The High Court in Nairobi has struck out a petition by a savings and credit cooperative organisation (SACCO) seeking to liquidate the Kenya Union of Savings and Credit Co-operatives Limited (KUSCCO) over an alleged unpaid debt of about Ksh108.85 million.
Justice Rhoda Rutto ruled that the petition had been filed under the wrong legal framework because KUSCCO is registered as a co-operative society rather than a company under the Companies Act.
The ruling, delivered on September 28, upheld KUSCCO’s preliminary objection and brought the petition filed on March 17 to an end.
The judge rejected the argument that KUSCCO’s status as a body corporate automatically made it a company for purposes of the Insolvency Act.
She also ruled that the use of the word “Limited” in KUSCCO’s name did not change its legal status or bring it under the Companies Act.
The judge pointed to Section 95 of the Co-operative Societies Act, which generally excludes the Insolvency Act from applying to co-operative societies unless specific provisions are incorporated through rules.
The court further noted that Section 61(5) requires a co-operative society to be dissolved or wound up through an order of the Commissioner for Co-operative Development.
KUSCCO’s proposed liquidation was expected to bring an end to its role as the country’s umbrella body for SACCOs.
The petitioner had cited an alleged unpaid demand of about Ksh108.85 million and financial records showing liabilities of approximately Ksh17.7 billion against assets of about Ksh5.2 billion in support of its petition.
The court held that even if those figures and other cited circumstances demonstrated financial difficulties, they could not give the High Court jurisdiction to commence liquidation proceedings under the Insolvency Act.
The ruling comes after Commissioner for Co-operative Development David Obonyo appointed Waithaka Ngaruiya of Waithaka and Associates as KUSCCO’s liquidator for up to one year in a Gazette Notice dated September 23.
The appointment followed KUSCCO members’ decision to dissolve the union on August 28, after which Obonyo cancelled its registration and ordered its liquidation on August 31, a move that was subsequently challenged in court.