The Nairobi High Court has dismissed a petition seeking to liquidate the Kenya Union of Savings and Credit Co-operatives Limited (KUSCCO), emphasizing its status as a cooperative society. Justice Rhoda Rutto ruled that the Insolvency Act does not apply to KUSCCO, as it is registered under the Co-operative Societies Act. The petition, filed by a savings and credit cooperative, claimed KUSCCO owed approximately Ksh108.85 million.
The court held that the presence of "Limited" in KUSCCO's name does not change its legal classification as a cooperative society. Section 95 of the Co-operative Societies Act generally excludes cooperatives from the Insolvency Act unless specific provisions are incorporated into their rules. Therefore, the petition filed under the Insolvency Act was deemed inappropriate.
According to Section 61(5) of the Co-operative Societies Act, a cooperative can only be dissolved or wound up by an order of the Commissioner for Co-operative Development, not by a High Court liquidation order. The petition, initially filed on 17 March, was dismissed on 28 September, upholding KUSCCO's preliminary objection.
The petitioner had presented financial statements showing liabilities of about Ksh17.7 billion against assets of roughly Ksh5.2 billion. However, the court ruled that these figures do not confer jurisdiction for liquidation under the Insolvency Act. The dismissal ends the attempt to liquidate the umbrella body.
Earlier, Commissioner for Co-operative Development David Obonyo issued a Gazette notice on 23 September appointing Waithaka Ngaruiya of Waithaka and Associates as liquidator for KUSCCO. The appointment was to last up to one year, following a decision by KUSCCO members on 28 August to dissolve the union.
After the decision to dissolve, the Commissioner cancelled KUSCCO's registration on 31 August and ordered its liquidation. This move was subsequently challenged in court, culminating in the High Court's dismissal of the petition. The court's decision reaffirms the legal framework governing cooperative societies in Kenya.
The case highlights the importance of understanding the legal status of cooperative societies in Kenya. KUSCCO's registration under the Co-operative Societies Act, rather than as a company, was a critical factor in the court's decision. The ruling provides clarity on the procedures for dissolving or winding up cooperative societies.
Key points
- The High Court dismissed the petition due to KUSCCO's status as a cooperative society.
- The Insolvency Act does not apply to cooperative societies unless specific provisions are incorporated into their rules.
- The Commissioner for Co-operative Development has the authority to order the dissolution or winding up of a cooperative society.
