High court strikes out petition to liquidate KUSCCO

Lady Justice Rhoda Rutto, sitting at the Milimani High Court, upheld a preliminary objection by KUSCCO, represented by lawyer Ceceil Miller, and found that the petition filed by Rupsa Regulated NWDT Sacco Society Limited was improperly brought under the Insolvency Act.

The court held that KUSCCO, being a co-operative society registered under the Co-operative Societies Act, is governed by the specialised statutory framework established under that law rather than the general corporate insolvency regime.

The ruling, delivered on September 28, 2026, brings to an end the petition filed on March 17, 2026, in which Rupsa sought the liquidation of KUSCCO.

Justice Rutto first considered whether KUSCCO's preliminary objection met the legal threshold established in Mukisa Biscuit Manufacturing Co. Ltd v West End Distributors Ltd.

The court rejected Rupsa's argument that determining the objection would require a detailed examination of KUSCCO's financial position, corporate structure and subsidiaries.

The judge found that KUSCCO's status as a co-operative society was undisputed and that the central question was one of statutory interpretation: whether a co-operative society could be subjected to liquidation proceedings under the Insolvency Act.

The court consequently held that the preliminary objection was properly before it.

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

Justice Rutto noted that the Co-operative Societies Act gives registered co-operative societies corporate personality, including the ability to own property, enter contracts and sue or be sued.

However, she held that corporate personality does not necessarily make an entity a “company” for purposes of every statute.

The Insolvency Act contains its own definition of a company, principally referring to companies or foreign companies registered under the Companies Act, together with specified entities.

KUSCCO was registered under the Co-operative Societies Act and not the Companies Act.

The court further rejected reliance on the word “Limited” in KUSCCO's name, holding that the designation did not transform the co-operative society into a company incorporated under the Companies Act.

A central issue in the case was Section 95 of the Co-operative Societies Act, which provides that, except where expressly provided through rules made under Section 91, the Companies Act, Insolvency Act and Registration of Business Names Act do not apply to a co-operative society.

Justice Rutto found the provision to be clear and unambiguous.

The judge also considered Section 91(2A), which allows the Cabinet Secretary, through rules, to apply selected provisions of the Insolvency Act relating to administration of insolvent companies to co-operative societies.

However, the court held that this provision does not automatically bring the entire Insolvency Act into operation against co-operative societies.

Instead, the relevant provisions would have to be incorporated through rules made under the statutory framework.

The court found that no such rule had been identified that would permit a creditor to directly present a liquidation petition against a registered co-operative society under Part VII of the Insolvency Act.

Justice Rutto further relied on Section 61(5) of the Co-operative Societies Act, which provides that no co-operative society shall be dissolved or wound up except by an order of the Commissioner for Co-operative Development.

The judge held that the provision prevents a creditor from bypassing the statutory process and directly invoking the liquidation provisions of the Insolvency Act.

The court noted that the Co-operative Societies Act provides its own framework for dissolution and liquidation, including the appointment of authorised insolvency practitioners as liquidators following cancellation of a society's registration.

The First Schedule to the Act also contains provisions dealing with circumstances in which a co-operative society may be considered unable to pay its debts.

These include failure to satisfy a statutory demand, an unsatisfied execution and circumstances demonstrating that the society cannot pay its debts as they fall due.

The schedule also recognises balance-sheet insolvency where a society's liabilities exceed the value of its assets.

The ruling clarified that the High Court is not excluded entirely from matters concerning the liquidation of co-operative societies.

Justice Rutto observed that the First Schedule gives the High Court powers in various aspects of the liquidation process, including matters concerning property, execution, the affairs of the society and meetings of creditors or contributories.

However, the judge held that those powers arise within the liquidation framework established by the Co-operative Societies Act.

They do not give the High Court an independent power to commence liquidation proceedings against a registered co-operative society under Part VII of the Insolvency Act.

Rupsa had relied on an alleged unpaid statutory demand of about Ksh108.85 million, alleged admissions concerning overdrawn bank accounts and financial reports which it said showed liabilities of approximately Ksh17.7 billion against assets of about Ksh5.2 billion.

It also cited alleged creditor claims, branch closures, disposal of assets, workforce reductions, transfers to subsidiaries and inter-company loans as evidence of KUSCCO's financial difficulties.

The court, however, held that even if those circumstances demonstrated insolvency, they could not create jurisdiction under the Insolvency Act where Parliament had prescribed a different statutory regime for co-operative societies.

Justice Rutto said the financial circumstances could potentially be relevant to proceedings under the Co-operative Societies Act, but they did not permit a creditor to bypass that framework.

The court ultimately found that it lacked jurisdiction to entertain the petition as presented.

Justice Rutto therefore upheld KUSCCO's preliminary objection dated March 28, 2026, and struck out the insolvency petition filed by Rupsa.