A co-operative society shall pay a dividend at such rate as may be recommended by the management committee and approved by the annual general meeting of the society.

47.

Maintenance of reserve fund

(1)	Every co-operative society which does or can derive surplus from its transactions shall maintain a reserve fund.

(2)	A co-operative society may carry to the reserve fund such portion of the net surplus in each year as may be prescribed by rules made under this Act or by the by-laws of the society.

47.

Maintenance of reserve fund

(1)	Every co-operative society which does or can derive surplus from its transactions shall maintain a reserve fund.

(2)	A co-operative society may carry to the reserve fund such portion of the net surplus in each year as may be prescribed by rules made under this Act or by the by-laws of the society.

(3)	The reserve fund shall be invested in the manner provided for under section 45 of this Act.

(4)	The reserve fund set up under this section shall be indivisible and no member shall be entitled to claim a specific share of it.

(5)	Upon the dissolution of a co-operative society, the assets under the reserve fund shall be applied in the discharge of the liabilities of the society. [Act No. 2 of 2004, s. 21]

48.	Distribution of net balance Subject to sections 46 and 47, the net balance of each year with, any sum available for distribution from previous years, may be distributed in the manner prescribed by rules made under this Act or by the by-laws of the society.

PART XI – CHARGES BY CO-OPERATIVE SOCIETIES

50.	Charge to comply with applicable law A charge created by a co-operative society in accordance with section 49 of this Act shall comply with the provisions of the law applicable to the particular type of charge.

55.	Society to keep copy of instruments of charge at registered office Every co-operative society shall cause a copy of every instrument of a charge which is required by this Act to be registered, to be kept at the registered address of the society.

PART XII – INQUIRY AND INSPECTION

58.

Inquiry by Registrar

(1)

The Registrar may, of his own accord, and shall on the direction of the Minister, as the case may be, or on the application of not less than one-third of the members present and voting at a meeting of the society which has been duly advertised, hold an inquiry or direct any person authorized by him in writing to hold an inquiry, into the by-laws, working and financial conditions of any co-operative society.

(2)	All officers and members of the co-operative society shall produce such cash, accounts, books, documents and securities of the society, and furnish such information in regard to the affairs of the society, as the person holding the inquiry may require.

(3)	The Registrar shall report the findings of his inquiry, by tabling the same, at a general meeting of the society which shall, in accordance with its by-laws, determine what action and or steps to take on such report.

58.

Inquiry by Commissioner

(1)

The Commissioner may, of his own accord, and shall on the direction of the Minister, as the case may be, or on the application of not less than one-third of the members present and voting at a meeting of the society which has been duly advertised, hold an inquiry or direct any person authorized by him in writing to hold an inquiry, into the by-laws, working and financial conditions of any co-operative society.

(2)	All officers and members of the co-operative society shall produce such cash, accounts, books, documents and securities of the society, and furnish such information in regard to the affairs of the society, as the person holding the inquiry may require.

(3)	The Commissioner shall report the findings of his inquiry at a general meeting of the society and shall give directions for the implementation of the recommendations of the inquiry report.

(4)

Where the Commissioner is satisfied, after due inquiry, that the Committee of a co-operative society is not performing its duties properly, he may—

(a)	dissolve the Committee; and

(b)	cause to be appointed an interim Committee consisting of not more than five members from among the members of the society for a period not exceeding ninety days.

(5)	A person who contravenes subsection (2) shall be guilty of an offence and shall be liable to a fine not exceeding two thousand shillings for each day during which the offence continues. [Act No. 2 of 2004, s. 27 & Sch.]

59.

Inspection of books of indebted society

(1)

The Registrar may, if he thinks fit, on the application of a creditor of a co-operative society, inspect, or direct some persons authorized by him in writing to inspect, the books of the society, if—

(a)	the creditor satisfies the Registrar that the debt is a sum then due, and that he has demanded payment thereof and has not received satisfaction within a reasonable time; and

(b)	the applicant deposits with the Registrar such sum as security for the expenses of the inspection as the Registrar may require.

