Important considerations when transferring SACCO shares

Savings and Credit Cooperative Organizations (SACCOs) have become a vital part of Kenya’s financial landscape, helping members save, access affordable credit, and grow wealth through dividends. One key aspect of SACCO membership is shareholding — the foundation of ownership and participation in the cooperative.

However, there are instances when a member may wish to transfer their shares to another member, such as during withdrawal, retirement, or succession. While this process is legally allowed under the Cooperative Societies Act (Cap 490) and SACCO by-laws, it comes with several important considerations that every member must understand before proceeding.

Shares Can Only Be Transferred to Existing Members

The first and most critical rule is that SACCO shares can only be transferred to another registered member of the same SACCO. This restriction ensures that ownership remains within individuals who share the cooperative’s objectives and meet its membership qualifications.

For instance, a teacher SACCO will only allow share transfers among teachers or those employed in education-related institutions, depending on its membership policy. Non-members or outsiders cannot buy or receive shares, as this would dilute the SACCO’s cooperative identity.

Before a transfer is initiated, the SACCO will verify that the recipient is a legitimate and active member who has met all the required conditions.

Clearance of Outstanding Loans and Liabilities

A member cannot transfer their shares if they have any unsettled loans or financial obligations with the SACCO. Shares often act as collateral or security for loans, meaning that until all debts are cleared, the SACCO retains a financial interest in them.

If the member also acts as a guarantor for other members’ loans, the SACCO may delay or decline the transfer until suitable replacements are found. This ensures that the SACCO’s financial stability is not compromised and that all members remain accountable for their financial commitments.

Board Approval Is Mandatory

No share transfer can take place without the formal approval of the SACCO’s Board of Directors or Management Committee. This step guarantees that all transactions are legal, transparent, and compliant with the SACCO’s by-laws.

The board reviews:

The eligibility of both the transferor (seller) and transferee (buyer).
The member’s financial standing and loan status.
Whether the transfer aligns with the SACCO’s objectives and policies.

Only after written approval from the board can the share transfer be executed and recorded in the SACCO’s official register.

Transfers Must Be Done in Writing

Every share transfer must be documented in writing through a formal request or a SACCO-issued share transfer form. Both the transferring member and the recipient must sign the document as proof of consent.

This written record prevents future disputes and serves as legal evidence in case of any misunderstanding. It also enables the SACCO to maintain accurate and verifiable records in its share register.

Transfers Are Not for Profit or Speculation

SACCO shares differ from company shares listed on the stock market. Their value is fixed at the par value stated in the SACCO’s by-laws, meaning they cannot be sold at a higher or lower price for profit.

Members are therefore prohibited from speculating or trading SACCO shares for monetary gain. The primary purpose of shareholding in a SACCO is participation in cooperative growth and access to services, not speculative investment.

Any transfer made with the intent of profit-making may be declared invalid by the SACCO board.

Adherence to SACCO By-Laws

Each SACCO operates under its unique by-laws, which serve as its constitution. These by-laws outline the specific procedures and conditions governing the transfer of shares. They may include:

The minimum and maximum shareholding limits per member.
The administrative fees payable during transfer.
The timelines for board review and approval.
The required documentation, such as identity verification and membership numbers.

Members should familiarize themselves with these rules before initiating a transfer to avoid delays or disqualification.

Transfers in Case of Death or Succession

When a SACCO member passes away, their shares do not automatically expire. Instead, the next of kin or nominated beneficiary can request a transfer of the deceased member’s shares, following the proper legal process.

The SACCO will require:

A death certificate of the deceased member.
A copy of the national ID of the nominee or beneficiary.
Proof of nomination or succession documents (such as a will or letters of administration).

Once verified, the SACCO either transfers the shares to the nominee (if they are a member) or refunds the share value to the beneficiary as provided for in the by-laws.

Timeframe and Processing Period

Share transfers are not immediate. Most SACCOs specify a processing period, typically ranging between 30 and 90 days, depending on internal procedures.

During this time, the SACCO reviews financial records, verifies member information, and seeks board approval. Members should therefore plan ahead, especially if the transfer is part of an exit or retirement process.

Record Updating and Confirmation

After approval, the SACCO updates its share register to reflect the new ownership. The new shareholder may receive a confirmation letter or updated share certificate, depending on the SACCO’s policy.

This document serves as official proof of ownership and enables the new member to start earning dividends and exercising voting rights.

Legal and Financial Implications

Members must understand that transferring shares may affect their voting rights, dividend entitlements, and membership status. Once the shares are fully transferred, the original holder relinquishes all associated rights and privileges.

Additionally, any future claims or disputes must be handled through the SACCO’s dispute resolution mechanisms as outlined in its by-laws or the Cooperative Tribunal.

Why These Considerations Matter

These conditions are not merely bureaucratic hurdles—they are essential for maintaining transparency, protecting members’ interests, and ensuring the SACCO’s financial health.

By enforcing these rules, SACCOs ensure that: