The High Court of Kenya has dismissed a liquidation petition filed by Rupsa Sacco against the Kenya Union of Savings and Credit Co-operatives (Kuscco) over an unpaid debt of Sh108.8 million. The court ruled that Kuscco, being registered as a co-operative society, is not subject to liquidation under the Insolvency Act. Instead, the Co-operative Societies Act governs the winding up of co-operative societies.
The debt dispute arose from fixed deposits placed by Rupsa Sacco with Kuscco from 2018, which matured in January 2024 but were not refunded in full. Kuscco acknowledged the debt during tribunal proceedings, citing severe liquidity challenges uncovered during inspections in late 2023. Rupsa Sacco filed the liquidation petition on March 17, 2026, relying on the Insolvency Act, after the debt was declared due under a Co-operative Tribunal decree issued on April 29, 2025.
The court upheld Kuscco's preliminary objection, arguing that it lacked jurisdiction to entertain the petition under the Insolvency Act. The Co-operative Societies Act provides a complete and self-contained statutory code for the winding up of co-operative societies by the Commissioner for Co-operative Development. The court found that Kuscco's corporate personality did not make it a company for purposes of the Insolvency Act, as it was registered under the Co-operative Societies Act.
The ruling does not establish that Kuscco is solvent, as the court did not determine whether Kuscco had failed to pay its debts or was balance-sheet insolvent. Rupsa Sacco had alleged that Kuscco had liabilities of about Sh17.7 billion against assets of Sh5.2 billion, leaving a Sh12.5 billion deficit. The Kenya Financial Stability Report also reported Kuscco's financial distress, affecting member saccos.
The court's decision is a significant development in the ongoing financial struggles of Kuscco. The union's separate liquidation under the Co-operative Societies Act had already begun, with the Commissioner cancelling Kuscco's registration on August 31 after members resolved to dissolve the union. A liquidator, Waithaka Ngaruiya of Waithaka and Associates, was appointed for up to one year.
The case highlights the complexities of co-operative societies' financial regulation in Kenya. The Co-operative Societies Act and the Insolvency Act have different provisions for the winding up of co-operative societies and companies, respectively. The court's ruling underscores the need for clarity on the applicable laws and regulations for co-operative societies.
The financial distress of Kuscco has significant implications for its member saccos and the broader co-operative sector in Kenya. The Kenya Union of Savings and Credit Co-operatives plays a crucial role in the country's financial landscape, and its stability is essential for the well-being of its members and the economy as a whole.
Key points
- The High Court of Kenya has rejected a liquidation petition against Kuscco, citing that co-operative societies are not subject to liquidation under the Insolvency Act.
- Kuscco owes Rupsa Sacco Sh108.8 million in unpaid debt, which contributed to the liquidation petition.
- The court's ruling does not establish Kuscco's solvency, and the union's financial struggles continue under the Co-operative Societies Act.
