High Court Suspends KUSCCO Liquidation
The High Court has temporarily halted the liquidation of the Kenya Union of Savings and Credit Co-operative Union Limited (KUSCCO), barring liquidators appointed through a Gazette Notice from taking further action against the troubled umbrella body.
Lady Justice Rhoda Rutto ruled that the appointed liquidators could not rely on the same legal instrument that purported to appoint them to exercise their powers.
The decision followed a case filed by RUPSA NWDT Sacco Society Limited, which challenged the liquidation after losing Sh108.8 million following the collapse of KUSCCO.
Justice Rutto had last week certified the matter as urgent and directed the parties to proceed with the case as the dispute over the liquidation continued.
The legal battle follows a Gazette Notice issued by the Commissioner for Co-operative Development, David K. Obonyo, ordering the liquidation of KUSCCO amid concerns over the union’s financial position and losses attributed to internal mismanagement.
The liquidation decision came after KUSCCO members held a meeting where they approved the move amid growing concerns over the umbrella body’s liquidity position.
Liquidation involves taking control of an entity’s assets and affairs with the aim of settling outstanding debts owed to creditors. Depending on the circumstances, the process can ultimately result in the closure of the entity.
The High Court’s intervention temporarily pauses that process, giving the parties an opportunity to have the legal issues surrounding the liquidation determined.
RUPSA NWDT Sacco is among the SACCOs that suffered significant financial losses linked to KUSCCO’s collapse.
The SACCO told the court that it had lost Sh108.8 million, prompting it to challenge the decision to liquidate the umbrella organisation and the legal process through which the liquidators were appointed.
The case comes against the backdrop of a major financial crisis at KUSCCO that has affected several SACCOs and raised concerns about the management of funds entrusted to the union.
A forensic investigation conducted by PwC about two years ago reportedly identified a financial shortfall of between Sh12 billion and Sh13.3 billion at KUSCCO.
The investigation attributed the shortfall to alleged financial irregularities, including suspected ghost loans, falsified commissions and alleged executive mismanagement.
The findings heightened scrutiny of the financial affairs of the umbrella organisation and raised questions over how funds belonging to member SACCOs were managed.
The financial problems also forced several SACCOs to write off millions of shillings that they had invested in KUSCCO.
Stima DT SACCO was among the institutions affected, with the SACCO reportedly writing off Sh108 million.
Balozi SACCO also suffered a major loss, writing off Sh437.5 million, while Afa SACCO was forced to write off Sh361.6 million, among other affected institutions.
KUSCCO has historically served as an umbrella organisation for savings and credit co-operative societies, providing services and financial support to member SACCOs.
