Cooperative law

1. COOPERATIVE LEGISLATION

2. INTRODUCTION
• Most jurisdictions recognize and regulate
cooperatives as an eligible legal type of
organization within a menu of types of private
entities provided for by legislatures.
• However, some few countries such as England
have no specific legislation on cooperatives,
• In the latter countries coops are considered as
private business organizations, regulated under
general laws regulating business entities.

3. • Factors which necessitate a country to have a
cooperative legislation include the following:
– (i) Policy requirements in order to implement
provisions of policy statements. Some policies
indicate enactment of a cooperative legislation as a
strategy for its implementation;
– (ii) Recommendations of special committees
appointed from time to time by the government.
For example, in Tanzania both pre as well as post
independence established committees did
recommend enactment, amendment or repeal and
replacement of cooperative legislation.

4. – (iii)Cooperators’ pressure, seeking government
protection though appropriate legislation;
– (iv) Administrative measure/intervention for
providing a legal framework for recognition and
supervision of certain types of business
organizations. These measures could be for
various purposes, ranging from developmental to
tax administration and collection.

5. • Lectures under this topic will cover various
areas which include the genesis of a
cooperative law and how that legislation
worked before and after independence;
• Further, there will follow a thorough analysis of
the current legislation;
• The objective is to enable the appreciation of
the importance of cooperative legislation and
policy in cooperative development.

6. Genesis of Cooperative Legislation
• Cooperative law is the organizational law of
cooperative entities—which, depending on the
jurisdiction, may be termed as “cooperative societies”,
“cooperative associations”, “cooperative companies”,
“cooperative corporations”, or simply “cooperatives”.
• The legislation consists of rules on the definition,
formation, organizational and financial structure,
allocation of surplus, operations, relations among
constituencies and among cooperatives, dissolution,
merger, demerger and conversion, etc.,

7. • Although factors that contribute to the enactment of a
cooperative legislation range from policy to influence of
potential individual cooperators (farmers in case of East
Africa);
• However, in the pre-independence Tanzania it is recorded that
the enactment of the first Cooperative Societies legislation,
namely The Cooperative Societies Ordinance (Cap. 211 of
1932) was due to the pressure from African farmers to
legitimize their fight against Asian traders;
• The colonial government accepted that enactment because it
wanted to control African organizations from turning into
political organizations but also to assure a smooth and
organized marketing of cash crops, especially after the second
world war, when European countries were in a badly need of
raw materials.

8. • In 1931 the English Colonial government in Kenya enacted
the first Cooperative Societies legislation, aimed at
providing a legal framework for white cooperatives and
enhancing a control against Africans from establishing
cooperatives.
• In the same year the colonial government employed an
expert, Mr. C.F Srickland, a former Registrar of Cooperatives
in Punjab State of India to advise on how to set up a
cooperative movement in Tanganyika.
• He recommended, among other things, the need for a
cooperative legislation.
• The government accepted the recommendation and the
Cooperative Societies Bill was tabled in the Legico by the
Secretary for Native Affairs in 1932.

9. • In his address to Legico he stated that the
primary objective of the Bill was:
– “to put KNPA in a position to organize itself in a
manner known to the law and under certain amount
of control”
• However, the long term objective of the Bill was
“to provide an organized means into the
economic life of the country and for ‘primitive
people’ coming into contact with European
Development”.
• The Bill was passed into law.

10. THE COOPERATIVE SOCIETIES
ORDINANCE, 1932 (Cap. 211)
• The Cooperative Societies Ordinance resembled
the Indian Cooperative Societies Act. It was an
Ordinance relating to the constitution and
regulation of cooperative societies.
• It was the first Cooperative legislation in East
Africa allowing Africans to form cooperatives;
• The Ordinance provided legal and formal
marketing frameworks for African farmers cash
crops;

11. • According to the Ordinance under sections 44
and 65 the cooperatives were the only legal
agents for marketing of produce.
• Under section 3 of the Ordinance the Registrar of
Cooperatives was given power of controlling the
cooperatives through registering them and
making their by-laws under section 12.
• In order to ensure that all produce was marketed
through the cooperatives some rules were passed
which made it illegal to sell produce otherwise
than through cooperatives.

12. • The first cooperative society to be registered was KNPA
under the name of Kilimanjaro Native Cooperative Union
(KNCU) in 1933 with 11 affiliated cooperative societies.
• Also the Ordinance had provisions that compelled people
to join cooperative societies.
• For example, under section 44 of the Ordinance, an
application could be made to the Governor requesting
him to order that all coffee produced in an area, be sold
through the cooperative society, in which all coffee
farmers could be compelled to membership.

13. • The Cooperative Societies Ordinance was amended in
1952 to introduce compulsory auditing, giving the
Registrar powers to audit cooperative accounts.
• The Cooperative Ordinance was amended after
independence in 1963 to allow the Registrar to register
cooperatives in all regions, disregarding the requirement
of economic viabiity.
• In order to strengthen the cooperative movement the
Government established the apex body known as the
Cooperative Union of Tanganyika (CUT) under the
Cooperative Union of Tanganyika Act, 1961.
• CUT also became a member of ICA

14. • The post independence speed of establishing
cooperatives resulted in having many cooperatives
which overwhelmed the capacity of managing
them, coupled with other consequential abuses;
• This forced the government in February 1966 to
establish the Presidential Special Committee of
Enquiry into Cooperative Movement and Marketing
Boards,
• Famously known as “The Mhaville Committee”.

