Building Societies Act

Section 1. Short title Section This Act may be cited as the Building Societies Act.

Section 2. Interpretation Section In this Act, unless the context otherwise requires— "annual licence" means an annual licence issued in accordance with section 12B ; "basic advance", in relation to an advance made or to be made by a building society for the purpose of its being used in defraying the purchase price of land, means the maximum amount which the society would consider proper to advance upon the security of that land if no other security were taken by the society; "board of directors", in relation to a building society, means the managing body thereof by whatever name called; "building society" means a society formed for the purpose of raising by the subscription of members a stock or fund from which to make advances to members secured on land and registered in accordance with this Act; "Central Bank" means the Central Bank of Kenya established under the Central Bank of Kenya Act ( Cap. 491 ); "continuing arrangement" means an arrangement made between a building society and another person whereby, in contemplation of a series of advances comprising excess advances being made by the society to members for the purpose of their being used in defraying the purchase price of...

Section 3. Appointment of Registrar Section The Cabinet Secretary shall appoint a Registrar of Building Societies to perform the duties and exercise the powers imposed and conferred by this Act, and may appoint a deputy registrar and any number of assistant registrars, who shall be subject to the directions of the Registrar. [L.N. 374/1964.]

Section 4. Certificates, etc., to be evidence Section 4(1) A certificate of registration of a society issued by the Registrar shall, upon its mere production, in the absence of proof of fraud, be conclusive evidence that all the requirements of this Act in respect of registration and of matters precedent and incidental thereto have been complied with and that the society is duly registered. Section 4(2) Any other document relating to a building society and purporting to be signed by the Registrar shall, in the absence of evidence to the contrary, be admissible as evidence in a court without proof of the signature.

Section 5. Indemnity of the Registrar and other persons Section The Registrar shall not, nor shall any person acting under the authority of the Registrar or under any regulation made under this Act, be personally liable for or in respect of any act or matter done in good faith in the exercise or supposed exercise of the powers conferred by this Act or by any regulation made thereunder.

Section 6. Formation of building societies Section 6(1) Any ten or more persons may form a building society by subscribing their names and addresses to rules agreed by them for the government of the society and by obtaining registration under this Act. Section 6(2) Subject to this section, persons intending to establish a building society may apply to the Registrar for registration in the prescribed form, accompanied by two copies of the rules. Section 6(3) If the Registrar is satisfied that the application and the rules are in compliance with the provisions of this Act and any regulations made thereunder, he shall enter the prescribed particulars relating thereto in the register. Section 6(4) The Registrar shall issue a certificate of registration in the prescribed form to every building society registered under this section. Section 6(5)(a) by the 31st December, 2000, shares worth fifty million shillings; Section 6(5)(b) by the 31st December, 2001, shares worth one hundred million shillings; Section 6(5)(c) by the 31st December, 2002, shares worth one hundred and fifty million shillings.

Section 7. Maintenance of register Section the name of the society;

Section 8. Effect of registration Section From the date of registration of a society under this Act, the society shall be a body corporate by its registered name with perpetual succession, and may in that name sue and be sued, and, subject to this Act and to its rules, shall be capable of doing all acts which a body corporate may by law perform.

Section 9. Names of building societies Section 9(1) No building society shall be registered by a name which is identical with that of another building society previously incorporated or registered, or by a name which so nearly resembles it as to be likely to deceive, unless that other society is in course of being terminated or dissolved and consents to the registration. Section 9(2) The name of every building society shall end with the words "Building Society". Section 9(3) A building society shall not use any name or title other than its registered name. Section 9(4) The Registrar may, unless otherwise ordered by the Cabinet Secretary, refuse to register a building society by a name which in his opinion is calculated to mislead the public or to cause offence to any person or class of persons.

Section 10. Contents of rules of building societies Section the name of the society and the situation and postal address of the chief office of the society;

Section 11. Common seal Section 11(1) Every building society shall have a common seal which shall bear the registered name of the society. Section 11(2) A building society which is by its rules permitted to carry on its business outside Kenya may, if authorized by its rules, have for use in any place not situated in Kenya an official seal, which shall be a facsimile of the common seal of the society with the addition on its face of the name of the place where it is to be used. Section 11(3) A deed or other document to which an official seal of a foreign building society registered under section 75 is duly affixed shall bind the society as if it had been sealed with the common seal of the society.

Section 12. Head office and postal address Section Every building society shall have a head office and postal address in Kenya to which all communications and notices may be addressed.