(2)	The Registrar shall inform the creditor of the results of the inspection.

59.

Inspection of books of indebted society

(1)

The Commissioner may, if he thinks fit, on the application of a creditor of a co-operative society, inspect, or direct some persons authorized by him in writing to inspect, the books of the society, if—

(a)	the creditor satisfies the Commissioner that the debt is a sum then due, and that he has demanded payment thereof and has not received satisfaction within a reasonable time; and

(b)	the applicant deposits with the Commissioner such sum as security for the expenses of the inspection as the Commissioner may require.

(2)	The Commissioner shall inform the creditor of the results of the inspection. [Act No. 2 of 2004, Sch.]

60.

Expenses of inquiry

(1)

Where an inquiry is held under section 58, or an inspection is made under section 59 of this Act, the Registrar may, by a certificate under his hand, make an order apportioning the expenses, or such part of the expenses as he considers proper, between the society, the members or creditor demanding the inquiry or inspection, and the officers or former officers of the society; and the decision of the Registrar thereon shall be final.

(2)	Any sum awarded by way of expenses under subsection (1) shall be a civil debt recoverable summarily on production of the certificate referred to in that subsection.

60.

Expenses of inquiry

(1)

Where an inquiry is held under section 58, or an inspection is made under section 59 of this Act, the Commissioner may, by a certificate under his hand, make an order apportioning the expenses, or such part of the expenses as he considers proper, between the society, the members or creditor demanding the inquiry or inspection, and the officers or former officers of the society; and the decision of the Commissioner thereon shall be final.

(2)	Any sum awarded by way of expenses under subsection (1) shall be a civil debt recoverable summarily on production of the certificate referred to in that subsection. [Act No. 2 of 2004, Sch.]

PART XIII – DISSOLUTION

63.	Effects of cancellation Where the registration of a co-operative society is cancelled, the society shall cease to exist as a corporate body from the date the order takes effect.

64.

Application of Companies Act

(1)	The sections of the Companies Act (Cap. 486) specified in Part I of the Schedule to this Act, modified in accordance with Part II of that Schedule, shall apply mutatis mutandis in relation to the winding-up of a co-operative society as they apply to that of a company registered under that Act.

(2)	The Minister may, by order, amend the Schedule to this Act.

70.	Enforcement of orders Subject to sections 68 and 69, any order or decision made under section 66 or section 68 on being filed in the court, may be enforced in a court in the same manner as if the order or decision were an order or decision of the court.

72.

Power to restrain convicted persons from being officers of society

Any person who is convicted of an offence under sections of the Companies Act (Cap. 486) specified in section 71 shall cease to be, or remain, an officer of a co-operative society, and shall cease to be concerned in or take part in, whether directly or indirectly, the management of a co-operative society, for a period of five years from the date of his conviction, and any person acting as, or purporting to be acting as such an officer, or being so concerned in, or taking part in the management of a co-operative society during that period, shall be guilty of an offence and shall be liable to imprisonment for a term not exceeding two years.

PART XIV – SURCHARGE

73.

Power to surcharge officers of co-operative society

(1)

Where it appears that any person who has taken part in the organization or management of a co-operative society or any past or present officer or member of the society, has misapplied or retained or become liable or accountable for any money or property of the society, or has been guilty of misfeasance or breach of trust in relation to the society, the Registrar may, of his own accord, or on the application of the liquidator or of any creditor or member, inquire into the conduct of such person and report his findings and recommendations at a general meeting of the society, convened for the said purpose.

(2)

If the Registrar’s findings and recommendations indicate that the person be required to repay, or restore the money or property or any part thereof, to the co-operative society, together with interest at such rate as the Registrar may think just, or to contribute such sum to the assets of the society, by way of compensation for the misapplication, retainer, dishonesty or breach of trust, the matter shall be determined by the general meeting in accordance with the society by-laws.

(3)	For the purpose of subsection (2) the Registrar shall have the power to direct the secretary and, or the chairman, of the society concerned, to convene a general meeting of the society.

