CHAPTER 211
CO-OPERATIVE SOCIETIES ACT

[SUBSIDIARY LEGISLATION]

INDEX TO SUBSIDIARY LEGISLATION

   RULES

      The Co-operative Societies Rules

RULES

THE CO-OPERATIVE SOCIETIES RULES

ARRANGEMENT OF RULES

   Section

Title

PART I
PRELIMINARY PROVISIONS

   1.   Short title.

   2.   Interpretation.

PART II
FORMATION OF SOCIETIES

   3.   Initial meeting and election of a formation committee.

   4.   Function of a formation committee.

PART III
REGISTRATION OF SOCIETIES

   5.   Registration of society.

   6.   Registrar may require additional requirement before registration.

   7.   Procedure for refusal to register a Society.

PART IV
RIGHTS, LIABILITIES AND PRIVILEGES OF MEMBERS

   8.   Membership of society.

   9.   Rights of members.

   10.   Rights of minors.

   11.   Entry of member's name in register.

   12.   Withdrawals from membership.

   13.   Vote of members.

   14.   Nominees.

   15.   Termination of membership.

   16.   Suspension or expulsion of a member.

   17.   Shares and deposits may be made on behalf of a school society.

   18.   Members to receive services in priority.

PART V
DUTIES OF REGISTERED SOCIETIES

   19.   Register of members.

   20.   Publication of balance sheet.

   21.   Annual Statements.

   22.   Copies.

   23.   Disputes.

   24.   Delegation of duties of Registrar.

PART VI
MANAGEMENT OF SOCIETIES

(a) General Meetings

   25.   First general meeting.

   26.   Annual general meeting.

   27.   General meeting.

   28.   Notice of meeting.

   29.   Quorum.

   30.   Voting.

   31.   Minutes of general meetings.

(b) Management of Societies

   32.   Management committee.

   33.   Eligibility of members.

   34.   Circumstances in which member of committee ceases to hold office.

   35.   Honorarium or payment to committee member.

   36.   Duties of Committee.

   37.   Duties of supervising manager.

   38.   Additional functions of committees in savings and Credit societies.

   39.   Bank Account.

   40.   Committee minute book.

   41.   Objects and functions of Co-operatives.

PART VII
PROPERTY AND FUND OF REGISTERED SOCIETIES

   42.   Funds.

   43.   Limit of loans.

   44.   Estimates of income and expenditure.

   45.   Guarantors.

   46.   Distribution of net balances.

   47.   Reserve Funds.

   48.   Investment of Reserve Fund.

   49.   Indivisibility of Reserve Fund.

   50.   Application of Reserve Fund on dissolution.

   51.   Contracts entered into by society.

   52.   Property of society.

PART VIII
SPECIAL PROVISIONS RELATING TO DIFFERENT CATEGORIES OF CO-OPERATIVE SOCIETIES

(a) Agricultural Co-operative Societies

General Provisions

   53.   Economic activities to be under the guidance of the Management Committee.

   54.   Objectives of Agricultural Co-operatives.

   55.   Allocation of production factors.

   56.   Ownership of property of society.

   57.   Matters to be included in feasibility study.

   58.   Management committee may establish a scheme.

   59.   Powers of society to make By-laws.

   60.   Persons with special skills may form Co-operative Society.

   61.   Specialised Co-operative to operate according to the Act, Rule and By-laws.

   62.   Co-operative society to maintain its own funds.

(b) Joint Enterprises

   63.   Societies may form joint enterprise.

   64.   A joint enterprise may cease to operate in certain cases.

   65.   Joint enterprise not to expand its operation without permission of Registrar.

   66.   Minister to make regulations in relation to joint enterprises.

   67.   Joint Enterprises to make By-laws.

   68.   Fees for registration.

   69.   Permission to inspect documents etc. of joint enterprise.

(c) Industrial Co-operative Societies

   70.   Industrial society to specify products.

   71.   Objects of society to be stated in its By-laws.

   72.   Evidence of ability to meet contractual obligation.

   73.   By-laws of Society to lay procedure for apprentices to be members of society.

   74.   By-laws of building society to define tenancy contract.

(d) Consumer Co-operatives

