The Co-operative Societies (Amendment) Bill, 2023

Background

The principal objective of the Co-operative Societies (Amendment) Bill, 2023 is to align the Co-operative Societies Act (No. 12 of 1997) with the Constitution of Kenya, 2010. Under paragraph 7(e) of Part 2 of the Fourth Schedule to the Constitution, co-operative societies fall under the functional mandate of county governments. However, due to the national economic significance of the co-operative sector, this Bill establishes a dual-system framework where primary societies are governed at the county level, while larger networks—specifically co-operative unions and the national apex society—remain under the jurisdiction of the National Government.

Key Amendments

Devolved Administration and Governance

• Part IA (Sections 2B, 2C, 2D): Distinguishes the obligations of both levels of government. It assigns the registration of primary societies to County Directors, while registering co-operative unions and the national apex society remains under the authority of the national Commissioner for Co-operative Development.
• Office of the County Director (Section 3A): Establishes county public service offices to manage primary co-operatives directly.
• Co-operative Principles (Section 2A): Legally binds all actors performing functions under the Act to core principles including non-discrimination, voluntary and open membership, democratic member control, autonomy, and concern for the community.

Registration Procedures

• Primary Societies (Section 6A): Applications for registration must be signed by at least ten qualified persons and submitted to the County Director with the prescribed fee, minutes of the founding meeting, four copies of the proposed by-laws, and member identification details.
• Unions and Apex Societies (Section 6): Applications must be signed by authorized representatives of member societies and submitted directly to the national Commissioner.
• Provisional Registration (Section 7): Allows the Commissioner or County Director to grant provisional registration for up to one year to societies requiring steps to achieve full compliance.

Mergers, Splits, and Financial Charges

• Amalgamation (Section 29) & Division (Section 30): Establishes detailed, step-by-step procedures for societies choosing to merge or split, including mandatory notification to creditors, secondary resolutions by a two-thirds majority, and final approval applications to the Commissioner or County Director within 14 days.
• Registration of Charges (Section 51): Requires co-operative unions and the apex society to register financial charges with the Commissioner, and primary societies to register charges with the County Director, within 30 days of creation.

New Obligations

• Audit Requirements (Section 25): Every co-operative society must prepare accounts in accordance with International Financial Reporting Standards (IFRS) and have them audited annually.
• Annual Returns (Section 25(10)): Audited accounts, balance sheets, and annual returns must be filed within four months after the close of the financial year. Primary societies file with the County Director; unions and apex societies file with the Commissioner.
• Remuneration Approvals (Section 89): Officers are strictly prohibited from receiving remuneration, salaries, or commissions unless approved by a resolution passed at a general meeting of the society.

Penalties

• Provisional Registration Violations (Section 7(6)): Any person purposing to act as an officer of a provisionally registered society in violation of the Act commits an offence and is liable to a fine not exceeding fifty thousand shillings (KSh 50,000), or one thousand shillings (KSh 1,000) per day for continuing offences.
• Failure to Register Charges (Section 51(4)): If a society fails to register a charge within 30 days, every officer in default commits an offence liable to a fine not exceeding five thousand shillings (KSh 5,000) for every day the default continues.
• Falsification of Registers (Section 56(2)): Officers who knowingly fail to make entries in registers of charges are liable to a fine not exceeding one hundred thousand shillings (KSh 100,000).
• Unlawful Remuneration (Section 89(3)): Officers receiving illegal remuneration or unauthorized payments commit an offence liable to a fine not exceeding one hundred thousand shillings (KSh 100,000), imprisonment for up to three years, or both, and will be ordered to repay the unauthorized sum to the society.
• Insolvency Misconduct (Section 72(2)): Persons convicted of specified offences under the Insolvency Act who continue to act as officers of a co-operative society commit an offence liable to a fine of up to one hundred thousand shillings (KSh 100,000), imprisonment for up to five years, or both.