15. • The committee pointed out five basic defects in the
cooperative movement, namely uninformed
membership, shortage of appropriate manpower,
lack of democracy, lack of skilled people in the
movement and susceptibility of the movement to
political interference.
• The Mhaville report came out during the time of
preparation for Arusha Declaration. According to
the Government Paper No. 4 of 1967
“cooperatives were the basic agency to bring about
social change and rural development”.
• They were a preparatory stage to socialism and
self-reliance.

16. THE COOPERATIVE SOCIETIES ACT,
1968
• The Act was passed as a response to the Mhaville
Committee recommendation to repeal the
Cooperative Ordinance of 1932 and enhance
government control over cooperatives.
• However, efforts to put cooperatives under the
full control of the Government had started with
the 1963 and 1967 amendments to the
Ordinance which gave the Minister mandate to
direct the registration of cooperatives and
amalgamation or division of the cooperatives.

17. • The Cooperative Societies Act, 1968 was also
enacted to provide for better provisions on
cooperatives;
• According to section 35 of the Act, the
cooperatives would be under the sole control of
the members and the management under
management committees (section 37);
• Further, the government gave a directive that all
ujamaa villages be registered under this Act in
order to give them a legal personality status.

18. • However, this was just a political convenience
since the cooperatives Act was based on a
marketing structure, just like the Ordinance.
• Moreover, the powers given to the Minister and
the Registrars, that is to dissolve and appoint the
managing committee, to order divisions and
amalgamation of cooperatives, etc. rendered the
concept of a cooperative society being an
independent legal person, doubtful (ss. 39,
73,75).

19. • The Registrar also had powers to determine on
registration of a cooperative society (s. 10(1), to
amend the by-laws of cooperative society (s.
13(3) and 14(1-2), to access account books of a
coop, appoint auditors(s. 21(1-11), direct any
registered society to invest its funds in the Post
Office Savings Bank, National Bank of Commerce
or any authorized investment(s. 45).
• Also could compel any producer to sell crops
through a cooperative society (s. 48(1).

20. • Payments of dividends or bonus to members also
needed an approval of the Registrar (s. 54(1).
• He could also dissolve any registered society by
cancelling its registration (s. 77).
• These powers were too wide and since ujamaa
villages were registered as cooperatives, this implies
that the Act gave the Registrar to interfere with the
operations of villages, which were government
political units. He would soon come into conflict with
the party leaders

21. The Unifies Cooperative Services Act,
No. 44 of 1968
• The above Act established a Commission to look
into the affairs of the staffs of the cooperatives (s.
4(1).
• This meant that the staffs of the cooperatives were
no longer the members, but Government
employees.
• On the other hand this was a Government reaction
against incompetent management and
embezzlement of coops funds as reported by
Mhaville committee. However, there were no
proper cautions to make sure that it does not
jeopardize the coops’ autonomy.

22. • Also in 1970 the National Bank of Cooperative
Development was dissolved and its assets were
vested in National Bank of Commerce (NBC) and
others in the Tanzania Rural Development Bank
(TRDB) which was established in 1971;
• The coop bank had to give way to government
sponsored banks and in a way enhance
government control over cooperatives in the
light of the then existing policy.

23. • In short, from 1968 to 1975 the Government had
made a lot of efforts to ensure that ujamaa
villages are transformed into cooperative
societies, such as:
– Passing of the Rural Lands (Planning and Utilization)
Act, No. 4 of 1873;
– Issuance of a Presidential Circular No. 1 of 1969;
– Launching of a campaign known as “operation vijiji”
which was aimed at moving people into ujamaa
villages;
• But all these efforts were not giving positive
results which the government wanted.

24. The Villages and Ujamaa Villages Act,
1975
• Thus, at the 16th ruling party annual conference
the Government was directed by the ruling
party to make sure that all the people were in
villages, which were regarded as production
units by 1976.
• The Government response was the enactment
of the Villages and Ujamaa Villages
(Registration, Designation and Administration)
Act, 1975.

25. The Villages and Ujamaa Villages Act,
1975
• Under section 4 of the Act a village to be registered
would be formed by 250 households and as per section
13 each village would be “deemed” to be a multi-
purpose cooperative society, provided that the provision
of the Cooperative Societies Act, No. 27 of 1968 shall not
apply to such a society.
• Under section 14 of the Act no cooperative society under
the Cooperative societies Act, No. 27 of 1968 was
supposed to operate in rural areas and such societies,
including Unions had to be wound up, under the
directive of the Minister responsible for villages and
ujamaa villages.

26. • Under section 15 the management and supervision
of the villages cum multipurpose cooperatives
were put under village assembly and village
councils, established under section 5 of the Act.
• Up to December 1979 there were 8, 269 villages,
8,087 were registered as villages and out of the
registered ones 7, 166 were incorporated.
• According to section 11 incorporated villages were
those whom the Registrar had issued them with a
certificate of incorporation which would entitle its
village council to be a body corporate.

27. • After incorporation the village council was
given legal powers to do all such acts and
things as are necessary or expedient for the
economic and social development of the
village;

28. • Section 14 of the Act barred cooperative
societies registered under the Cooperative
Societies Act, 1968 to operate in a village;
• Therefore in effect the true cooperatives were
left to operate in urban areas.

