New law to remove legal minefields, protect depositors.
It is a legal victory for Sacco members, who will benefit from enhanced safeguards for their co-operative membership.
The Co-operative Bill 2024 seeks to bring to a halt the practice of employers withholding or delaying in remitting Sacco deductions.
The proposed law also seeks to speed up the current lengthy liquidation process of collapsed co-operatives and punish Saccos that refuse to refund members withdrawing from the Society.
According to the Sacco Societies Regulatory Authority(SASRA), non-remittance of Sacco dues by errant employers severely impacts the financial health of members, who are either unable to make timely repayments of their loans or make their monthly deposits to the respective Sacco.
The proposed law states that an employer has a maximum of one week to remit the deductions. Failure to do so will attract a fine of the sum deducted together with an interest of not less than 5% per month.
The Commissioner for Co-operatives can also appoint a person, bank, or institution to be an agent of the affected co-operative to collect the unremitted dues. The agent has a window of 30 days to make the collection.
At present, the problem of dealing with employers who fail to remit Sacco remains a fluid legal area, and even the Commissioner’s office or SASRA has their hands tied.
The reason is that the employer is also the agent of the Sacco and, therefore, not under any supervision.
“What the regulator has been doing is encouraging affected Saccos to work closely with employers to understand why there is a delay in remittances. In the case of county governments and assemblies, the excuse has always been that the national government has delayed in disbursing funds, “said Peter Njuguna, CEO of SASRA, in a past interview.
While section 35 of the co-operatives Act stipulates punitive measures that can be taken against employers who fail or delay in remitting Sacco dues, these provisions are said to be weak and unenforceable by the Commissioner for Co-operatives, who is accused of being less effective.
The employer has a contract with the Sacco, an arrangement that does not involve the Sacco regulator. The powers to take action on culprits who fail to remit Sacco dues lies in the office of the commissioner of co-operative development, who also lacks the legal muscle.
Members Right Protected
The Co-operative Bill 2024 also protects members who decide to withdraw from a Society. The affected members must first issue a notice of withdrawal before the co-operative refunds any deposits held as well as interest on such deposits.
The new law also requires that the affected member be paid any accrued dividends prior to the date of the withdrawal notice and that the said member’s shares continue to earn dividends whenever such dividends are declared.
A co-operative that fails to refund members’ deposits and other dues, at the request of the aggrieved member, will require that the Commissioner issue an agency notice to bankers of the defaulting co-operative.
The proposed law intends to charge the affected co-operative interest on the outstanding deposits or any other dues, at the rate of 5% per month for every month that the deposit or other dues remain unpaid.
The Co-operative Societies Bill 2024 aims to amend the Co-operative Societies Act, No. 12 of 1997, in order to align it with the Constitution of Kenya, 2010, by setting out the functions of the National Government and the county governments in relation to the governance of co-operative societies.
It will ensure that the legal framework governing co-operatives reflects the current constitutional provisions.
This will create a conducive environment for co-operatives to conduct their businesses and contribute to the economy and the social fabric by strengthening the capacity and skills of co-operative members. Already, the Council of Governors and Government-led Co-operatives Committee has held a consultative meeting with the Cabinet Secretary Ministry of Co-operatives and MSMEs, Simon Chelugui, to discuss the contentious issues in the Co-operative Bill 2024, currently tabled at the National Assembly.
The Council raised concerns about the sections of the bill that seek to undermine Devolution by taking away the functions of Co-operatives assigned to the County Governments.
Among the issues highlighted by the Council is the constitutional mandate of County Governments to register primary and secondary co-operatives, the mandate to conduct inquiries, inspections, issuance of agency notices, and demand notices.
