The process of transferring SACCO shares

Savings and Credit Cooperative Organizations (SACCOs) are built on the principles of mutual ownership, democratic participation, and shared prosperity. When a member invests in a SACCO, they purchase shares that signify part ownership of the cooperative. These shares not only determine voting rights but also influence the dividends a member receives annually.

However, there may come a time when a member wishes to transfer their shares—perhaps due to relocation, withdrawal from the SACCO, or a desire to pass them to another member. While SACCO shares cannot be freely traded like company stocks, the law provides a structured process for transferring them. Understanding this process is essential to ensure compliance with the SACCO’s by-laws and the Cooperative Societies Act (Cap 490) of Kenya.

1. Table of Contents

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   Understanding SACCO Share Transfer

A SACCO share transfer is the process of moving share ownership from one registered member to another within the same SACCO. Unlike ordinary financial institutions, SACCOs restrict ownership to members who share common objectives, such as employees of a particular organization, residents of a certain region, or individuals in a specific profession.

Therefore, when transferring shares, the new holder must also meet all membership requirements and be formally accepted into the SACCO.

2. Reasons for Transferring SACCO Shares

Members may request to transfer their shares for various reasons, including:

• Voluntary exit: When a member resigns from the SACCO or wishes to discontinue their membership.
• Retirement or relocation: Members who move to another region or institution may prefer transferring their shares to another active member.
• Inheritance or succession: In case of a member’s death, shares may be transferred to a next of kin or nominee.
• Reallocation of assets: Some members may wish to consolidate their investments or gift shares to a family member who is also a SACCO member.

3. Legal Framework Governing Share Transfer

The Cooperative Societies Act (Cap 490) and the SACCO’s by-laws outline how share transfers should be handled. Key provisions include:

• Shares can only be transferred to another existing member of the same SACCO.
• All transfers must be approved by the management committee or board of directors.
• Members must clear all outstanding loans or obligations before initiating a transfer.
• The SACCO must maintain a share register documenting all transactions and ownership changes.

These rules ensure transparency, protect the SACCO’s capital, and maintain stability within the cooperative.

4. Step-by-Step Process of Transferring SACCO Shares

Step 1: Confirm Eligibility

Before initiating a transfer, the member must confirm that:

• They have fully paid for the shares to be transferred.
• They have no outstanding loans or unfulfilled financial obligations.
• The intended transferee (recipient) is an active and eligible member of the same SACCO.

If any of these conditions are not met, the SACCO will not authorize the transfer.

Step 2: Write a Formal Request to the SACCO

The member must submit a written application to the SACCO’s board or management committee requesting permission to transfer their shares. This letter should include:

• The member’s full name and membership number.
• The number of shares to be transferred.
• The name and membership number of the receiving member.
• The reason for the transfer.

Some SACCOs also provide standard share transfer forms that must be filled out and signed by both parties.

Step 3: Clearance of Financial Obligations

The SACCO will verify that the transferring member has no pending loans, guarantees, or other obligations. If the member has guaranteed loans for others, the SACCO may require the member to replace those guarantees or withdraw consent from borrowers before approving the transfer.

This step ensures the SACCO’s financial security and protects other members.

Step 4: Board Review and Approval

Once the application is received, the SACCO’s board of directors or management committee reviews the request. They ensure compliance with the SACCO’s by-laws and verify that both the transferor and transferee are in good standing.

If the application meets all requirements, the board grants written approval for the transfer.

Step 5: Updating the Share Register

After approval, the SACCO updates its share register to reflect the change in ownership. The register records the details of both the former and new member, the number of shares transferred, and the date of the transaction.

The new owner will then receive an updated share certificate or a written confirmation showing their new shareholding.

Step 6: Issuance of Confirmation Letter or Certificate

Finally, the SACCO issues an official confirmation letter or reprints a new share certificate in the transferee’s name. The transfer is now complete, and the new member becomes entitled to dividends and voting rights based on the shares received.

5. Important Considerations When Transferring SACCO Shares

• No profit from transfer: SACCO shares are not traded for profit. They are transferred at par value as stated in the by-laws.
• Transfers within the same SACCO: Shares cannot be transferred to a member of a different SACCO.
• Board discretion: The board has the right to reject a transfer if it deems it contrary to the SACCO’s interests.
• Succession transfers: In the event of a member’s death, shares are transferred to a nominee or next of kin upon submission of legal documents such as a death certificate and succession papers.
• Waiting period: Some SACCOs may impose a waiting period (usually 30–90 days) to complete verification before the transfer is finalized.

6. Role of the SACCO By-Laws

Each SACCO’s by-laws provide detailed guidelines on share transfers. These internal rules define:

• The minimum and maximum number of shares a member can hold.
• The procedure for submitting transfer requests.
• The fees, if any, associated with share transfer processing.
• The timeline for approval and record updates.

Members should familiarize themselves with these by-laws to ensure a smooth and compliant transfer process.

7. Benefits of Following the Proper Procedure

Following the legal process of share transfer ensures:

• Transparency: Both parties are protected from disputes or misunderstandings.
• Accountability: The SACCO maintains accurate financial records.
• Financial stability: The SACCO prevents unauthorized or risky ownership changes.
• Continuity: Membership and shareholding remain within a trusted group of individuals.

Author: Andrew Walyaula

Andrew Walyaula is a seasoned multimedia journalist. satrendmagazine@gmail.com