Petitioner seeks insolvency process for KUSCCO over Sh17.7bn liabilities
NAIROBI, Kenya, June 25 – A petitioner has asked the High Court to place the Kenya Union of Savings and Credit Co-operatives (KUSCCO) under insolvency proceedings, arguing that the troubled cooperative’s financial position warrants action under the Insolvency Act.
In submissions filed before the High Court’s Commercial and Tax Division, the petitioner urged the court to dismiss KUSCCO’s preliminary objection, saying the case raises factual and legal issues that require a full hearing.
The dispute centres on whether KUSCCO, which is registered as a cooperative society, can be subjected to the Insolvency Act.
The petitioner argues that KUSCCO’s corporate status, ownership structure and network of subsidiaries make it eligible for insolvency proceedings.
“KUSCCO is a body corporate under section 4(1) of Cap 490. Its name includes ‘Limited’ by compulsion of section 4(3). The Insolvency Act applies to companies,” the court filings state.
“Section 384 does not carve out companies that also happen to be co-operative societies. Jurisdiction attaches to legal status.”
The filings further argue that KUSCCO meets several insolvency tests under Kenyan law, citing unpaid statutory demands and audit findings showing liabilities exceeding assets.
According to the documents, the cooperative has liabilities of Sh17.7 billion against assets of Sh5.2 billion, leaving a deficit of about Sh12.5 billion.
The petitioner also cites statements by Cooperatives Cabinet Secretary Wycliffe Oparanya to the Senate indicating that about Sh13 billion was lost at KUSCCO and raising concerns over the institution’s financial reporting.
The submissions further reference ongoing criminal cases involving former KUSCCO officials accused of fraud-related offences linked to the cooperative’s financial challenges.
The petitioner argues that KUSCCO’s interests in five subsidiary companies and billions of shillings in intercompany loans require closer scrutiny, saying only a court-appointed insolvency practitioner would have the powers to investigate the transactions and protect creditors.
KUSCCO, through its preliminary objection, is challenging both the court’s jurisdiction and the applicability of the Insolvency Act to the cooperative.
The High Court is expected to determine whether the preliminary objection can be decided as a point of law or whether the case should proceed to a full hearing.