   75.   Provision in the By-laws of consumer Co-operative Society.

   76.   Consumer to set price policy.

   77.   No officer to act independently in credit transaction.

(e) Savings and Credit Societies

   78.   Objects, name and common bond in a savings and credit society.

   79.   Employer of Agricultural society to supply supporting services to savings and credit society.

   80.   Service to member Organisation.

   81.   By-laws to provide for appointment of committee.

   82.   Powers of a savings and credit society.

   83.   Shares in savings and credit society.

   84.   Member's deposits and withdrawal.

   85.   Deposit services.

   86.   Cash reserves.

   87.   Methods of withdrawal of shares and deposits.

   88.   Cash fund to meet withdrawals.

   89.   No overdraft allowed.

   90.   Commencement of lending operations.

   91.   Loans by credit society.

   92.   Preference in the granting of loans.

   93.   Maximum loans to members.

   94.   Restriction in making loans in certain cases.

   95.   Total amount of loans for land, buildings and business purposes.

   96.   Restriction on loans to officers.

   97.   Prohibitions.

   98.   Unauthorised loans prohibited.

   99.   Limitation of loan.

   100.   Security for loan.

   101.   Rates of interest on loans.

   102.   Loans for business purposes.

   103.   Suspension and resumption of loaning operations.

   104.   Uncollectable loans and charge offs.

   105.   Limitation of payments.

   106.   List of loans in arrears.

   107.   Use of pass book.

   108.   Inspection and evaluation in a savings and credit society.

   109.   Discussion of inspection report with officers of a society.

   110.   Distribution of net surplus of credit society.

PART IX
AMALGAMATION AND DIVISION OF SOCIETIES

   111.   Procedure on voluntary amalgamation.

   112.   Election of new committee.

   113.   Procedure on voluntary division.

   114.   Election of committee of divided societies.

PART X
DISSOLUTION OF SOCIETIES

   115.   Rules relating to winding up of societies.

   116.   Appeals from decision of liquidator.

PART XI
MISCELLANEOUS RULES

(i) Use and maintenance of Reserve Fund

   117.   Use of Reserve Fund.

   118.   Investment of moneys in the Reserve Fund.

(ii) Inspection and Management Advice

   119.   Discussion of inspection report with officers of a society.

   120.   Special service by another society.

   121.   Special services by Government agencies.

   122.   Special services by advisory officers and members.

   123.   Inspection of documents.

   124.   Fees.

   125.   Revocation.

SCHEDULE

THE CO-OPERATIVE SOCIETIES RULES

(Section 126)

G.Ns. Nos.
408 of 1991
18 of 1996

PART I
PRELIMINARY PROVISIONS (rules 1-2)

1.   Short title

   These rules may be cited as the Co-operative Societies Rules.

2.   Interpretation

   In these Rules, unless the context otherwise requires–

   "Act" means the Co-operative Societies Act *;

   "area of operation of a Society" means a registered boundary where membership is drawn;

   "Balance Sheet" means a statement of assets and liabilities drawn at a specific date;

   "budget" means a projection of income and expenditure statement approved by the members at the general meeting;

   "Chief executive" means an officer of a Society vested with the powers to manage and supervise all the day-to-day affairs of a Society;

   "Co-operative Officer" means an officer of the Co-operative Development Division of the Ministry responsible for matters relating to Co-operative Societies;

   "Court" means district court or a court of a resident magistrate having jurisdiction over the area in which the headquarters of the society are situated;

   "Department" means the Co-operative department headed by the Registrar;

   "Formation Committee" means a committee elected under the provisions of rule 3;

   "Management Committee" means a committee elected by members at a general meeting;

   "prescribed" in relation to forms, means prescribed by regulations made under section 124 of the Act, and in relation to fees, means prescribed under these Rules.

