MERGERS OR AMALGAMATION OF CO-OPERATIVES

The Sacco Societies Regulatory Authority (Sasra) has asked 65 co-operatives to merge so as to raise their capital levels to 10 million as required by law so as to continue offering Front Office Savings Activities (FOSA). Amalgamation is a complicated process and more so as the said Saccos some were mismanaged and probably some are still refunding past members their deposits or have other debts. Saccos should not rush to have FOSAs and should concentrate on back office services until such a time they have the membership and financial capabilities to do so.

The following is an excerpt from the Co-operative Societies Act Cap 490 on amalgamation/mergers of co-operative societies:-

Section 29 Amalgamation of co-operative societies

(1) Any two or more co-operative societies (hereinafter referred to as amalgamating societies) may, by special resolution (in this section referred to as the preliminary resolution), resolve to amalgamate as a single society
(hereinafter referred to as the amalgamated society).

(2) A copy of the preliminary resolution shall be sent to all the members and creditors of each of the amalgamating societies, and to all other persons whose interests in any of the amalgamating societies will be affected by the amalgamation.

(3) Any member of any of the amalgamating societies may, notwithstanding any by-law to the contrary, by notice in writing given to his society at least one month before the date specified as the date of amalgamation, intimate his intention not to become a member of the amalgamated society.

(4) Any creditor of any of the amalgamating societies may, notwithstanding any agreement to the contrary, by notice in writing given to such society at least one month before the date specified as the date of amalgamation, intimate his intention to demand the payment of any money due to him.

(5) Any other person whose interest will be affected by the amalgamation may, by notice in writing given to the concerned amalgamating society, not less than one month before the date specified as the date of amalgamation, object to the amalgamation unless his claim is satisfied.

(6) Not less than three months after the date of the meeting at which the preliminary resolution is passed, a further special general meeting of each of the amalgamating societies shall be held to consider the preliminary resolution and any notices received under this section.

(7) At the special general meeting held under subsection (6) provision shall be made by a further resolution of the society (in this section referred to as the secondary resolution) for—
(a) the repayment of the share capital of any member who has given notice under subsection (3);
(b) the satisfaction of any claims by creditors who have given notice under subsection (4); and
(c) the satisfaction of the claims of such other persons who have given notice under subsection (5) securing of their claims in such manner as determined or directed by the Commissioner. Provided that no member or creditor or other person shall be entitled to such repayment or satisfaction until the preliminary resolution is confirmed as provided in subsection (8).

(8) Each amalgamating society may, by further resolution passed by a two thirds majority of the members present and voting, confirm the preliminary resolution.

(9) (1) If, within such time as the Commissioner considers reasonable, the Commissioner is satisfied that the secondary resolutions of each of the societies amalgamating comply with the provision of this section, he may register the amalgamated society and its by-laws and thereupon—
(a) each of the amalgamating societies shall stand dissolved and its registration cancelled;
(b) the registration of the amalgamated society shall be a sufficient conveyance to vest the assets and liabilities of the amalgamating societies in the amalgamated society;
(c) the remaining members of the amalgamating societies shall become members of the amalgamated society and will be subjected to its bylaws;
(d) any share holders of the amalgamating societies or any other persons who have claims against the amalgamating societies and whose claims were not satisfied in accordance with the secondary resolution, may pursue such claims against the amalgamated society.

(10) Where the Commissioner refuses the amalgamation of the amalgamating societies under subsection (9) such societies may appeal against such refusal to the Minister.

DIVISION OF CO-OPERATIVE SOCIETIES

Division of Co-operative Societies is also permitted under the Co-operative Societies Act Cap 490 of the Laws of Kenya Section 30. With Co-operatives, the bigger the better; economies of scale is easily realized and taken advantage of. Division is also not an easy process as it can be seen from the process below from the excerpt of the Act. Its advisable not to recommend division but look at other ways of improving the society capacity or find lasting solutions to the problems that are leading to division.

