RIGHTS AND OBLIGATIONS OF CO-OPERATIVE SOCIETIES

RIGHTS AND OBLIGATIONS OF CO-OPERATIVE SOCIETIES

Society to have charge over member’s produce
A co-operative society which has as one of its objects the disposal of any agricultural produce, may enter into a contract with its members, either in its laws or a separate document binding the members to dispose of all their agricultural produce, or such amounts or descriptions of the same as may be stated therein, to or through the society, and the contract may bind the members to produce the quantities of agricultural produce therein specified, and the contract may also provide for payment of a specific sum per unit of weight or other measure as liquidated damages for any breach of the contract, and any such sum on becoming payable shall be a debt due to the society and shall be a charge upon the immovable property of the member (subject to registration of the charge under the law under which the property is registered) and all stock then being thereon.
Any such contract as is mentioned in subsection (1) shall have the effect of creating in favour of the co-operative society a charge upon the proceeds of sale of all produce mentioned therein, whether existing or future.
A co-operative society may, on the authority of a resolution passed in general meeting, pledge the produce deliverable members under any such contract as is mentioned in subsection (1) as security for loans made to the
society, in all respects as if it were the owner of the produce.
No contract entered into under this section shall be contested in any court on the ground that it constitutes a contract in restraint of trade.
Fines for violation of by-laws
The by-laws of a co-operative society may, subject to this Act and rules made thereunder, provide for the imposition of fines, not exceeding twenty thousand shillings, on its members for any infringement of its by-laws, but no such fine shall be imposed upon any member until written notice of intention to impose the fine and the reason therefore has been served on him and he has had an opportunity of showing cause why the fine should not be imposed and, if he so desires, of being heard with or without witnesses.
Any such fine shall be a civil debt due to the co-operative society, and shall, without prejudice to any other means of recovery, be recoverable summarily.
The whole or any part of such fine may be set off against any moneys due to such member in respect of produce delivered him to the co-operative society.
A member shall not be taken to have infringed the by-laws of a cooperative society reason of his having failed to deliver produce to such society, if the failure was due to the fact that, before becoming a member of the
society, he had contracted to deliver such produce to some other person, and the contract had been disclosed in accordance with subsection (5).
It shall be the duty of every person applying for membership of a registered society to disclose to the society particulars of all such contracts as are mentioned in subsection (4).

Society to have first charge over debts, assets, etc. in certain cases  (1) Subject to any other written law as to priority of debts where a co-operative society has—
(a) supplied to any member or past member any seeds or manure, or any animals, feeding stuff, agricultural or industrial implements or machinery or materials for manufacture or building; or
(b) rendered any services to any member or past member; or
(c) lent money to any member or past member to enable him to buy any such things as aforesaid or to obtain any such services, the society shall have a first charge upon such things or, as the case may be, upon any agricultural produce, animals or articles produced therewith or therefrom or with the aid of such money.
The charge shall subsist for such period as the loan or value of the services rendered a co-operative society to a member shall remain unpaid.
Society to have first charge over members’ share A co-operative society shall have a first charge upon the share or interest in the capital and on the deposits of a member or past member, and upon any dividend, bonus or accumulated funds payable to a member or past member, in respect of any debt due from such member or past member to the society, and may set off any sum credited or payable to such member, or past member in or
towards the payment of any such debt.
Failure to remit the sum deducted
Where an employer of a person who is a member of a co-operative society has, under the instructions of the employee, made a deduction from the employee’s emoluments for remittance to the co-operative society concerned but fails to remit the deductions within seven days after the date upon which the deduction was made, the employer shall be liable to pay the sum deducted together with compound interest thereon at a rate of not less than five per cent per month.
The Commissioner may, on behalf of the society, institute legal proceedings in court for recovery of the sum owing under subsection (1) without prejudice to any other mode of recovery and such sum shall be a civil debt
recoverable summarily.
The Commissioner may, written notice, appoint any person, bank or institution to be an agent of the society for the purposes of collection and recovery of a debt owed to the society.