PART II
FORMATION OF SOCIETIES (rules 3-4)

3.   Initial meeting and election of a formation committee

   Persons interested in the formation of a Co-operative Society, either primary or joint enterprise, secondary, Apex or Federation shall meet under the chairmanship of the local Co-operative Officer or any other Co-operative Officer appointed by the Registrar for that purpose for electing a formation committee.

4.   Function of a formation committee

   The function of a formation committee shall be–

   (a)   to consider in detail the type of society to be formed and to determine its objects;

   (b)   to assess the probable membership and expected volume of business;

   (c)   to undertake, with the assistance of the Co-operative Officer and, where necessary, with any person with a relevant technical skill, a feasibility study into the economic and practical aspects of the activities to be carried out by the proposed society;

   (d)   to prepare a viability statement or project write-up for submission to the Registrar;

   (e)   to compile a list of prospective members and a record of the probable share capital or contributions;

   (f)   to prepare, in consultation with the Co-operative Officer appropriate By-laws for the proposed society; and

   (g)   to do all such acts as may be necessary for the purpose of making an application for the registration of the proposed society.

PART III
REGISTRATION OF SOCIETIES (rules 5-7)

5.   Registration of society

   (1) Every society applying for registration must comply with the provisions of section 30 of the Act and shall submit an application to the Registrar in the form prescribed in these Rules.

   (2) Every application for registration of a Co-operative Society shall be signed on its behalf by persons duly elected by the formation meeting–

   (a)   certified copy of such resolution shall be attached to the application;

   (b)   four copies of the By-laws which the society proposes to adopt shall be submitted together with the application;

   (c)   four copies of the viability statement or project write-up referred to in rule 4(d) shall be submitted with the application.

   (3) Where the Registrar registers the application he shall return to the society–

   (a)   one copy of the By-laws and application for registration stamped with his official seal together with the certificate of registration;

   (b)   one copy of the viability statement or project write-up duly stamped as approved;

   (c)   one copy of income and expenditure contained therein to represent the first estimates of the society and shall be so treated.

6.   Registrar may require additional requirement before registration

   In order to determine whether the proposed society is economically viable or otherwise the Registrar may prescribe one or more of the following requirements before registration–

   (a)   that additional information be provided to show whether the proposed society meets economic, social or cultural need, and has reasonable prospects for achieving its object;

   (b)   that the applicants for registration obtain support from more persons who may be expected to become members;

   (c)   that more capital be furnished initially by the applicants for registration and other persons expected to become members, and that such additional capital be sufficient for the commencement of the operations;

   (d)   that arrangements be made for more educational and advisory work respecting co-operative principles and practices and the objects of the proposed society among the applicants for registration, and among other persons who may be expected to become members;

   (e)   that there be sufficient respecting the availability of officers capable of directing and managing the affairs of the proposed society and of keeping proper records and books of account as prescribed by the Registrar under the Act, and that if necessary, such officers be required to undergo such additional training as the Registrar deems necessary.

7.   Procedure for refusal to register a Society

   Where the Registrar refuses to register a society or its By-laws he shall record in writing his reasons for doing so.

PART IV
RIGHTS, LIABILITIES AND PRIVILEGES OF MEMBERS (rules 8-18)

8.   Membership of society

   Members of a society shall consist of–

   (a)   persons who join during the application for registration of a society;

   (b)   persons admitted in accordance with the By-laws of the society;

   (c)   persons who have attained the age of eighteen and are of a sound mind, are following a trade or occupation relevant to the society's objectives, have a common need which the society seeks to satisfy and are capable of paying fees and acquiring shares;

   (d)   persons who have not attained the age of eighteen years but have attained the age of fifteen referred to as minors may join a Co-operative Society in accordance with subsection (3) of section 14 of the Act.