29. JUMUIYA YA MUUNGANO WA VYAMA
VYA USHIRIKA ACT, No. 9 of 1979
• This Act was passed by Parliament in February 1978 to
give statutory effect to the establishment of
WASHIRIKA and consequentially to dissolve the CUT
and UCS in order to implement article 70 of the CCM
Constitution, which required CCM to establish party
organizations.
• Under section 5 of the Act WASHIRIKA as the Apex
organization of the cooperative movement in Tanzania
was composed of villages registered under the Villages
and Ujamaa Villages Act, of 1975, Cooperative
Societies registered under the Cooperative Societies
Act, 1968 and those of Zanzibar.

30. • Part III of the Act which has sections 8 – 14
provides for the dissolution of the CUT and
UCS and vesting all assets and liabilities of
these organizations to WASHIRIKA, including
their employees.
• According to section 7 of the Act, WASHIRIKA
was to be governed according to the Rule
made under the Act, appearing in the
Schedule to the Act

31. • Main objectives of those rules were:
– To organize farmers and cooperators to implement
CCM policies of socialism and self reliance;
– To unite farmers and people in urban areas to fight
capitalist exploitation and build a socialist economy
and a socialist democracy in cooperatives;
– To bring about scientific, technical and
communication revolution in agriculture and other
production activities

32. • Members of WASHIRIKA were:
– All registered ujamaa villages
– Other cooperative societies
• WASHIRIKA had to have “members” meetings at district,
regional and national levels, which were composed of
village as well as CCM leaders;
• All these levels had to have executive committees which
were assigned with the managing of day to day activities
of WASHIRIKA at their respective levels.
• For example, members of these committees at district
level included government cooperative and agricultural
officers as well as Members of Parliament in the districts.

33. • At district, regional as well as national levels
WASHIRIKA had a chairman and a secretary as
leaders of cooperatives for the respective level.
• In short, the Jumuiya ya Washirika Act played a
great role of mingling cooperative matters with
political as well as governmental matters, the
effects of which are still impacting on
cooperative development.

34. • The multiparty system was formally accepted
on 29 February 1992, when a specially
convened extraordinary congress of the ruling
party CCM accepted to end its monopoly of
political activities and its supremacy
guaranteed by the constitution.
• In May 1992, the Parliament endorsed the
recommendation to start the transition to
multiparty politics and enacted a law to allow
opposition parties to begin political activities on
1 July 1992.

35. • To effect this change Article 3 of the
Constitution, which provided for a one-party
system was amended to provide for a multi-
party system.
• And, Article 10, which provided for party
supremacy and monopoly of activities in the
country by CCM was repealed.
• The Government decision to start a multi-party
democracy indicated an initial step towards ‘de-
politicization’ of cooperatives in Tanzania.

36. • Consequently in March 1993 the government
agreed to dissolve WASHIRIKA.
• On 2nd April 1993 the High Court of Tanzania
issued an order to appoint the Government
Administrator General to be a Trustee of assets
and liabilities of the dissolved WASHIRIKA until
when the apex cooperative body would be
established to take over.

37. • The Tanzania Federation of Cooperatives (TFC)
was registered on 8th December, 1994 with
Registration Number 5503 under the Cooperative
Societies Act, 1991.
• Founding Members of TFC consists of five
National Cooperative apexes from Tobacco,
Cotton, Coffee, Cashew and Cereal; two
specialized Unions Savings and credit Cooperative
Union of Tanzania SCCULT and Tanzania Industrial
Co-operative Union and six Cooperative Unions.

38. • Thus, the 1982 and 1991 Cooperative Society Acts were
passed and operated under the one party democracy
policy, reflecting party and government control over
cooperatives.
• However, the 1991 Cooperative Societies Act, was also
aimed at implementing the Nyirabu Committee
recommendations, which aimed at recommending policy
and legal environment for cooperatives to operate under
free market economic policies.
• Therefore the 1991 Cooperative Societies, though
drafted along ICA principles and values could not be
implemented properly until when the Muungano wa
Vyama vya Ushirika Act of 1979 was repealed in 1993.

39. THE 2003 AND 2013 COOPERATIVE
SOCIETIES ACTS
BACKGROUND
• Both the 2003 and 2013 Cooperative Societies Acts
draw their policy justification or rationale from the
2002 Cooperative Development Policy, which was
passed as partial implementation of the George
Kahama Committee report recommendation.
• Therefore the two Acts are more or less similar in the
substantive sections, namely sections dealing with
formation and operation of cooperatives.

40. • Their differences are mainly in the following areas:
(i) Government enforcement bodies/structure
 The 2003 Act provides that the Office of the Registrar of
Cooperatives within the ministry responsible for
cooperatives will be the legislation enforcement body.
 Therefore in order to effect this the Ministry responsible
had to establish the Cooperative Development
Department for that purpose and the Registrar had to
be at the same time the Director of Cooperative
Development.
 Further, the Government /Minister responsible for
cooperatives had enormous powers with regard to
establishment and operation of cooperatives (section 5 -
9)

41.  The 2013 Act provides that the Tanzania
Cooperative Development Commission (TCDC) will
be the Government body responsible for the
implementation of the legislation and the Registrar
of Cooperatives will be the Chief Executive Officer of
the Commission.
 Therefore the TCDC is established by law as an
independent/autonomous body to deal with
supervision of cooperatives, not directly controlled
by the central government to reduce direct
government involvement in cooperatives.