Section 12A. Annual licences to be held Section 12A(1) Notwithstanding any other provision of this Act, no building society shall carry on business in Kenya as a building society unless it holds an annual licence to do so in accordance with section 12B . Section 12A(2) A building society which contravenes subsection (1) shall be guilty of an offence and liable to a fine not exceeding fifty thousand shillings and in addition shall be liable to pay any annual licence fee which should have been paid. Section 12A(3)(a) that, through no act or omission on his part, he did not know that the contravention was intended or about to take place or was taking place; or Section 12A(3)(b) that he took all reasonable steps to prevent the contravention taking place. Section 12A(4) A person who is guilty of an offence under subsection (3) shall be liable to a fine not exceeding ten thousand shillings or to imprisonment for a term not exceeding one year or to both. [Act No. 16 of 1985 , s. 5.]

Section 12B. Issue of annual licence Section 12B(1)(a) an application by the building society for an annual licence to carry on business as a building society; or Section 12B(1)(b) an application to open a new branch, Section 12B(2) The Cabinet Secretary for the time being responsible for finance may, subject to such conditions as he may consider necessary, issue an annual licence to a building society in such form as may be prescribed. Section 12B(3) In considering an application for an annual licence the Cabinet Secretary for the time being responsible for finance may require to be satisfied as to the financial condition and history of the building society, the character of its management including the integrity and qualifications of its directors, the adequacy of its capital and purposes of continued existence and that the public interest will be served by the licensing of the building society. Section 12B(4) For the purposes of this section, the criteria for assessing the professional or moral suitability of persons proposed to manage or control a building society shall be as prescribed in the Fourth Schedule. Section 12B(5) An annual licence issued under subsection (2) shall r...

Section 12C. Display of annual licence Section An annual licence shall be prominently displayed by the building society at its head office in Kenya and a copy shall be prominently displayed at every branch office in Kenya. [Act No. 16 of 1985 , s. 5.]

Section 12D. Change of name and amalgamation Section 12D(1) If a building society changes its name in accordance with section 46 , when the Registrar registers one copy of the resolution under section 46 (3) he shall endorse any annual licence in force with the new name of the society. Section 12D(2) Where two or more building societies amalgamate under Part VIII, none of those societies are entitled to any refund of annual licence fees in respect of any unexpired periods of their annual licences, but the Cabinet Secretary for the time being responsible for finance shall issue to the new society an annual licence for the longest of those unexpired periods. [Act No. 16 of 1985 , s. 5.]

Section 12E. Revocation or cancellation of annual licence Section 12E(1)(a) registration of a building society is suspended or cancelled under section 63 ; or Section 12E(1)(b) a building society is dissolved in terms of section 64 or 70 , Section 12E(2)(a) deemed to be revoked under subsection (1); or Section 12E(2)(b) wholly or partly cancelled at the request of the building society,

Section 13. Directors Section 13(1) Every building society shall have a board of directors consisting of three or more persons, of whom the secretary may, but need not, be one. Section 13(2) The duties of every director of a building society shall include the duty of satisfying himself that the arrangements made for assessing the adequacy of any security to be taken in respect of an advance to be made by the society are such as may be reasonably expected to ensure that the adequacy of a security to be so taken will be assessed by a competent and prudent person experienced in the matters relevant to the determination of the value of that security: Provided that nothing in this subsection shall preclude a director of a building society from approving those arrangements by reason only that the arrangements provide for the assessment of the adequacy of the security by himself or any other director of the society.

Section 14. Secretary Section 14(1) Every building society shall have a secretary. Section 14(2) Anything required or authorized to be done by or to the secretary may, if the office is vacant or there is for any other reason no secretary capable of acting, be done by or to any assistant or deputy secretary, or, if there is no assistant or deputy secretary capable of acting, by or to an officer of the society authorized generally or specially in that behalf by the board of directors.

Section 15. Audit Section Every building society shall have one or more auditors, each of whom shall be the holder of a practising certificate issued pursuant to section 21 of the Accountants Act (Cap. 531). [Act No. 2 of 1977 , s. 46, Act No. 13 of 1987 , s. 6, Act No. 15 of 2008 , s. 49.]

Section 16. Officers to give security Section Every officer of a building society having the receipt or charge of any money belonging to the society shall before taking upon himself the execution of his office become bound with one sufficient surety at the least in a bond in the prescribed form, or give such other security as the society may direct, in such sum as the society may require, conditioned for rendering a just and true account of all moneys received and paid by him on account of the society, and for payment of all sums of money due from him to the society at such times as its rules appoint or as the society may require.