9.   Rights of members

   Members shall have the following rights–

   (a)   rights to vote and to be voted for, right to attend meetings and to participate in the leadership of the society, right to call a meeting in accordance with these Rules and By-laws;

   (b)   no member of a registered society shall exercise the right of a member unless or until he has made such payment to the society in respect of shares, entry fees, and any other dues;

   (c)   each society may limit the number of its members in relation to its activities and in accordance to sections 14 and 23 of the Act;

   (d)   no company incorporated or registered under the Companies Act * and no unincorporated or registered body of persons shall be entitled to become a member of a registered society except with the written permission of the Registrar and subject to the following conditions–

      (i)   unless such company or body has shown interest to make use of services of the society and the Registrar is satisfied with such move;

      (ii)   the membership of such company or body shall comply with the Act, Rules and By-laws of the society;

      (iii)   the society shall benefit from the services of such company.

10.   Rights of minors

   (1) A minor may be a member but where parent or guardian of such a minor is informed of his desire to become a member he shall open a share account or pay a membership fee, and buy shares as the case may be.

   (2) Where the parent or guardian has been informed of a share or deposit account held by a minor and no restrictions on the account held by a minor and no restrictions on the account are imposed by the society, a minor may make payments to and withdraw money from such account, or make such other use of the account as deemed desirable without the approval of his parent or guardian.

   (3) A minor who makes use of the services of the society in accordance with subrule (1) or (2) shall have the rights of a member except the right to vote.

   (4) The provision of this rule shall not apply in the case of school society.

11.   Entry of member's name in register

   Every member admitted after the registration of the By-laws shall have his name entered in the register of members and shall sign his name or affix his thumbprint to such entry in the presence of two members of the committee.

12.   Withdrawals from membership

   (1) A member may withdraw from the society upon giving such notices as may be required by the By-laws or such additional notice as the committee may deem necessary in any particular case.

   (2) Without restricting the generality of the foregoing, additional notice may be required if the member is a borrower or guarantor of a loan owing to the society, or is otherwise indebted to the society.

   (3) No member withdrawing shall be entitled to a refund of his entrance fee.

13.   Vote of members

   At general meetings and in the affairs of the society each individual member present shall have one vote only irrespective of the number of shares held by him and no proxies or representative of such member shall be allowed.

14.   Nominees

   (1) Every member of a society may at the time or after he becomes a member nominate in writing with two attesting witnesses, one person who, in the event of his death, will succeed to his shares or other interests in the society, and such nominee may apply for membership.

   (2) In the event of such nominee not becoming a member or not being admitted to membership by the committee the value of the shares or other interest shall nevertheless be paid to him in accordance with subrule (4).

   (3) In the event of such nominee dying or of the member desiring to cancel such nomination, the member may from time to time nominate in writing another person in the same manner as in subrule (1), and the necessary alterations shall be made in the records of the society.

   (4) For the purposes of a transfer to the nominee, or to the legal presentative if there is no nominee, the value of any shares or other interest shall include the sum actually paid to the society by the member or credited to his share capital or other account from time to time out of the earnings of the society in accordance with the By-laws.

   (5) The value of the interest of a member who has become of unsound mind and incapable of managing his affairs shall be ascertained and paid or transferred to a nominee of the unsound mind member to whom such interest shall vest.

15.   Termination of membership

   Membership shall be terminated–

   (a)   in accordance with the By-laws;

   (b)   upon the member's death;

   (c)   upon the member's ceasing to hold a share or shares and any contributions as required by the By-laws of a society;

   (d)   upon the member's ceasing to be a resident of the area of operation of the society;

   (e)   by expulsion;

   (f)   for failure to participate in the economic activities of the society as required by the By-laws;

   (g)   upon a member becoming of unsound mind;

   (h)   by withdrawal.

16.   Suspension or expulsion of a member

   (1) Save as is provided by paragraph (2) a member may be suspended or expelled–

   (a)   upon his conviction of a criminal offence involving dishonesty or a sentence of imprisonment for six months or more;

   (b)   for giving or tendering any gratuity or commission to anyone employed by the society;

   (c)   for any action which may be held by the committee and a general meeting to be dishonest or contrary to the stated objects of co-operation;

   (d)   for failure to pay any sum due from him to the Society within the period allowed;

   (e)   for any other reason specified in the By-laws.

   (2) Subrule (1) shall apply to any member or delegate of a co-operative society.

