Building Societies Act

This Act may be cited as the Building Societies Act.

Section 2 provides definitions of terms used in the Act, including 'annual licence', 'basic advance', 'board of directors', 'building society', 'Central Bank', 'continuing arrangement', 'core capital', 'director', 'dispute', 'excess advance', 'existing society', 'land', 'mortgage', 'register', 'Registrar', and 'special resolution'.

The Cabinet Secretary must appoint a Registrar of Building Societies; the Registrar must perform duties and exercise powers under the Act; the Cabinet Secretary may appoint a deputy registrar and assistant registrars who must be subject to the Registrar's directions.

A certificate of registration issued by the Registrar is conclusive evidence of compliance with registration requirements and that the society is duly registered, when produced and absent proof of fraud; other documents purporting to be signed by the Registrar are admissible in court without proof of signature unless contradicted.

The Registrar and persons acting under the Registrar's authority or under regulations are not personally liable for acts or matters done in good faith while exercising powers under this Act or its regulations.

The rules of a building society must state the society's name and the situation and postal address of the society's chief office.

Every building society must have a common seal bearing its registered name; a society permitted by its rules to operate outside Kenya may, if authorized by its rules, have an official seal (a facsimile of the common seal with the place name); a deed to which such an official seal of a foreign registered building society is duly affixed binds the society as if sealed with the common seal.

Every building society must have a head office and postal address in Kenya to which communications and notices may be addressed.

Ten or more people may form a building society by subscribing rules and obtaining registration; applicants may apply to the Registrar with two copies of the rules; the Registrar must enter particulars if satisfied and must issue a certificate; staged share thresholds are set by specified dates.

Section title refers to maintenance of the register and the phrase "the name of the society" appears in the text.

From the date of registration a registered society becomes a body corporate with perpetual succession, may sue and be sued in its registered name, and (subject to the Act and its rules) can do all acts a body corporate may by law perform.

Rules on names of building societies: societies must end their registered name with "Building Society", must not register or use names identical or confusingly similar to another society (unless that other society is being terminated or consents), and the Registrar may refuse registration of misleading or offensive names unless ordered otherwise by the Cabinet Secretary.

A building society must hold an annual licence in accordance with section 12B; contravention is an offence with fines and possible requirement to pay missed licence fees; individuals guilty under subsection (3) face fines or imprisonment subject to specified defences.

The Cabinet Secretary responsible for finance may issue, endorse, vary, suspend or revoke annual licences for building societies subject to conditions; building societies must pay a late penalty if they fail to renew within three months of expiry.

A building society must prominently display its annual licence at its head office in Kenya and must prominently display a copy at every branch office in Kenya.

If a building society changes its name, the Registrar must endorse its annual licence with the new name; when societies amalgamate under Part VIII they are not entitled to refunds of unexpired licence periods and the Cabinet Secretary for finance must issue the new society an annual licence for the longest unexpired period.

An annual licence is revoked or cancelled when a building society's registration is suspended or cancelled under section 63, or when the building society is dissolved under section 64 or 70; it is deemed revoked under subsection (1) or may be wholly or partly cancelled at the request of the building society.

Building societies must have a board of at least three directors; the secretary may be a director. Every director must ensure that arrangements for assessing security for advances will lead to assessment by a competent and prudent person.

Every building society must have a secretary.

Every building society must have one or more auditors, and each auditor must hold a practising certificate issued under section 21 of the Accountants Act (Cap. 531).

Officers of a building society who handle society money must, before starting their office, provide security (either a bond with at least one surety or other security) in a sum required by the society to account for and pay money received or payable on the society's account.

Officers (and their executors or administrators) must, when requested by demand or written notice at their last or usual residence, render accounts of society funds and deliver all society securities, effects, books, papers and property to the person appointed by the society.

Directors, secretaries, surveyors, advocates and other officers of a building society must not take any gift, bonus, commission or benefit in connection with the society's business; persons who pay or accept such payments commit an offence and face a fine not exceeding ten thousand shillings or imprisonment up to six months, and convicted accepting persons must pay the amount or value to the society when instructed by the convicting Court.

