MOUNT KENYA UNIVERSITY

BACHELOR OF LAWS DEGREE PROGRAMME

BLW 2204: COOPERATIVE AND PARTNERSHIP LAW

ADMINISTRATION AND MANAGEMENT OF COOPERATIVES

The administration and management of cooperatives is done through
management organs. In order that a society achieves efficiency as a business
organization, the law provides a management structure in which members exercise
supreme authority in a general meeting.

Control of the day to day operations is left to a small group of members with
specific powers and duties. The small group is elected by members and is known
as the management committee or board of directors.

The general meeting and the management committee/ BOD, and the Supervisory
committee comprise the key management organs of the society.

GENERAL MEETINGS
General meetings are meetings where all members of a co-operative society attend.
The supreme authority of a co-operative society is vested in the general meeting.
This is where members have the right to attend, participate and vote on all
matters. There are several different types of general meeting.

The Inaugural General Meeting

This meeting takes place in every cooperative but once. This meeting shall be held
not later than one month after receipt of the certificate of registration of the co-
operative society. ( the commissioner has a duty to send the certificate of
registration of the society.) Its role is to inaugurate the functioning of the
cooperative, to elect all the office bearers of the cooperative discuss, to determine
the maximum borrowing powers, approve the estimates of income & expenditure,
appoint the co-ops bankers and auditors and receive any reports. Sec 27 (3) of the
Coop Act

The Annual General Meeting

The role of this meeting is to assess all aspects of the past year's activities and if
the co-operative is growing and making progress, this will be seen in the annual
general meeting. This is the occasion when members exercise their ownership,
authority and control of the co-operative.

Every co-operative society shall hold its annual general meeting within four
months after close of its financial year (by 30th April for Sacco Societies – Sec 27
(2) of the Act). The meeting must be convened by the management committee of
the society or the commissioner or his representative e.g. the distrcit cooperative
officer. The AGM shall be convened by giving at least fifteen days written notice
to the members ( Sec 27 (4) Act).

The functions of the annual general meetings are: (section 27 (5) of the Act)
 Consider & confirm the minutes of the last annual general meeting and
any other intervening general meeting.
 Consider reports of the committee and any from the commissioner.
 Consider and adopt audited accounts.
 Determine the manner in which any available surplus is to be distributed
or invested.
 Approve the estimates of income and expenditure of the ensuing year.
 Carry out elections to fill any vacant positions.
 Determine, where necessary, the maximum borrowing power of the society.
 Appoint auditor for the ensuing year.
 Transact any other general business of the society of which notice has been
given to

The Special General Meeting

Whenever the need arises during the year, this general meeting may be called.

A Special General Meeting of a co-operative society may be convened by:

 The management committee for the purpose of discussing any matter
which may arise in the society before the annual general meeting is due.
 The committee on receipt of a written notice for such meeting signed by
such number of members of the co-operative society as may be prescribed
in society’s by-laws and stating the objects and reasons for calling the
meeting. If the committee fails to convene a meeting within 15 days of
 receiving the notice from the members, the members demanding the
meeting may themselves convene the meeting by giving notice to the other
members of the co-operative society stating the objects and reasons for the
meeting and the fact that the committee has failed to convene the meeting.
 The Commissioner for co-operative development, who may direct the
matters to be discussed and who may preside at the meeting will not need a
quorum
There is no fixed number of special general meetings to be held in a year. The
number will depend on the frequency at which urgent issues arise.

COMMITTEES
The Managing Committee/ BOD
Section 27 of the Act provides that the committee of a society shall be its
governing authority and subject to any direction from a general meeting of the
society and its bylaws. That is it derives its authority from the supreme authority
of the society which is the general meeting, which elects them.

They make decisions regarding the day- to-day management for operations of the
society.
They are directly responsible to the share- holders for giving accurate and
dependable accounting information in investment decisions without a doubt of
its reliability or validity. Management committees are also responsible to the
general public, government etc on behalf of the shareholders/ members.