42.  In order to effect this even the duties or functions of
the Registrar of cooperatives under the 2013 Act are
delineated or rationalized.
 The Act identifies regulatory functions as the main
responsibility of the commission and cooperative
promotion function, which it shares with other
bodies, public as well as private in their
implementations (Section 8 of the Act).
 As far as the cooperative promotion function is
concerned TCDC is more of a coordinator than a
direct implementer.

43.  As far as implementation of regulatory functions are
concerned TCDC is supposed to implement them
directly, starting at the local government, regional up
to the national level (Section 9).
 At the national level TCDC headquarter offices are
responsible (sections 10 and 11), at the regional level
offices of Assistant Registrars of Cooperatives are
responsible (section 12), at the local government or
district level cooperative inspectors offices are
responsible (section 13 and 92).

44. • As far as implementation of cooperative promotion
functions are concerned the Act provides that these are
the functions of public as well as private sector bodies
and are to be performed by cooperative development
officers in their respective areas.
• Public bodies responsible for cooperative promotion
include sectoral ministries, regional and local
government (section 14);
• Private bodies may be any, but TCDC is legally
empowered to inquire into what they are doing (section
16).

45.  TCDC is also empowered to coordinate cooperative
development plans prepared by cooperative development
promotion bodies, whether public or private (section 15(1);
 It will also monitor the implementation of those plans (section
15(2).
• Consequently the implementation of the 2013 Cooperative
Societies Act has an effect to the implementation of the
Decentralization Policy (D by D) in the sense that assistant
registrars in the regions and cooperative inspectors in the
districts are directly accountable to the Registrar of
Cooperatives.
• Under the 2003 Act they were accountable to the RASs and
DEDs respectively.

46. (ii) Deficiencies in the implementation of the 2002
Cooperative Development Policy
• The 2003 Act, though intended to implement the
Cooperative Development Policy, 2002 did not
implement most of policy directives as required
by the policy.
• One of the main reasons for this is that such
radical changes needed more awareness creation
to MPs most of whom grew under the old
cooperative paradigm. Such areas of the policy
include the following:

47. (a) Structural Framework of the Cooperative Movement
 Although the policy had directed that the government
will encourage establishment of a cooperative structure
which is cost effective and which emanates from the
members (para 4.1 of the policy), the 2003 Act continued
to be prescriptive on the required cooperative structure
(sections 14 -22 of the Act), apart from providing the
lowest level cooperative and the highest level
cooperative;
 Although it uses the term ‘may’, implying that it is not
mandatory, the practice has been to ensure that all
structures are met at the whim of external influence.

48.  The 2013 Act, on the other hand does provide that the
structure shall be primary societies at the lower level
and federation at the highest level (section 19(1).
 However, under subsection (2) it does not limit itself to
allowing members to be free to determine structures.
 It sometimes uses the term ‘shall’ in prescribing the
objects of such structures, which may be against the
spirit of the 2002 policy (sections 20 -25).
 This implies that more awareness is required to
participants in cooperative laws making process.

49. (b) Cooperative leadership and management
 Para 5.1 of the policy directs five areas of
intervention in cooperative leadership, namely:
introduction of advisory committees, limitation of
leadership duration, establishment of code of
conduct for cooperative leadership and separation
of political and government leadership from
cooperative leadership.
 The 2003 Act managed to address only one item,
namely establishment of the code of conduct
(section 125 of the Act)

50.  The 2013 Act addresses all the four areas in the Act,
namely:
 establishment of supervisory boards in cooperative
societies (provided in the SACCOS regulations of 2014;
 Limitation of the duration of cooperative leaders to not
more than two terms of three years (provided under
section 68 Schedule III (3)
 Code of Conduct for cooperative leadership and
management (provided under section 134, Schedule II of
the Act,
 Prohibition of political and government leaders being also
cooperative leaders (provided under section 132 of the
Act)

51. (iii) Other differences between the 2003 and the
2013 Acts
(a) Section 26 of the 2013 Act provides for
establishment of cooperative joint enterprises as
well as cooperative joint ventures
 Section 21 of the 2003 Act provides for
establishment of cooperative joint enterprises
 Changes in the 2013 Act were introduced to
capture the notion of innovation in cooperative
societies.

52. (b) Section 41 of the 2013 Act requires for ownership
of at least 50 percent paid up shares for a
cooperative member to exercise member’s rights.
 Section 35 of the 2003 Act is general, it does not
indicate a minimum of shares required for a
member to exercise member’s rights
 This was introduced in the 2013 Act in order to
ensure members’ seriousness in establishing and
owning cooperative societies which are
economically strong and which adhere to ICA
principles.

53. (c) Section 50 of the Cooperative Societies Act, 2013
requires cooperative promotion officers to create
awareness to members on their rights and
obligations
 The 2003 Act had no such a provision
 This provision was introduced in the new Act
because of understanding the fact that there has a
general lack of understanding of the meaning, rights
and obligations of cooperative members to the
extent that even some members still understand
that cooperatives belong to the government.

54. (d) Section 55(5) of the 2013 Act requires the external
auditors who audit cooperative societies to submit a
copy of their report to the Registrar of cooperatives
before submission of the same to the general meeting
of the respective cooperative society.
 The provision does not appear in the 2003 Act.
 The provision was introduced to ensure the Registrar
of cooperatives who is their principle regulator to use
that report for purposes of enforcing the law. Also to
limit the possibility of cooperative leaders tampering
with the report before its submission to the
cooperative general meeting.