Persons who continue to act as officers of a building society after being disqualified under this section commit an offence and face a fine up to fifty thousand shillings or imprisonment up to two years or both.

The section prohibits persons with a financial interest in land and building societies (and their officers, servants or agents) from exchanging commissions or gifts related to introducing mortgage business connected to land dispositions, and makes contravention an offence punishable by a fine up to ten thousand shillings or imprisonment up to six months.

Provisions that exempt or indemnify directors, managers, officers or auditors of a building society from liabilities for negligence, default, breach of duty or breach of trust are void; however, a building society may indemnify such persons for liabilities incurred in defending proceedings where they are acquitted or judgment is given in their favour or when relief is granted under section 21.

The court may relieve certain persons from liability for negligence, default, breach of duty or breach of trust if they acted honestly and reasonably and it is fair to excuse them; affected persons may apply to the High Court for relief, and the High Court has the power to grant the same relief on application.

Section 22 authorises building societies to take deposits or loans for their purposes, requires them to maintain a minimum 8% core-capital to deposit-liabilities ratio, restricts acceptance of deposits/loans unless at least one month's notice for withdrawal is required, deems certain security deposits as borrowed money, makes contraventions an offence punishable by a fine up to 2,000 shillings, and makes directors personally liable for excess receipts.

Section 23 grants building societies the power to acquire and hold land for business premises, staff housing, by foreclosure or surrender, to acquire and hold land for developing residential houses for members (if resolved at a general meeting), and to let parts of business premises not immediately required.

Building societies may make advances to members on land security subject to limits and conditions, with prohibitions on advancing over certain prior mortgages and caps tied to core capital, and special rules where guarantees or life policies are additional security.

A building society may invest portions of its funds (subject to its rules and authorization) and may keep money on current or deposit accounts at specified banks or the Kenya Post Office Savings Bank.

A building society may add to an advance to a member a further advance to pay a single premium for a life assurance policy on the member or close relatives when needed to facilitate repayment of the advance secured on land.

A building society must give notice to a member when security for a loan is taken from a third party specifying maximum advance considered on the land and prescribed particulars; if it fails to give notice the court may reopen the transaction.

A building society, except an existing society, must not make any such investment within five years of its registration under this Act.

Building societies have the power to borrow money at interest (not deposits) from banks or, with the Registrar's written approval, from non-bank persons, and to arrange overdraft facilities with a bank.

Building societies must hold a minimum amount of liquid assets as determined by the Central Bank.

A building society must not pay any dividend or interest on its shares except out of profits earned by the society.

Section 56 sets rules for resolving disputes: arbitrators are to be nominated or elected (not beneficially interested), at least three arbitrators chosen by ballot, societies must replace failing arbitrators and record names, awards by a majority of arbitrators or the Registrar are final, and awards can be filed in the High Court on request and payment.

The Court may determine a dispute on petition if an application to settle by arbitration was made and not complied with within forty days, or if arbitrators refused or neglected for twenty-one days to make an award.

A determination by arbitrators or the Registrar is binding, conclusive and final on all parties and not subject to appeal or removal into any court; the arbitrators or the Registrar may, on request, state a case to the High Court on a question of law (not compelled) and may grant discovery.

A building society must, within five months after its financial year ends, hold an annual general meeting (in addition to other meetings that year) and must state that it is the annual general meeting in the notices calling it.

The board of directors of a building society must call other general or special meetings when required by the society's rules or when they consider it desirable, and must call a meeting on application by at least one-tenth of members or by at least fifty members, whichever is less.

Building societies must prepare annual accounts and statements, have them attested by auditors and countersigned by at least two directors, publish and make copies available, and send a certified copy to the Registrar within specified periods; failure is an offence with a fine up to five thousand shillings.

Returns must identify every property sold by the society during the period to which the return relates when sold in the exercise of its powers as mortgagee.

Building societies registered under section 6 must keep specified minute books, registers and books of account; records must be kept in English; failure is an offence punishable by a fine up to one thousand shillings.