The agent shall pay the amount specified in the notice issued under subsection (3) out of any moneys which may, at any time during the twelve months following the date of the notice, be held him for the employer or are
due from him to the employer.
Where an agent claims to be or to have become unable to comply with subsection (3) reason of lack of moneys held or due from him, he shall give a written notification to the Commissioner stating the reasons for his inability and the Commissioner may—
(a) accept the notification and cancel or amend the notice accordingly; or

(b) if he is not satisfied with the reasons, reject the notification in writing.
Where an agent fails to notify the Commissioner or the notification is rejected, it shall be presumed that the agent has sufficient moneys for the payment of the amount specified in the notice.
Where an agent fails to pay the amount specified in the notice within thirty days from the date of service or the date on which any moneys come into his hands for or become due to him from the employer, the agent shall be liable for the amount specified in the notification as if he were the employer.
In any proceedings for the collection or recovery of the amount specified in the notice, it shall not be a defence for the agent to claim lack of the moneys.
This section shall apply notwithstanding that the failure under subsection
(1), to remit the sum deducted may constitute an offence under some other law for which the employer has been prosecuted, or is being, or is likely to be prosecuted.
In this section “employer” includes any person, firm or organization holding remuneration or payment for produce of a member of a co-operative society and the term “employee” includes any person who receives
remuneration or payment for produce from such persons or firm or organization.

Member’s share not subject to attachment
Subject to section 34, the share or interest of a member in the capital of a co-operative society shall not be liable to attachment or sale under any decree or order of a court in respect of any debt or liability incurred such member, and a trustee in bankruptcy under the law relating to bankruptcy shall not have any claim on such share or interest:
Provided that, where a co-operative society is dissolved, the share or interest of any member who is adjudged a bankrupt under such law shall vest in the trustee in bankruptcy in accordance with such law.
Liability of past members
The liability of a past member of a co-operative society shall be in respect of the debts of the society as they existed at the date when he ceased to be a member and proceedings in respect thereof may be commenced within a period
of two years from such date:
Provided that, in the case of a co-operative society with limited liability, if the first audit of the accounts of such society after his ceasing to be a member discloses that the society is solvent, the financial liability of such past member shall cease forthwith.

Liability of deceased members
The estate of a deceased member shall be liable for the debts of the co-operative society as they existed at the time of his death, and proceedings in respect thereof may be commenced within one year of the death:
Provided that—
(i) in the case of a co-operative society with limited liability, if the first audit of the accounts of the society after the death discloses a credit balance in favour of the society, the financial liability of the estate
shall cease forthwith; and
(ii) a personal representative shall not be liable except in respect of assets in his possession or under his control.
Transfer of share or interest of deceased members
On the death of a member, a co-operative society may transfer the share or interest of the deceased member to—
(a) the person nominated in accordance with this Act and any rules made thereunder; or
(b) if there is no person so nominated, such person as may appear to the Committee of the society to be the personal representative of the deceased member; or
(c) if either of such persons is not qualified under this Act and any rules made thereunder or the by-laws of such society for membership, such person, specified the nominee or personal representative, as the
case may be, who is so qualified, or may pay to such nominee or personal representative, as the case may be, a sum representing the value of such member’s share or interest ascertained in accordance with any rules made under this Act or by-laws of the society:
Provided that—
(i) in the case of a co-operative society with unlimited liability, such nominee or personal representative, as the case may be, may require the society to pay him the value of the share or interest of the deceased member ascertained in the manner mentioned in this subsection; or
(ii) in the case of a co-operative society with limited liability, the society shall transfer the share or interest of the deceased member to such nominee or personal representative, as the case may be, being qualified in accordance with this Act or any rules made thereunder or the by-laws of such society for membership of the society, or on his application within one month of the death, to any person specified in the application, who is so qualified.
A co-operative society shall pay all other moneys due to the deceased member from the society to such nominee or personal representative, as the case may be.

All transfers and payments made a co-operative society in accordance with this section shall be valid and effectual against any demand made upon the society any other person.
Evidence of member’s interest in society
Any register or list of members or of shares which is kept a co-operative society shall be prima facie evidence of any of the following particulars entered therein—
(a) the date on which the name of any person was entered in such register or list, as a member;
(b) the date on which any such person ceased to be a member; and
(c) the number of shares held any member.
A copy of any entry in a book of a co-operative society regularly kept in the course of its business, shall, if certified in accordance with the rules made under this Act, be prima facie evidence in any proceedings of the existence of
such entry, and of the matters, transactions, and accounts, therein recorded.
Restriction on production of society’s books
No officer of a co-operative society shall in any legal proceedings to the society or liquidator is not a party may be compelled to produce any of the society’s books where the contents can be proved under section 40 or to appear
as a witness to prove the matters, transactions, and accounts therein recorded, unless the court, for special cause, otherwise orders.

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