55. (e) Section 67 of the 2013 Act gives power to the
minister responsible for finance to consider
exempting any cooperative society from tax.
 Section 60 of the 2003 Act was giving tax
exemption powers to the President.
 This new change was introduced in the legislation
to harmonize the cooperative legislation with
other existing laws on tax exemption.

56. (f) Section 68 of the 2013 Act vests the management of a
registered cooperative society in the Board. However,
Schedule III which gives provisions on the management of a
cooperative society starts with the general meeting.
 On the other hand section 61 of the 2003 Act was vesting the
control and management of a cooperative society in the
general meeting.
 We think it not correct for the control and management of a
cooperative society to vest in the Board. In principle the
Board’s power are delegated to it by the general meeting and
therefore it has to be accountable to that meeting. The 2003
Act was more correct in this aspect.

57. (g) The 2013 Act, creates a section for designation of
cooperative officers as inspectors and makes them
accountable to the Registrar.
 This section did not exist in the 2003 Act, under that
any cooperative officer could be appointed by the
Registrar to do cooperative inspection.
 This provision was introduced in the new Act to
facilitate implementation of the regulatory function
of TCDC

58. (h) Section 126 of the 2013 Act introduces new
sanctions to offenders in cooperative society, namely
a fine of not less than five million shillings or
imprisonment for a term of not less than two years or
both fine and imprisonment.
 In addition to the fine the court may order the
offender to compensate any loss occasioned or
confiscate the properties of such offender.
 Section 120 of the 2003 Act provided a fine of one
hundred thousand shillings or a term of imprisonment
of not less than six months or both.

59. (i) Section 141 of the 2013 Act provides for powers to
the Minister to make regulations to facilitate the
implementation of the Act.
 The section empowers the Minister in that regard to
make three types of regulations, namely:
(a) General Regulations’
(b) Regulations for SACCOs, and
(c) Regulations for cooperative banks.
 Section 131 of the 2003 Act was empowering the
Minister to make rules in respect of any registered
society for proper implementation of the Act.

60. (j) Section 142 empowers the Commission to make
rules in respect of any registered society for proper
implementation of the Act.
 This provision does not exist in the 2003 Act.
 Generally the 2013 Act is more reflective of the
2002 Cooperative Development Policy than the
2003 Act. However, even the 2013 Act already
requires some review in order to make it reflect
the internationally envisaged cooperative
societies legislation which reflects the necessary
elements as presented in the ICA and ILO
cooperative legislation guidelines.

61. FORMATION, REGISTRATION AND
CANCELLATION OF COOPERATIVES
• Formation is Provided under Part IV of the Cooperative
Societies Act, 2013 and has to be read together with
Regulations 4 – 10 of Cooperative Regulations, 2015.
• Stages
– Reg. 4 persons intending to form a cooperative society to
hold an initial meeting under supervision of cooperative
promotion officer to inter alia elect a formation committee
(F.C);
– Reg. 5 the F.C will elect a chairperson and perform functions
identified under subreg. (3) which include undertaking a
feasibility study of the coop.
– Reg. 6 requirements of a feasibility study.

62. • Reg. 7 requires the F.C to organize the
Formation Meeting, for purposes of receiving a
report by the F.C for registering a Cooperative
Society, according the meeting functions which
are provided under subreg. (2);
• The formation of pre-cooperative societies and
middle level societies have slightly different
procedures as indicated under regulation 8 and
9 respectively.

63. REGISTRATION OF A COOPERATIVE
SOCIETY
• Registration of a Cooperative Society is covered under Part V
of the Act sections 29 – 40 and Regulations 11 – 15
• Reg. 11 and 12 application for registration and things
necessary to be submitted with that application
• Reg. 13 the Registrar to consider the application while being
assisted with a viability test form provided as Form No. 3 in
the First Schedule to the Regulations.
• Regs. 14 and 15 the Registrar may register or refuse to register
a coop. by issuing a certificate (Form No.2) or reasons for
refusal whereby the re-submission will be treated as a new
application (sub-reg. 3)
• Section 32 and reg. 17 a society whose registration has been
refused may appeal to the Minister within 60 days after the
refusal.

64. • According to Section 35 after registration the
cooperative society becomes a body
corporate.
• Section 36 in cases where the Registrar is
unable to register a cooperative he may defer
that registration in which case such a
cooperative society is known as a
probationary socety.

65. MANAGEMENT OF THE COOPERATIVE
SOCIETY
Introduction
• In principle the management of a cooperative society vests
in the General Meeting of members and according to
section 68(2) provisions relating to the management of a
registered coop. are provided in the Third Schedule of the
Act.
• Members participate in the management through
exercising members’ rights and duties at the General
meeting, as provided in the by-laws, regulations and the
law.
• Qualifications for membership are provided under section
20(2) of the Act.
• Reg. 31 provides for the rights of members and requires
every cooperative society to provide them in the by-laws.

66. – According to sub-reg (2) (a –h) these rights include:
• Right to vote and be voted for
• To attend and participate in the society meeting
• To participate in the leadership of a cooperative society;
• To call a special general meeting
• To appeal as provided for in the Act and regulations
• However, according to section 41 of the Act, a member
cannot exercise those rights unless he has paid up fifty
percent of the required shares, entrance fees, and any
other dues.
• Members who have not attained the majority age
(contrary to section 20(2)) can be members of a
cooperative society in which case their rights are
protected under section 43 and 44 and reg. 32.

