High Court strikes out KUSCCO liquidation petition, says co-operative societies governed by separate law

NAIROBI,Kenya Sep 29 – The High Court in Nairobi has struck out a petition seeking the liquidation of the Kenya Union of Savings and Credit Co-operatives Limited (KUSCCO) under the Insolvency Act, ruling that co-operative societies are governed by a separate statutory framework.

Justice Rhoda Rutto of the Milimani High Court held that the court lacked jurisdiction to entertain the insolvency petition filed by RUPSA Regulated NWDT Sacco Society Limited against KUSCCO.

The judge upheld a preliminary objection by KUSCCO and struck out the petition dated March 17, 2026, which sought to commence liquidation proceedings against the national umbrella body for savings and credit co-operative societies.

Justice Rutto ruled that the Co-operative Societies Act expressly excludes the application of the Insolvency Act to registered co-operative societies, except where specific provisions are applied through rules made under the Co-operative Societies Act.

The court relied particularly on Section 95 of the Act, which provides that the Insolvency Act does not apply to a co-operative society except as expressly provided by rules made under Section 91.

The judge also cited Section 61(5), which states that no co-operative society may be dissolved or wound up except by an order of the Commissioner for Co-operative Development.

“The provision is not merely procedural. It is jurisdictional in character,” Justice Rutto ruled, adding that it identifies the statutory authority through which the dissolution and winding-up process of a co-operative society is initiated.

The court rejected RUPSA’s argument that KUSCCO’s status as a body corporate brought it within the definition of a company under the Insolvency Act.

Justice Rutto said although a registered co-operative society becomes a body corporate, this does not automatically make it a “company” for purposes of the Insolvency Act.

The judge noted that the Insolvency Act has its own definition of a company, covering entities registered under the Companies Act and specifically identified entities.

“KUSCCO was not incorporated or registered under the Companies Act. It was registered under the Co-operative Societies Act,” the court said.

The use of the word “Limited” in KUSCCO’s name also did not change its legal status, the judge ruled, noting that its legal character was determined by the law under which it was established.

RUPSA had argued that KUSCCO was insolvent and cited an unpaid statutory demand of about Ksh108.85 million, alleged overdrawn bank accounts and financial reports showing liabilities of approximately Ksh17.7 billion against assets of about Ksh5.2 billion.

It also cited alleged creditor claims, branch closures, asset disposals, workforce reductions and transfers involving subsidiaries as evidence of financial difficulties.

However, the judge said those issues could not confer jurisdiction on the High Court under the Insolvency Act.

“The fact that the Respondent may be indebted, may have been served with a statutory demand or may otherwise satisfy the factual indicators of insolvency does not alter the statutory regime applicable to it,” Justice Rutto said.

The court further rejected RUPSA’s argument that excluding co-operative societies from the Insolvency Act would create a regulatory vacuum.

According to the judge, Parliament had instead created a specialised framework under the Co-operative Societies Act, including provisions governing dissolution, cancellation of registration and liquidation.

The court noted that the First Schedule to the Co-operative Societies Act incorporates several insolvency-related concepts, including circumstances in which a co-operative society may be considered unable to pay its debts.

It also gives the High Court powers in certain aspects of the liquidation process.

However, Justice Rutto clarified that the High Court’s role arises within the statutory liquidation framework under the Co-operative Societies Act and does not give creditors an independent right to commence liquidation proceedings directly under Part VII of the Insolvency Act.

The judge cited a 2025 High Court decision in Gitonga Michuki & Company Advocates v Murang’a Farmers Co-operative Union Limited, in which the court similarly held that Section 61(5) of the Co-operative Societies Act governs the winding up of co-operative societies.

Justice Rutto also referred to another 2025 decision involving Ng’undu Farmers Co-operative Society, where reliance on the Insolvency Act in proceedings involving a co-operative society was found to be misplaced.

The court consequently found that RUPSA’s petition was unsustainable.

“The Preliminary Objection dated 28th March 2026 is accordingly upheld. The Petition dated 17th March 2026 is hereby struck out for want of jurisdiction,” Justice Rutto ruled.

The court directed that each party bears its own costs.

The ruling was delivered on September 28, 2026, at the Milimani High Court Commercial and Tax Division.