The rules of a registered building society are binding on its members, its officers, and anyone claiming under a member or under those rules.

A building society must provide any person who requests it a complete printed copy of its rules with the certificate of registration appended, and may charge up to five shillings.

A certified copy of a building society's registered rules is admissible as evidence of those rules unless there is evidence to the contrary.

Persons under twenty-one may be admitted as members of a building society (unless its rules prohibit admission) and may exercise certain membership rights (consent to dissolution, vote, hold office, transfer shares, execute mortgages).

Two or more persons may jointly hold a share in a building society.

No building society may cause or permit applicants for advances to ballot for precedence or make granting of an advance depend on chance or lot.

A building society that advances funds to a member for buying land is treated as warranting the purchase price is reasonable, unless it gives the member a prescribed written notice before any contract requiring repayment is entered into stating no such warranty is implied.

Requires a building society selling mortgaged land to take reasonable care to obtain the best price; requires the society to send a prescribed notice to the former owner within twenty-eight days of completion; preserves mortgagee accounting rules; and makes contravention of the notice requirement an offence attracting a fine not exceeding one thousand shillings.

If certain society-issued certificates or deposit records are lost or destroyed, the society may issue a certified copy after evidence and specified advertisement, subject to directors' terms; directors may dispense with the advertisement requirement.

Any person may, on payment of the prescribed fees, inspect at the office of the Registrar documents kept by the Registrar relating to any society or obtain certificates, copies or extracts of such documents.

Building societies may change their name by special resolution; if they do, they must send two certified copies of the resolution to the Registrar within fourteen days, the Registrar must register one copy and return the other endorsed, and the change of name does not affect rights, obligations or legal proceedings.

Building societies that change their registered office or postal address must, within fourteen days, send the Registrar notice in the prescribed form; the Registrar must register it.

A building society must not open or operate a branch or any office other than its registered office without the Registrar's written consent.

When a person becomes or ceases to be a director of a building society, the society must notify the Registrar in the prescribed form within fourteen days.

Building societies may change their rules by special resolution; after doing so they must send two certified copies of the resolution to the Registrar within fourteen days, and the Registrar must register one copy and return the other if satisfied it conforms with the Act.

If a building society fails to comply with specified sections, the society and its directors, secretary and other officers are guilty of an offence and liable to a fine not exceeding five thousand shillings.

Two or more building societies may unite and become one society; notice of such union must be sent to the Registrar in the prescribed form; upon completion the united societies are deemed dissolved and the Registrar shall register the new society.

A building society may, by special resolution, transfer its engagements to another building society or undertake to fulfil another society's engagements; transfers are subject to section 53.

Consent of holders of not less than two-thirds of the whole number of shares of each society party thereto is required for a union or transfer to take effect; building societies must apply and publish notice, and the Registrar may require publication and may confirm unions/transfers even without that consent.

When the Registrar registers or confirms a union or transfer of engagements of building societies, all funds, assets and property of the societies vest in the united society or the receiving society without further assurance.

A union (amalgamation) of building societies or a transfer of engagements between building societies must not prejudice the rights of any creditor of either society.

Allows a building society to apply to transfer its business to a limited liability company through the Central Bank to the Cabinet Secretary; the Central Bank must examine and forward the application; the Cabinet Secretary must publish notice and invite objections within 30 days and may approve or reject the application.

Existing members of the building society shall become ordinary shareholders in the company; the value of the shares allotted shall be equivalent to the value of the shares they held in the building society.

The Registrar may require a building society or its officers to produce books, documents and information; failure to comply is an offence punishable by a fine not exceeding five thousand shillings.

The Registrar may appoint an accountant or actuary to inspect a society's books on specified member application conditions; applicants must deposit security for costs; expenses are to be defrayed as directed; appointees may copy books; the Registrar must communicate results.

The Registrar may appoint an inspector and direct inspections or special meetings; applicants must support applications with evidence and provide security for costs; inspectors may demand documents and examine witnesses on oath; the Registrar can direct meeting arrangements and allocation of expenses, and meetings have full meeting powers including appointing their own chair.