67. • According to section 45 shares of any member are
supposed to be less than one fifth (1/5) of the share
capital of the cooperative society.
• Also a member cannot transfer those shares unless he
has held them for a period of not less than two years
(section 45(2)) and he can only transfer them either to
the society or to another member.
• Section 46 provides that the liability of members to a
cooperative society shall be limited to the unpaid shares
held by them, the value of which shall be ascertained
after every three years (46(3).

68. • Sections 47 and 48 provide for liability of past
and deceased members.
• With the approval of the Registrar a company
may become a member of a cooperative society
or may convert itself into cooperative society
(section 49).
• Duties of members have to be incorporated in
the by-laws of a cooperative society and shall
include the duties are provided under
regulation 33.

69. • According to section 52 the management of a
cooperative society is governed by the by-
laws, which the cooperative must make and
submit to the Registrar on registering the
coop.
• Once registered the by-laws bind the
members and the society to observe them
(section 54).

70. MEETINGS OF MEMBERS 3rd Sched.
And Reg. 40 -51
• Meetings of Society members are generally into
three main categories (Reg. 40):
(a) Annual General meetings (Reg. 42)
(b) Ordinary general meetings (Reg. 43)
 First GM (Reg. 41)
(c) Special general meetings (Reg. 44)
44(1) it can be convened by 1/3rd of members, board of directors
or Registrar
• Reg. 46 requires a 21 days notice for the general
meetings.
• According to Reg. 48 one responsibility of the GM is
to elect members of the board who shall be elected
according to the procedures provided under the
regulation.

71. • Reg. 51 provides for the functions of the board which
include the following:
 Manage the affairs of a cooperative society democratically
 Lay down proper financial procedures and regulations
necessary to maintain transparency and proper record
keeping;
 Ensure that accounts of a coop are prepared and audited in
accordance with the requirements of the Act,
 Facilitate the inspection of the coop books
 Ensure that loans are applied for the approved purpose and
that proper securities have been taken for any loan made in
accordance with the by-laws.

72. REVENUES AND FUNDS OF A
REGISTERED COOP.
• Section 70 specifies different sources of
revenue of a cooperative society which include (
under section 70(1):
– Fees or charges, membership subscription,
– Issuance of shares
– Deposits and loans from non-members
– Savings and deposits made by members
– Sales of produce of the society
– Any other lawful source

73. • According to sections 71 and 72 the revenues of a
cooperative society have to be well managed and any
loans or advances which have to be given out of that
money have to be sanctioned by the general meeting and
Registrar;
• Section 73 restricts a cooperative society from receiving
deposits and loans from persons who are not members
unless sanctioned according to the Act and regulations.
Pursuant to this, Reg. 64 requires every cooperative to fix
at the GM the maximum liability it may incur in loan or
deposit, which also has finally to be sanctioned by the
Registrar through issuance of a Maximum Liability
Certificate.

74. • Section 74 provides for areas in which a cooperative
society may invest its revenues, which may include the
following:
– Interests bearing deposits which may be approved by
TCDC;
– Shares of another cooperative society;
– Government bonds and other securities
• Section 78 requires cooperatives to maintain reserve
funds and contribute ¼th of net surplus of coop. to
that fund.
• Section 77 requires the coop. to have its accounts
audited before issuance of dividends or bonus.

75. • Auditing of a cooperative society has to be done pursuant
to section 55 of the Act.
• According to sub-section 10 of section 55 the cooperative
society has to prepare a statement of its accounts within a
period of three months after the end of the financial year
of a coop. to enable auditing. Otherwise members of the
board who do not comply with requirement shall lose their
membership to the board and shall not be elected for the
next six years.
• Sub-section 13 creates an offence to the board in case the
audit report discovers abuses of cooperative funds.

76. INSPECTION OF AFFAIRS OF A COOP.
• Apart from the auditing the law requires that the
cooperatives should routinely be inspected or
supervised by the regulator (Registrar) (section 93)
and inspectors to perform such a function on
behalf of the Registrar are appointed pursuant to
section 92.
• Further under section 91 or 93(3) the Registrar
may conduct a special inquiry into the financial
affairs of cooperative society, suo-moto or if
requested by a creditor or members of the board.

77. • Functions of inspectors are provided under Reg.
73, they include the following:
– Inspect the compliance to the Act and regulations
– Inspect books and different documents of the
cooperative society
– To assess the effectiveness of the instituted controls
to the cooperative society
– To provide advice to the cooperative society on
matters that need compliance.

78. • Section 94(1) empowers the Registrar to
apportion the costs of conducting an inquiry,
depending on who requested it.
• In case some who has to bear the costs of
inquiry refuses to pay, the law (section 94(2))
empowers the Registrar to lodge the
certificate of cost apportionment to the court
of Resident of District Magistrate and enforce
it as a court decree.

79. SURCHARGE
• Where upon audit, inquiry or inquiry or inspection the
Registrar finds out that past or present members or
officers made or authorized an unlawful payment or
negligently occasioned a deficiency or loss or damage to
any property of a coop. the Registrar is given power to
surcharge such person to pay for such deficiency, loss or
damage (section 95(1)).
• He can do that by giving a notice in writing under sub-
section (2);
• In case such person refuses to pay the Registrar may
recover that surcharged money as a debt in court by
filing a surcharge certificate with a Resident or District
Magistrate court, which by virtue of sub-section (3) and
(4) may be recovered, just like any court decree through
the Civil Procedure Code.