Section 30 Division of co-operative societies

(1) (a) A co-operative society (hereinafter referred to as the existing society) may, by special resolution (in this section referred to as the preliminary resolution), resolve to divide itself into two or more co-operative societies
(hereinafter referred to as the new societies).
(b) The preliminary resolution shall contain proposals for the division of assets and liabilities of the existing society among the new societies in which it is proposed to be divided and may prescribe the area of operation of, and specify the members who will constitute, each of the new societies.

Money can't buy happiness, however it can rent it :-)

(2) A copy of the preliminary resolution shall be sent to all the members and creditors of the existing society, and to all other persons whose interests will be affected by the division of the existing society.

(3) Any member of the existing society may, notwithstanding any by-law to the contrary, by notice in writing given to the society within two months of the receipt of the copy of the preliminary resolution, intimate his intention not to become a member of any of the new societies.

(4) Any creditor of the existing society may, notwithstanding any agreement to the contrary, by notice in writing given to the existing society within two months after his receipt of the copy of the preliminary resolution, intimate his intention to demand the payment of any money due to him.

(5) Any other person whose interest will be affected by the division may, by notice in writing given to the existing society within two months of the receipt of the preliminary resolution, object to the division.

(6) After the expiry of three months after the date of the preliminary resolution, a further special general meeting of the existing society shall be held to consider the preliminary resolution and any notices received under this
section.

(7) At the special general meeting held under subsection (6), provision shall be made by a further resolution of the society for—
(a) the repayment of the share capital of any member who has given notice under subsection (3);
(b) the satisfaction of any claims by creditors who have given notice under subsection (4);
(c) the satisfaction of the claims of such other persons who have given notice under subsection (5) or the securing of their claims as the Commissioner may determine, or direct: Provided that no member or creditor or other person shall be entitled to such repayment or satisfaction until the preliminary resolution is confirmed as
provided in subsection (8).

(8) The society may, by further resolution passed by a two-thirds majority of the members present and voting, confirm the preliminary resolution, with or without changes as in the opinion of the Commissioner are not substantial, and the decision of the Commissioner as to whether any changes are or are not substantial shall be final.

(9) If, the Commissioner is satisfied within such time as he considers reasonable that the provisions of the secondary resolution and the provisions of this section have been complied with, he may, register the societies into which the existing society has been divided and the by-laws of such societies and thereupon—
(a) the registration of the existing society shall stand dissolved;
(b) the registration of the new societies shall be sufficient to vest the assets and liabilities of the existing society in the new societies in the manner specified in the preliminary resolution, as confirmed;
(c) the remaining members of the existing society shall become members of one or other of the new societies, as is provided by the preliminary resolution, as confirmed; and
(d) any share holders or creditors of the existing society and any other persons who have claims against the existing society and whose claims were not satisfied in accordance with the secondary resolution, may pursue such claims against one or other of the new societies, as is provided by the preliminary resolution, as confirmed.

(10) Where the Commissioner refuses to approve the division of an existing society under subsection (9), the society may appeal to the Minister within thirty days of the communication to it of the refusal.

SHORT HISTORY OF THE CO-OPERATIVE MOVEMENT IN KENYA

The co-operative movement in Kenya was found in the beginning of 20th Century. Africans were allowed to form co-operative societies in the 1950's when they were permitted to grow cash crops. The attainment of independence in 1963 became the turning point in the movement. It has ever since grown in terms of societies membership and share capital/member deposits.

The firs Kenya co-operative society, Lumbwa Co-operative Society, was formed in 1908 by the European farmers with the main objective of purchasing fertilizer, chemicals, seeds and other farm inputs and then market their produce to take advantage of economies of scale. In 1930, Kenya Farmers Association was registered as a co-operative society to take over the role of supply of farm input played by Lumbwa Co-operative Society. The African smallholder farmers fought for formation of their own co-operatives and later in 1950's they were allowed to promote and register co-operatives for cash crops like coffee and pyrethrum. Consequently at independence in 1963, there were 1,030 co-operatives societies with 655 being active with a total membership of 355,000.