East Africa

Radical changes in the draft Co-operatives Bill

NAIROBI-Co-operative Societies will soon be allowed to sell and purchase members’ shares and trade capital instruments through a Co-operatives platform if the Cooperatives Bill 2021 is passed.

If the Bill is passed into law, the Cooperative Societies Act, No. 12 of 1997, will be repealed.

Subject to this Bill and provisions of the Capital Markets Act, a co-operative will also be allowed to issue a capital raising instrument.

The Bill states that the Cabinet Secretary shall, by regulations, operationalize the platform and prescribe the minimum eligibility criteria for a co-operative to list the shares of its members in the co-operative shares trading platform.

An Apex co-operative will establish a fund to be known as the Cooperative Development Fund in accordance with the regulations prescribed by the Cabinet Secretary.

The Fund’s purpose is to promote education; training; research; innovation, emerging technology, and other related activities in the co-operative sector in Kenya.

The Fund will consist of contributions by co-operatives in such sums or rates as the Cabinet Secretary prescribes in the regulations, appropriations by parliament, donations and any other lawful source.

The proposed law puts term limits on those elected to be directors, but this has been opposed by a section of leaders in the sector. A person elected by the board of directors to serve as a chairperson shall not serve as such chairperson for more than three consecutive terms of three years each, provided that such person may become eligible for election as a chairperson after a break of a minimum of six years.

The new laws lock out individuals who attain the age of seventy years from being directors, do not have a minimum secondary level of education certificate, has not, within thirty days of being elected, submitted a wealth declaration to the Commissioner in the prescribed manner or adversely named by the Commissioner in an inquiry report or any inspection report for mismanagement or corrupt practices while a member of the board of directors, among others.

Also disqualified from being directors are those with any uncleared debt owing to a co-operative at the end of its financial year other than in respect of a loan and those who fail to satisfy provisions of Chapter six of the Constitution.


The Co-operatives Bill 2021 allows the merger of several societies into one, as well as the division of a large Society into two or smaller Societies.

By special resolution, any two or more co-operatives may resolve to amalgamate as a single co-operative, and a copy of the preliminary resolution sent to all the members and creditors of each of the amalgamating co-operatives and to all other persons whose interests will be affected by the amalgamation.

Any member of any amalgamating co-operatives can opt not to become a member of the co-operative. Any creditor of any of the amalgamating co-operatives can also demand the payment of any money due to them.

An existing co-operative can also resolve to divide itself into two or more co-operatives, and members and creditors affected by the change can petition or decide not to become members of the new societies.

Under the new Act, a co-operative will be able to borrow or lend to another co-operative to cover temporary liquidity shortfalls or for on-lending to its members.

A co-operative will, however, not be able to borrow from another co-operative in such sums as may exceed its borrowing powers or the prescribed limit for external borrowing.

Source: Co-op News



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