80. DISPUTE SETTLEMENTS IN
COOPERATIVES
• According to section 141(2)(f) the Minster may
make regulations providing for procedures for
dispute settlement in cooperative societies;
• Reg. 83 provides for that procedure:
• R. 83(1) a dispute may arise between:
– Members
– Members and board of cooperative society or officer
– Officer and Board
– A cooperative society and another cooperative society
• Can be resolved through the following steps
provided under the regulations:

81. • 1st Step: amicable settlement through
negotiation or reconciliation within 30 days
(sub-reg. (1)
• 2nd step: if not settled, should be referred to the
Registrar through Form No. 13 appearing in the
first schedule (sub-reg. 2(2);
• 3rd Step: if a party is not satisfied with the
decision of the Registrar, he may appeal to the
Minister, whose decision shall be final (sub-reg.
(9)).

82. PROCEDURES FOR DISPUTE
SETTLEMENTS
• A party responsible (claimant) is supposed to
submit a letter of reference to the Registrar and a
copy to be served to the other party to the
dispute (respondent)(sub-reg. 4).
• On receipt of the reference the Registrar is
required to endorse it, note the date of receipt
and serve a copy to the respondent and other
interested parties (sub-reg. 5)
• The respondent has to file a statement of reply
within fifteen days (sub-reg. 6)

83. • Options available to the Registrar in handling the
received dispute reference:
– may decide to handle the dispute by himself;
– may appoint a committee of experts and persons
conversant in cooperative law to assist him;
– may refer it to an independent arbitrator after
consultation with the parties to the dispute (sub-reg. 7)
• The Registrar may order the party to the dispute to
submit any document or information, relevant for the
dispute (sub-reg. 8)
• The proceedings before the Registrar shall as nearly as
possible, be conducted in the same way as proceedings
in the court of law (sub-reg. 13).

84. • If the Registrar decides to refer the dispute to an
independent arbitrator he shall do it through and “order of
reference” (sub-reg. 14)
• The order of reference shall:
– Specify the name and physical address of the arbitrator;
– Particulars of the dispute
– Time when the award shall be forwarded to the Registrar
• Proceedings before the Arbitrator shall be conducted in
accordance with the Arbitration Act (Cap. 15) (sub-reg. 16)
and as expounded under the sub-regulation 16.
• The award of the arbitrator shall be in writing, signed and
dated, stating the amount of award and expenses (sub-reg.
17)

85. Cases on whether the powers of the
court are ousted by the coop.
legislation
• Regulation 83(1) and (2) require that disputes in
cooperative societies which have failed to be
settled amicably should be referred to the Registrar
has been challenged in courts, whereby some
parties have attempted to disregard it and go
directly to the courts of law to institute their
claims;
• The arguments has been that the jurisdiction of
the court to entertain the suits cannot be ousted.

86. • For example, in cases of:
– Kibong’oto Wanri Rural Coop. Ltd. v. Koboko Rural Coop.
Society – Misc. Civil Application No. 137 of 2002 – Moshi
Registry;
– Sabas Mzee Massawe v. Anael Pallangyo & Others – Civil
Case No. 16.2001 Arusha Registry
– Gerald A. Nkya v. Obed Munisi & Others – Civil Case No.
29 of 1997 – Moshi Registry and
– Lyamungo Coop. Society Ltd. v. KNCU and Others – Land
Case No. 6 of 2004
• It was held that the court cannot entertain coop.
disputes in contravention of the said regulation
unless in situations where:

87. – The law must so state in no uncertain and most
unequivocal terms (as per Biron J. in Mtenga v.
University of Dar es Salaam 1971 HCD n. 247
– The dispute must concern the business or
commercial activities of the parties in a
cooperative society (per Munuo J Gerald A. Nkya
v. Obed Munisi & Others – Civil Case No. 29 of
1997 – Moshi Registry ).

88. PROSECUTION OF CASES UNDER
COOPERATIVE ACT
• Offences that have been created under the Cooperative
Societies Act (sections 126, 55(13), etc.) are criminal
offences under have to be prosecuted according to the
Criminal Procedure Law;
• Criminal cases filed in magistrate courts and above are to
be prosecuted by State Attorneys from the office of DPP
(Director of Public Prosecution);
• However, section 133 of the Cooperative Societies Act
gives powers to the DPP to appoint prosecutors who shall
be responsible for the prosecution of cases involving
cooperative societies.

89. • Although these prosecutors have not yet been appointed or
trained it is important for the lawyer who is prosecuting a
case that involves offences committed contrary to the
cooperative societies legislation to be well versed with
knowledge on cooperative matters because:
– Proof of mense rea or motives of offenders on cooperatives may
involve the understanding of cooperative principles and values;
– Systems of regulating cooperatives are different from regulation of
general business matters by other organizations that is why even
the court is ousted by the legislation from entertaining
cooperative civil suits
• Otherwise the general criminal procedures of drawing
charges, levels of proof during prosecution, etc. are in
accordance to Criminal proceedings legislation.

