The High Court in Nairobi has struck out a Sh108.85 million petition seeking the liquidation of the Kenya Union of Savings and Credit Co-operatives Limited (KUSCCO). Lady Justice Rhoda Rutto ruled that KUSCCO, being registered under the Co-operative Societies Act, is governed by a specialised framework that requires winding-up to follow a process overseen by the Commissioner for Co-operative Development. This process applies even where insolvency is alleged.
The ruling, delivered on September 28, 2026, followed a petition filed by Rupsa Regulated NWDT Sacco Society Limited on March 17. Rupsa sought KUSCCO's liquidation over an alleged unpaid statutory demand of Sh108.85 million. At the centre of the dispute was whether a registered co-operative society could be subjected to liquidation proceedings under the Insolvency Act. Justice Rutto upheld KUSCCO's preliminary objection, finding that the union is registered under the Co-operative Societies Act and is therefore subject to the winding-up process set out under that law.
Justice Rutto rejected Rupsa's argument that resolving KUSCCO's objection would first require the court to examine its financial position, corporate structure and subsidiaries. The judge also dismissed the argument that KUSCCO's status as a body corporate automatically brought it within the meaning of a company under the Insolvency Act. Justice Rutto noted that registration under the Co-operative Societies Act gives a society corporate status, allowing it to own property, enter into contracts and sue or be sued.
However, the judge said this status does not turn a co-operative society into a company for purposes of every other law. KUSCCO was registered under the Co-operative Societies Act and not the Companies Act. The court also rejected reliance on the word "Limited" in its name, holding that the designation did not change its legal status or make it a company incorporated under the Companies Act.
In reaching the decision, the court relied on Section 95 of the Co-operative Societies Act. This section provides that the Companies Act and the Insolvency Act do not apply to co-operative societies unless specifically provided for through rules made under Section 91. Justice Rutto said no such rule had been identified that would allow a creditor to directly file a liquidation petition against a registered co-operative society under Part VII of the Insolvency Act.
Rupsa had argued that KUSCCO was facing serious financial difficulties, pointing to financial reports showing liabilities of about Sh17.7 billion against assets valued at Sh5.2 billion. The Sacco also relied on creditor claims, closure of branches, disposal of assets, reductions in its workforce and inter-company loans as evidence of the union's financial position. However, the court held that even if the circumstances presented by Rupsa pointed to insolvency, they could not give the court jurisdiction to apply the Insolvency Act.
Justice Rutto consequently upheld KUSCCO's preliminary objection dated March 28 and struck out the liquidation petition. The court's decision was based on the specialised framework governing co-operative societies, which places such matters under the oversight of the Commissioner for Co-operative Development. This framework applies to KUSCCO, and the court ruled that it cannot be subjected to liquidation proceedings under the Insolvency Act.
Key points
- The High Court in Nairobi has struck out a Sh108.85 million petition seeking the liquidation of KUSCCO.
- The court ruled that registered co-operative societies cannot be placed under the liquidation process provided by the Insolvency Act.
- KUSCCO is governed by a specialised framework under the Co-operative Societies Act, which requires winding-up to follow a process overseen by the Commissioner for Co-operative Development.