(4)	Any secretary, chairman or any other officer of the co-operative society who fails to call the general meeting of the society as directed by the Registrar under subsection (3) shall be guilty of an offence under this Act and shall be liable to a fine not exceeding two thousand shillings.

(5)	The decision or action taken pursuant to subsection (2) of this section, shall not prejudice the fact that the same act or default upon which the decision or action was based may constitute an offence under some other law for which the person has been prosecuted or is likely to be prosecuted.

73.

Power to surcharge officers of co-operative society

(1)

Where it appears that any person who has taken part in the organization or management of a co-operative society, or any past or present officer or member of the society—

(a)	has misapplied or retained or become liable or accountable for any money or property of the society; or

(b)	has been guilty of misfeasance or breach of trust in relation to the society,

the Commissioner may, on his own accord or on the application of the liquidator or of any creditor or member, inquire into the conduct of such person.

(2)

Upon inquiry under subsection (1), the Commissioner may, if he considers it appropriate, make an order requiring the person to repay or restore the money or property or any part thereof to the co-operative society together with interest at such rate as the Commissioner thinks just or to contribute such sum to the assets of the society by way of compensation as the Commissioner deems just.

(3)	This section shall apply notwithstanding that the act or default by reason of which the order is made may constitute an offence under another law for which the person has been prosecuted, or is being or is likely to be prosecuted. [Act No. 2 of 2004, s. 32.]

74.

Appeal against order

(1)	Any person aggrieved by an order of the Commissioner under section 73(1) may, within thirty days, appeal to the Tribunal.

(2)	A party aggrieved by the decision of the Tribunal may within thirty days appeal to the High Court on matters of law. [Act No. 2 of 2004, s. 33.]

75.

Recovery of surcharge

(1)	Subject to section 74, an order made pursuant to section 73 for any moneys to be repaid or contributed to a co-operative society shall be filed with the Tribunal and shall, without prejudice to any other mode of recovery, be a civil debt recoverable summarily.

(2)	Without prejudice to the powers by the Committee of a society to take action for recovery of the sum surcharged under section 73, the Commissioner may, on behalf of the society, institute such action. [Act No. 2 of 2004, s. 34.]

PART XV – SETTLEMENT OF DISPUTES

81.

Appeal to High Court

(1)

Any party to the proceedings before the Tribunal who is aggrieved by any order of the Tribunal may, within thirty days of such order, appeal against such order to the High Court:

Provided that the High Court may, where it is satisfied that there is sufficient reason for so doing, extend the said period of thirty days upon such conditions, if any, as it may think fit.

(2)

Upon the hearing of an appeal under this section, the High Court may—

(a)	confirm, set aside or vary the order in question;

(b)	remit the proceedings to the Tribunal with such instructions for further consideration, report, proceedings or evidence as the court may deem fit to give;

(c)	exercise any of the powers which could have been exercised by the Tribunal in the proceedings in connection with which the appeal is brought; or

(d)	make such other order as it may deem just, including an order as to costs of the appeal or of earlier proceedings in the matter before the Tribunal.

(3)	The decision of the High Court on any appeal shall be final.

82.

Power to appoint co-operative assessors

The Chairman of the Tribunal may appoint any person with special skills or knowledge on co-operative issues which are the subject matter of any proceedings or inquiry before the Tribunal to act as an assessor in an advisory capacity, in any case where it appears to the Chairman that such special skills or knowledge are required for proper determination of the matter.

83.	Contempt of Tribunal It shall be an offence for any person to engage in acts or make omissions amounting to contempt of the Tribunal and the Tribunal may punish any such person for contempt in accordance with the provisions of this Act.

84.	Remuneration of members of Tribunal There shall be paid to the Chairman and members of the Tribunal such remuneration and allowances as the Minister shall, from time to time determine.

86.	Powers to establish benches of Tribunal The Minister may establish one or more benches of the Tribunal in any part of Kenya as he deems appropriate and shall for that purpose provide for the constitution and jurisdiction of such benches, in consultation with the Chairman of the Tribunal.