   (3) For the purposes of subparagraph (a) of paragraph (1) of this Rule, the ordinary date on which the period allowed for making an appeal against a conviction or sentence, as the case may be expires or, if such appeal is made, the date on which the appeal is finally disposed of or is abandoned shall be deemed to be the date of the conviction or sentence, as the case may be.

17.   Shares and deposits may be made on behalf of a school society

   Shares may be held and deposits may be made in a society by a duly authorised person on behalf of school society or other junior organisation, and withdrawals may be made on behalf of such society or organisation with the written approval of the person authorised to hold shares or made such deposits.

18.   Members to receive services in priority

   A member of a society shall have priority in receiving such services and any other privileges as may be provided for in the By-laws of the society.

PART V
DUTIES OF REGISTERED SOCIETIES (rules 19-24)

19.   Register of members

   Every society shall maintain a register of members showing–

   (a)   the name, address and occupation of each member, and a statement of the number of shares held by him;

   (b)   the date on which each member's name is entered in the register;

   (c)   the date on which any member ceased to be a member;

   (d)   the nominee, if any, appointed under Rule 14.

20.   Publication of balance sheet

   Every society shall exhibit its annual balance sheet during office hours to any person interested in its funds as a member, depositor or creditor.

21.   Annual Statements

   (1) The committee of every society or some officers of the society appointed for this purpose by the committee, shall prepare in such form and for such period as the Registrar may direct–

   (a)   an account showing the income and expenditure or an account of like nature acceptable to the Registrar;

   (b)   an appropriation account; and

   (c)   a balance sheet:

   Provided that the accounts shall be made up to the last day of the period to which they relate, and a copy thereof shall be sent to the auditor not later than three months after the closing of the financial year and auditors shall complete the auditing work within two months.

   (2) Accounts of every registered society shall be audited at least once in a year by the Co-operative Audit and Supervision Corporation or a competent registered auditor who may charge a reasonable fee. The appointment of a competent and registered auditor shall be made at a general meeting of members and is subject to the approval of the Registrar.

   (3)(a) A registered society shall make annual contribution through its net surplus to a fund to be known as the Inspection and Supervision of Existing Societies, the administration of which shall be prescribed by Registrar.

   (b) A general meeting of the society may fix the amount of the annual contribution.

22.   Copies

   For the purpose of section 60 of the Act, a copy of any entry in the book of the society may be certified by a certificate written at the foot of such copy declaring that it is a true copy of such entry, and that the book containing the entry is still in the custody of the society. Such certificate shall be dated and signed by the secretary of the society or officer approved by the Registrar.

23.   Disputes

   (1) Any dispute concerning the business of a co-operative society between the members of the society or persons claiming through them, or between a member of persons so claiming and the committee or any officer, or between one society and another shall be referred to the Registrar. Reference may be made by the committee or by the society by resolution in general meeting or by any party to the dispute, or if the dispute concerns a sum due from a member of the committee to the society, by any member of the society.

   (2) The Registrar may either decide the dispute himself or refer it to arbitration under the Arbitration Act *.

   (3) In any case of doubt as to the interpretation of the By-laws of the society the matter shall be referred to the Registrar for decision.

   (4) A person aggrieved by a decision of the Registrar under paragraph (2) or paragraph (3) may within fourteen days of the receipt thereof appeal in writing against such decision to the Minster whose decision shall be final.

   (5) In the event of conflict between the By-laws of a secondary society and the By-laws of a primary society which is a member of such secondary society, the By-laws of the secondary society shall prevail, and in the event of a conflict between the By-laws of an Apex society and the By-laws of a secondary society which is a member of such Apex, the By-laws of the Apex society shall prevail, and in the event of a conflict between the By-laws of an Apex society and the By-laws of a Federation or Apex societies, the By-laws of the Federation shall prevail.

   (6) In the event of conflict between the By-laws of a joint enterprise and the By-laws of a primary society which is a member of such joint enterprise the By-laws of the joint enterprise shall prevail. In the event of conflict between the By-laws of a joint enterprise and the By-laws of an Apex society which is a member of such joint enterprise the By-laws of the joint enterprise shall prevail, in the event of conflict between the By-laws of a joint enterprise and the by-laws of a Federation of Apex societies which is a member of such joint enterprise the By-laws of the joint enterprise shall prevail.

