Can you sell or transfer SACCO shares?

Savings and Credit Cooperative Organizations (SACCOs) play a vital role in Kenya’s financial ecosystem, offering members access to affordable loans and encouraging savings through share capital. However, many members often wonder — can you sell or transfer SACCO shares? The answer is not a simple yes or no. It depends on the SACCO’s bylaws, membership policies, and the Cooperative Societies Act that governs such institutions.

SACCO shares represent a member’s ownership stake in the cooperative. When you join a SACCO, you buy shares that give you membership rights, including the ability to vote, receive dividends, and benefit from loans. These shares form part of the SACCO’s permanent capital and are different from savings deposits, which can be withdrawn.

Unlike shares in publicly listed companies, SACCO shares are not freely traded in the open market. Their transfer or sale is controlled to protect the SACCO’s financial stability and maintain its cooperative identity.

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Can You Sell SACCO Shares?

Generally, a SACCO member cannot directly sell shares to just anyone outside the society. The sale or disposal of shares is subject to approval by the SACCO’s management committee or board. According to the Cooperative Societies Act (Cap 490, Laws of Kenya), a member can sell or transfer their shares only to another existing member of the same SACCO, or to a person who qualifies for membership.

This restriction ensures that ownership remains within the cooperative’s approved membership pool and aligns with the principle of mutual benefit among members.

Before the sale can happen, the following conditions usually apply:

Written Request:
The member must submit a formal written request to the SACCO’s management committee, indicating the intention to sell or transfer their shares.
Buyer’s Eligibility:
The person buying or receiving the shares must be an active or qualified member of the SACCO.
Approval by Management:
The SACCO board must approve the transaction to ensure it meets legal and policy requirements.
Settlement of Obligations:
A member who wishes to sell or transfer shares must first clear any outstanding loans or obligations with the SACCO.

Can You Transfer SACCO Shares?

Yes, SACCO shares can be transferred, but only under specific circumstances. The transfer can happen:

Voluntarily: When a member chooses to transfer shares to another member or eligible individual, following due process.
Upon Death: If a member passes away, their shares are transferred to their nominated next of kin or beneficiary, as per the SACCO’s nomination records.

In the case of death, the nominee receives the deceased member’s share value after the SACCO has settled any outstanding liabilities.

The Process of Transferring SACCO Shares

The process varies slightly from one SACCO to another, but the general steps are as follows:

Submit a Transfer Request:
The member writes to the SACCO’s management committee requesting the transfer of shares, providing details of the intended recipient.
Verification of the Recipient:
The SACCO verifies that the recipient is either an existing member or qualifies for membership based on the cooperative’s bylaws.
Clearance of Outstanding Loans:
If the transferring member has an active loan, they must clear it or transfer it to another guarantor before the process can proceed.
Approval and Record Update:
Once approved, the SACCO updates its register of members and share ledger to reflect the new ownership.

Limitations on Selling or Transferring Shares

While the law allows for transfers within the SACCO, there are several restrictions:

Shares Cannot Be Cashed Out: SACCOs rarely buy back shares directly from members unless the member is withdrawing from the SACCO altogether.
Minimum Shareholding Requirement: Members must maintain a minimum number of shares to retain active membership. Selling all shares could mean forfeiting membership rights.
Transfer Approval Time: Some SACCOs take time to process approvals, especially if the buyer is a new or inactive member.

A member who wishes to leave the SACCO can withdraw and request payment of the value of their shares, subject to the SACCO’s bylaws. However, the withdrawal is processed only after all loans are cleared and the SACCO finds a buyer or absorbs the shares within its capital structure.