Constitution
 Elected by the general meeting. This committee can be removed by 2/3
majority of the present members at the general meeting
 The committee shall consist of not less than five and not more than nine
members and the committee and they shall elect a chairman and vice chair.
 Eligibilty of membership to committee ( sec 28 (4) Act)
No person shall be a member of the management committee/ if he
 is not a member of the co-operative society;
 is under eighteen years of age;
 is unable to read and write;
 receives any remuneration, salary or other payment from the co-
operative society save in accordance with this Act;
  is a committee member in two other co-operative societies;
 being a member of a co-operative society that lends money to its
members, lends money on his own account;
 being a member of a co-operative society which trades in goods or
produce, trades either on his own account or some other person’s
account in the same type of goods or produce;
 has not, within thirty days of being appointed, declared his wealth to
the Commissioner in the prescribed manner;
 is an undischarged bankrupt;
 is of unsound mind;
 has been adversely named by the Commissioner in an inquiry report
adopted by a general meeting for mismanagement or corrupt practices
while a member of the Committee;
 has been convicted of any offence involving dishonesty or is sentenced
to imprisonment for a term exceeding three months;
 has been convicted of any offence under this Act or rules made
thereunder;
 has any uncleared debt owing to a co-operative society at the end of its
financial year other than in respect of a loan under the provision of any
rules made under this Act;
 is a person against whom any amount of money is due under a decree,
decision or order or is pending recovery under this Act.

All society committee shall file an indemnity-Form V of the Co-operative Societies

Act shall be signed by the management committee members agreeing to uphold
the values of accountability, honesty and transparency in dealing with the affairs
and resources of the society and accepting liabilities arising from lack of
upholding such values. This is done within fourteen days after being elected, and
if they do not, they will automatically lose their positions. The indemnity figure
shall be fixed by members in a general meeting.

All committee members shall fill wealth declaration forms within thirty days after
elections, and if they do not, they automatically lose their positions.

Powers and Duties

The management committee directs the affairs of the society with the following
powers (sec 28 (3) of Act):
 To enter into contract;
 To institute and defend suits and other legal proceedings brought in the
name of or against the society;
 To do all other things necessary to achieve the society’s objects in
accordance with its bylaws.

The committee shall ensure that any payment made by cheque has been signed by
such officers as the bylaws authorise and the committee shall also be responsible
for the custody of all monies belonging to the society.

It is required to hold regular meetings at which the following are done.

 The minutes of its previous meeting are considered and confirmed;

 The accounts bank books and cash in hand are scrutinised and checked
and its observation thereon recorded in the minutes;
 Any loans due and owing to the society are considered and any action
considered necessary in respect of such loans is authorised and recorded in
the minutes; and
 Any current business is conducted.

It is the committee’s responsibility to send annually to the Commissioner the

audited balance sheet of the society and annual return.

It is further required to keep available for inspect at the society’s registered offices
the following documents:

(a) The Certificate of Registration;

(b) A copy of the Act, rules and registered bylaws;
(c) A list of members and
(d) A list of Officers.

In the conduct of its affairs committee members are required to exercise the
prudence and diligence of ordinary men of business and shall be held jointly and
severally liable for any losses sustained through any of their acts which are
contrary to the Act, the Rules, the Bylaws or the directions of any General
Meeting.

It may delegate any of its duties to an officer or officers of the society but such
delegation shall not absolve it from its responsibilities of running the affairs of the
society in a proper and businesslike manner.

Board of Representatives
The cooperative society rules provide for a board of representatives in societies
whose membership consists of primary societies e.g. cooperative unions and apex
societies. The board should consist of one delegate from each affiliated society
elected at its annual general meeting. The board serves as the general meeting of
the union and is empowered to give directions in regard to the business of the
union.

No member serving on the committee of a union can be elected to serve on the

board of representatives.

Supervisory Committee (Art 28 Rules)

“Supervisory Committee” means an oversight committee elected at a General
Meeting.

The Supervisory Committee is the Internal Audit Committee of the Society. Its
role is complimentary to that of the Management Committee which is mainly to
ensure that there is an effective control system in the Society.

The main objective is that of assisting the Management Committee in ensuring

that adequate checks and balances are put in place that the principles of
transparency and accountability are observed for the good of the Society and its
members.

Constitution
The members of the Supervisory Committee shall meet the same qualifications as
those of the members of the Management Committee.
In addition at least one member of the member of the committee shall have basic
bookkeeping, accounting, auditing or financial management knowledge. Where
no such person is elected, those elected may be taken for basic accounting
training.
The Committee is elected directly by the members at a General Meeting. It
occupies the same position as the Management Committee in the organization
structure of the society.

The Committee is independent.

Duties of the supervisory committee

The main duties of the Supervisory Committee are provided for under respective
By-laws of each society and generally include the following:-
 verification of all transactions of the society;
 writing periodic reports of its findings to be tabled at management
committee meetings;
 submission of its reports to the Commissioner;
 presenting its reports to the general meeting.

NB: The Supervisory Committee should hold at least one quarterly joint meeting
with the Management Committee to discuss their reports.