24.   Delegation of duties of Registrar

   (1) The Registrar shall gradually delegate his duties of promoting, advising, educating and training of Co-operative Societies to the Co-operatives on mutual agreement according to section 12(2) of the Act, when such Co-operative Societies have attained the following qualifications–

   (a)   have employed competent staff to administer the affairs of the society;

   (b)   have instituted a sound internal control system to safeguard property and finances of the society;

   (c)   have attained an adequate internal financing system and are not very much dependent on external loans;

   (d)   have cleared themselves of all previous debts from their creditors especially bank overdraft;

   (e)   have committed members who fully participate in the affairs of the society;

   (f)   have sufficient turnover of business to cover all the costs and earn adequate revenue to facilitate operations of the society;

   (g)   have capability of paying patronage dividends and bonuses to its members;

   (h)   individual projects run/operated by the society must be self-sustaining;

   (i)   capable of producing current audited financial statements within six months from the closure of the financial year;

   (j)   have produced favourable audited results from operations for three consecutive years and have been able to pay honorarium/bonus.

   (2) Subject to the provisions of the above conditions each society shall be graded on its own merits and shall be granted with gradual delegation of duties of the Registrar accordingly.

PART VI
MANAGEMENT OF SOCIETIES (rules 25-41)

(a) General Meetings (rules 25-31)

25.   First general meeting

   (1) Unless otherwise provided in the By-laws, or the time is extended by the Registrar, every society shall within two months from the receipt of the certificate of registration, hold a general meeting at which all members shall be entitled to be present and vote.

   (2) The business of the first general meeting shall include the election of a Chairman, Vice Chairman and a managing committee.

   (3) The managing committee shall elect from amongst themselves a sub-committee provided that in case of savings and credit society such sub-committee shall be elected by the general meeting.

26.   Annual general meeting

   Every society shall hold an annual general meeting of its members or delegate in every calender year as prescribed in the By-laws:

   Provided that such meetings shall, unless otherwise approved by the Registrar, be held within six months of the close of the previous financial year of the society.

27.   General meeting

   (1) Every society shall hold a general meeting for the disposal of necessary business including–

   (a)   the election, suspension or removal of members of the committee;

   (b)   the consideration and adoption of the annual balance sheet;

   (c)   the disposal of sums available for distribution;

   (d)   the amount of honoraria, if any, for unsalaried officers and committee members;

   (e)   the acquisition or disposal by the society of all immovable property and of movable property of value in excess of ten thousand shillings in the case of a primary society, twenty thousand shillings in the case of a secondary society, five hundred thousand shillings in the case of an apex society and one million shillings in the case of the federation of apex societies;

   (f)   the approval of the annual budget.

   (2) The procedure for election of committee members shall be done in a manner following–

   (a)   for nomination of candidates it shall be done by a show of hands at the annual general meetings;

   (b)   the candidate so nominated shall get the support of some of the members present at the meeting;

   (c)   voting shall be done by secret ballot; and

   (d)   counting of votes shall be done immediately after election and results shall be announced by the chairman.

   (3) Every society shall hold general meetings at least two times in a year except that the federation shall hold general meetings at least once in a year.

   (4) The Registrar or any person authorised by him may summon and preside over a special or general meeting of the society in such manner and at such time and place as he may direct. He may also direct what matters shall be discussed at the meeting. Such meeting shall have the person and subject to the same rules as a meeting called in accordance with the By-laws of the society. All expenses for the meeting shall be met by the society.

   (5) A special meeting shall be held by a society where at least one-third of members signify in writing the intention to hold such meeting.

28.   Notice of meeting

   (1) A notice of a least twenty-one days in the case of an annual general meeting, fourteen days' notice in the case of an ordinary general meeting and seven days' notice in the case of a special general meeting, shall be given whether by advertisement, mail or otherwise.

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