High Court Steps In to Stop KUSCCO Liquidation

Plans to wind up the troubled Kenya Union of Savings and Credit Co-operatives (KUSCCO) have hit a legal hurdle after the High Court temporarily stopped the liquidation process.

The order means the liquidators appointed by the Commissioner for Co-operative Development will, for now, be unable to proceed with taking control of KUSCCO’s assets and records as the court considers a case challenging the process.

Lady Justice Rhoda Rutto issued the temporary orders following a case filed by RUPSA NWDT Sacco Society Limited, one of the institutions affected by KUSCCO’s financial troubles. The Sacco says it lost Ksh 108.8 million following the collapse of the once powerful co-operative umbrella body.

The dispute centres on the decision to place KUSCCO under liquidation and the powers of the people appointed to oversee the process. Justice Rutto found that the appointed liquidators could not proceed by relying on the same action that was being challenged in court.

The case had earlier been certified as urgent, with the judge directing all parties involved to respond and appear before the court for further directions.

KUSCCO was formally pushed into liquidation after its members voted to dissolve the organisation, bringing an end to efforts to rescue the institution from its deep financial crisis. Commissioner for Co-operative Development David K. Obonyo subsequently cancelled KUSCCO’s registration through a Gazette Notice.

Obonyo said the decision followed liquidity problems that had made it difficult for the organisation to continue meeting its objectives.

“Now therefore pursuant to section 62 (1) (c), I cancel the registration of KUSCCO and order that it be liquidated,” Obonyo said in the Gazette Notice.

The Gazette Notice also appointed liquidators to oversee the winding-up process. Their role was expected to include taking custody of KUSCCO’s properties, books and other records before beginning the process of dealing with its debts and remaining assets.

However, the High Court’s intervention has now placed that process on hold, creating fresh uncertainty for member SACCOs and other creditors hoping to recover money tied up in the institution.

KUSCCO’s financial crisis has been linked to a massive hole uncovered through a forensic audit by PricewaterhouseCoopers. The investigation found that the organisation had a shortfall estimated at between Sh12 billion and Sh13.3 billion.

The audit raised concerns about ghost loans, manipulated financial records, questionable commissions, unexplained withdrawals and alleged mismanagement. The findings left KUSCCO heavily insolvent and put billions of shillings belonging to SACCOs at risk.

Several SACCOs have already been forced to absorb major losses. Balozi Sacco wrote off Sh437.5 million, while Afa Sacco lost Ksh 361.6 million and Stima DT Sacco wrote off Sh108 million.

For RUPSA NWDT Sacco and other affected members, the court battle now adds another chapter to the KUSCCO crisis. The temporary halt does not cancel the liquidation, but it stops the process until the legal questions surrounding it are addressed by the court.