87.	Right of parties before Tribunal Any person who is a party to the proceeding before the Tribunal may appear in person or be represented by an Advocate.

88.

Immunity

(1)

The Chairman or other members of the Tribunal shall not be liable to be sued in a civil court for an act done or omitted to be done or ordered to be done by them in the discharge of their duty as members of the Tribunal, whether or not within the limits of their jurisdiction:

Provided they, at the time, in good faith, believed themselves to have jurisdiction to do or order the act complained of.

(2)

No officer of the Tribunal or other person bound to execute the lawful warrants, orders or other processes of the Tribunal shall be liable to be sued in any court for the execution of a warrant, order or process which he would have been bound to execute if within the jurisdiction of the Tribunal issuing it.

PART XVI – GENERAL

89.

Remuneration to officers and members of society

(1)

No officer or member of a co-operative society shall receive any remuneration, salary, commission or any other payment from the society for services rendered to the society unless the society has, by a resolution passed at a general meeting, approved the payment of such remuneration, salary, commission or other payment.

(2)

No officer or member of a co-operative society shall receive any remuneration, salary, commission or other payment from any person or body or association other than the society in respect of any business or transaction entered into by the society:

Provided that in special circumstances the society may, by resolution passed at a general meeting, authorize such remuneration, salary, commission or other payment to be made.

(3)

Any officer or member of a co-operative society who receives any remuneration, salary, commission or other payment in contravention of this section shall be guilty of an offence and liable to a fine not exceeding one hundred thousand shillings or to imprisonment for a term not exceeding two years, or to both such fine and such imprisonment; and shall, if the offence is the contravention of subsection (1) of this section, be ordered to repay the amount of the remuneration, salary, commission or other payment received from the society in addition to or in lieu of any other punishment, and default in such payment shall be dealt with in the same manner as default in paying a fine imposed by a court.

[Act No. 2 of 2004, s. 40.]

90.

Restriction on use of word “Co-operative”

(1)	No person, other than a co-operative society, shall trade or carry on business under any name or title of which the word “Co-operative” or its equivalent in any other language is part, without the written approval of the Registrar.

(2)

Any person who contravenes subsection (1) of this section shall be guilty of an offence and shall be liable to a fine not exceeding two thousand shillings, and in the case of a continuing offence, to a further fine not exceeding two hundred shillings for each day on which the offence is continued after conviction therefor.

90.

Restriction on use of word “Co-operative”

(1)	No person, other than a co-operative society, shall trade or carry on business under any name or title of which the word “Co-operative” or its equivalent in any other language is part, without the written approval of the Commissioner.

(2)

Any person who contravenes subsection (1) of this section shall be guilty of an offence and shall be liable to a fine not exceeding fifty thousand shillings, and in the case of a continuing offence, to a further fine not exceeding two thousand shillings for each day on which the offence is continued after conviction therefor.

[Act No. 2 of 2004, s. 41 & Sch.]

90A.

Co-operative Development Fund

(1)	The Minister may establish a fund to be known as the Co-operative Development Fund (hereinafter referred to as “the Fund”).

(2)	The object and purpose for which the Fund is established is the promotion of education, training, research, consultancy and other related activities in the co-operative sector in Kenya.

(3)	The Fund shall consist of contributions by co-operative societies and any other lawful source.

(4)	The Fund shall vest in a Board of nine trustees, six of whom shall be elected by the co-operative movement and three appointed by the Minister.

(5)	The Minister may, in consultation with the apex society, prescribe the manner of formation and maintenance of the Fund. [Act No. 2 of 2004, s. 42.]

91.

Rules

(1)	The Minister may make rules for the better carrying out of the provisions and purposes of this Act.

(2)

In particular, and without prejudice to the generality of the foregoing power, such rules may—

(a)	prescribe the forms to be used and the conditions to be complied with in making application for the registration of a society and the procedure to be followed;

(b)	prescribe the matter in respect of which a co-operative society may or shall make by-laws, and the procedure to be followed in making, varying and revoking by-laws, and the conditions to be satisfied before making, varying or revoking by-laws;

(c)	provide for the