The Registrar may order a building society not to invite subscriptions, acquisitions, lending or deposits if he considers it expedient for investors' protection; before doing so he must serve written notice, consider representations within thirty days and, if requested, hear the society; the Registrar may revoke such an order; contravening the order is an offence punishable by up to two years' imprisonment or a fine not exceeding ten thousand shillings, or both.

The Registrar may cancel or suspend a building society's registration for specified grounds; the Registrar must give at least two months' written notice before doing so and must publish notice after; the society may appeal to the High Court; a society's privileges cease on cancellation or suspension.

The Central Bank (or a person it authorizes) may inspect a building society and, when directed by the Cabinet Secretary responsible for finance, must cause such an inspection; when an inspection is made the building society must provide all books, accounts, documents or information to the Central Bank or its authorized person.

After inspection under section 63A, the Central Bank may issue directions to a building society to take corrective action or discontinue harmful practices; the building society must comply within the period specified and show compliance; failure to comply is an offence with additional daily penalties.

The Central Bank must notify the Registrar of any inspection it undertakes, of any directions it issues and that a building society has complied with those directions.

Gives power to restrict, suspend or prohibit the payment of dividends by the building society.

The Central Bank must collect data and other information needed for supervising building societies and may require building societies to submit periodic statistical and other returns.

The Central Bank may require any building society to furnish it with information.

The Cabinet Secretary may require the Central Bank or a building society to furnish information to him at times and in manners he directs.

When the Central Bank or a building society must provide information under this Part, it must provide that information and any supplementary material within the period specified in this Part or relevant direction, or within a reasonable period agreed.

The Central Bank or the Cabinet Secretary may publish information furnished under the Act, except information disclosing a person's financial affairs without that person's written consent; and, except as provided in the Act, no person shall disclose or publish information obtained through performing duties under the Act.

The provisions of sections 34, 34A, 35 and 35A of the Banking Act apply, mutatis mutandis, to a building society registered under this Act.

Provisions of Part VIII of the Banking Act shall apply mutatis mutandis to a building society registered under this Act.

Section 64 was repealed by ActNo. 7 of 2001, s. 11.

Section 65 has been repealed by Act No. 7 of 2001, s. 11.

Section 66 has been repealed by ActNo. 7 of 2001, s. 11.

Section 67 was repealed by Act No. 7 of 2001, s. 11.

Section 68 has been repealed.

Section 69 has been repealed.

Section 70 has been repealed.

Entities such as societies, associations, partnerships or companies must be registered and licensed to operate or use the name "Building Society" in Kenya; the Registrar may inspect records; contravention is an offence with fines.

A person who obtains or has possession of a building society's money, securities, books, papers or effects by false representation or who withholds, misapplies or wilfully applies them otherwise than permitted commits an offence and faces fines, orders to restore and possible imprisonment.

A person who knowingly makes, allows, or falsifies a required document is guilty of an offence and can be imprisoned for up to six months.

The society must give any notice, send any return or document, or do or allow to be done anything required of it by the Act or regulations.

Foreign building societies must submit specified documents for registration; the Registrar may allow or refuse; an aggrieved person may appeal within one month; if registration is allowed the society is entered in the register, becomes entitled to hold land and take mortgages, and the Registrar must issue a certificate; foreign societies must be registered and licensed before commencing business in Kenya.

Section 76 requires a foreign building society registered under section 75 to maintain an office and postal address in Kenya; keep English records and accounts in Kenya; prepare English accounts and consolidated statements in the required form; not invest outside Kenya more than one-fifth of its capital assets raised in Kenya without prior Cabinet Secretary approval; and show its original place of registration on advertisements and documents. The Cabinet Secretary may by order exempt or modify application of these provisions.

Section 77 gives the Chief Justice power to make rules of court, gives the Cabinet Secretary power to make regulations (including prescribing registry procedure, forms and fees), and allows the Cabinet Secretary to prescribe penalties to be paid by building societies or natural persons for failing to comply with Central Bank directions, with specified maximum amounts and daily additions.