90. DISSOLUTION, CANCELLATION AND
WINDING-UP OF COOPS.
A. DISSOLUTION (section 99)
• If the Registrar is of the opinion that, after one of the
following:
(i) An inquiry or inspection has been carried out according to
sections 91 and 93 of the Act, respectively;
(ii) Has received an application for dissolution of the society by
3/4th of the members;
(iii) There has been a failure to comply with the directives of the
Registrar on amalgamation or division of a cooperative society
or societies, per sections 96 and 98;
• He may decide to dissolve the cooperative society by
serving to that society a cancellation order in writing and
notifying the General meeting of the Federation.

91. CANCELLATION (section 100)
• In addition to the grounds for dissolution of a cooperative
society which may warrant cancellation (as per section 99)
other factors for cancellation include:
(i) The required number of members has fallen below the legally
required minimum (section 20 and 100(1);
(ii) It has ceased to carry business for which it was registered or
has not commenced its business six months after its
registration (Section 100(2);
(iii) In case of a SACCOS, it has failed to present audited accounts
as per section 47 (act. No. 4 of 2006) of BoT Act (section
100(3) which gives powers to BoT to access and inspect
records of financial institutions, including micro-financial
institutions such as SACCOS.

92. EFFECTS OF CANCELLATION
1. The society may appeal to the Minister
within 30 days, if the Minister confirms the
order of cancellation or if it is not appealed
against (section 101).
2. The society shall cease to exist as a body
corporate from the date when the order of
cancellation takes effect, except for purpose
of winding-up only (section 102).

93. WINDING - UP
• A cooperative society whose registration has been
cancelled (section 100) or dissolved (section 99) shall be
wound-up through the following procedure:
(a) The Registrar shall appoint a custodian of the cancelled
cooperative assets and liabilities (section 103(1)(a))
(b) The Registrar shall thereafter appoint the liquidator of
assets and liabilities of the defunct cooperative society
within forty days after appointment of the custodian
(section 103(1) (b))
(c) The names of the persons appointed and the time limit for
liquidation shall be published in the Government Gazette
(section 103 (2 and 3).

94. COOPERATIVE LIQUIDATION
• As provided under section 104(1-2) a liquidator has powers
to:
(i) institute and defend suits and other legal proceedings;
(ii) Investigate all claims against the society;
(iii) take possession of the books, documents and assets of the
society;
(iv) refer disputes in the cooperative society to arbitration;
(v) determine the contribution to be made by members, past
members and estates of the deceased members;
(vi) summon the attendance of witness and compel production of
documents as it is applicable in the court under the CPC
(section 104(2)
(vii) etc.

95. • Under section 105 the Registrar is given legal powers to
control and monitor the liquidator, including to refer
any subject of dispute between the liquidator and any
third party to settlement (sub-section (1)(h).
• Under section 106 a liquidator, creditor or member of
the society may make an application to stay any
proceedings against the society;
• According to sections 107 and 108 after the
registration of the society has been cancelled any
disposition of the property of the society or
attachment, distress or execution of the assets of the
society under liquidation shall be void.

96. • Section 109 gives power to the Registrar, on the
application of the liquidator or creditor or
contributor to assess to investigate in the
property of any person who took part in the
management of the cooperative society and
make an order requiring that person to repay,
restore or compensate the misapplication,
misfeasance or breach of trust;
• The Registrar may enforce that order in the
resident or district magistrate court, just like a
court decree (sub-section 3).

97. • Section 110 gives powers to the court of
resident magistrate on application of the
Registrar or liquidator to order the arrest of the
absconding promoter who is about to leave the
country, if they are suspicious that he is leaving
for the purposes of avoiding compliance with
the winding up procedures.
• Where the society is insolvent procedures
under Bankruptcy Act (Cap. 25) will be followed
(section 112).

98. • Section 113(1) provides for the ranking in priority
of payments out of the liquidation proceeds as
follows:
a. Government taxes and local rates due from the
society not exceeding one year assessment;
b. Government rents of arrears of the past year
c. Wages and salaries of services rendered to the society
during four months next before the relevant date. not
exceeding one hundred thousand shillings;
d. All amounts due in respect of compensation under
any law

99. • According to section 114 transactions such as transfer,
conveyance, mortgage, charge, delivery of goods,
payment or other acts relating to property made against
a society under liquidation six months before
cancellation, shall be deemed fraudulent preference of
the creditors and shall be void;
• Persons engaged in fraudulent acts shall be liable as
surety for the debts to the extent of the transactions
they executed with the cooperative society (section 115).
• Section 117 empowers the liquidator to sell property of
the society under liquidation with a disclaimer, after
obtaining approval of the Registrar for those properties
or assets with encumbrances.
• Any person injured as a consequence of the sale shall be
deemed to be a creditor of the society (sub-section 117
(5).

100. • Creditors who were in the process of issuing
execution against immovable property or have
attached any debt creditor as due to the society
which is subsequently wound-up, shall be
entitled to retain the benefits of execution or
attachment against the liquidator in the winding
up of the society (section 118).
• In the above case the court has a duty to order
the court bailiff to deliver the attached property
and the money collected, if any, to the liquidator
(section 119);

101. • On completion of his duties, the liquidator is
required to hand over to the Registrar all books
and records of the wound-up society, which after
two years from the date of its cancellation shall
be preserved in the archive (section 120).
• Section 121 excludes the court from having any
jurisdiction in respect of any matter connected
with dissolution of a registered society, with
exception on those areas which are expressly
provided in the Act.