Section 17. Officers to account Section Every officer of a building society and his executors or administrators shall, upon demand made or notice in writing given or left at his last or usual place or residence, render an account of all moneys received or paid by him on account of the society and for all moneys remaining in his hands and shall deliver all securities and effects, books, papers and property of the society in his hands or custody to such person as the society may appoint.

Section 18. Officers not to accept gifts Section 18(1) No director, secretary, surveyor, advocate or other officer of a building society shall, in addition to the remuneration prescribed or authorized by the rules of the society, receive from any other person any gift, bonus, commission or benefit for or in connection with any transaction whatsoever relating to the business of the society. Section 18(2) A person who pays or accepts any such gift, bonus, commission or benefit shall be guilty of an offence and liable to a fine not exceeding ten thousand shillings and in default of payment to imprisonment for a term not exceeding six months, and the person accepting the gift, bonus, commission or benefit shall, as and when instructed by the Court by whom he is convicted, pay over to the society the amount or value of the gift, bonus, commission or benefit, and in default of payment shall be liable to imprisonment for a term not exceeding six months.

Section 19. Restriction of payment of commissions Section 19(1)(a) for a person having a financial interest in the disposition of land to receive or to agree to receive a commission or gift from a building society or from any officer, servant or agent of a building society, in consideration of the introduction of mortgage business to the society in connection with the disposition of the land or in consideration of a promise to introduce that business to the society; or Section 19(1)(b) for a building society, or any officer, servant or agent of a building society, to offer to give or agree to give a commission or gift to any person known to the society, officer, servant or agent, as the case may be, to have a financial interest in the disposition of land or to be a servant of a person having such an interest, for consideration mentioned in paragraph (a). Section 19(2) For the purposes of this section, a person who is employed, otherwise than in pursuance of a contract of service, in connexion with the disposition of land by a person who has a financial interest in the disposition shall be treated, so far as relates to the disposition of that land, as a servant of the person having...

Section 20. Provisions excluding liability of officers forbidden Section Any provision, whether contained in the rules of a building society or in a contract with a building society or otherwise, for exempting a director, manager or officer of a building society, or a person (whether an officer of the society or not) employed by the society as auditor, from, or indemnifying him against, a liability which by virtue of any rule of law would otherwise attach to him in respect of any negligence, default, breach of duty or breach of trust of which he may be guilty in relation to the society, shall be void: Provided that a building society may, in pursuance of such a provision, indemnify a director, manager, officer or auditor against liability incurred by him in defending proceedings, whether civil or criminal, in which judgment is given in his favour or in which he is acquitted or in connection with an application under section 21 in which relief is granted to him by the court.

Section 21. Powers of court to grant relief in certain cases Section 21(1) If, in proceedings for negligence, default, breach of duty or breach of trust against a person to whom this section applies, it appears to the court hearing the case that that person is or may be liable in respect of the negligence, default, breach of duty or breach of trust, but that he has acted honestly and reasonably, and that having regard to all the circumstances of the case, including those connected with his appointment, he ought fairly to be excused for the negligence, default, breach of duty or breach of trust, the court may relieve him either wholly or partly from his liability on such terms as the court may think fit. Section 21(2) Where a person to whom this section applies has reason to apprehend that a claim will or might be made against him in respect of negligence, default, breach of duty or breach or trust, he may apply to the High Court for relief, and the High Court on any such application shall have the same power to relieve him as under this section it would have had if it had been a court before which proceedings against that person for negligence, default, breach of duty or breach of...

Section 18A. Disqualification of officers Section 18A(1)(a) becomes bankrupt or suspends payment or compounds with his creditors; or Section 18A(1)(b) is convicted of an offence involving dishonesty or fraud or is directly or indirectly connected with a building society which has been dissolved in terms of section 64 or 70 . Section 18A(2) Any person who continues to act as an officer of a building society after he has been disqualified by virtue of this section shall be guilty of an offence and liable to a fine not exceeding fifty thousand shillings or to imprisonment for a term not exceeding two years or to both. [Act No. 13 of 1987 , s. 7.]

Section 22. Power to borrow Section 22(1) Subject to this Act, a building society may receive deposits or loans at interest from its members or from other persons to be applied to the purposes of the society. Section 22(2) A building society shall, at all times maintain a ratio of not less than eight per cent between its core capital and its total deposit liabilities. Section 22(3) The amount of deposits or loans from any one person shall be within any limits prescribed by the rules of the society. Section 22(4)(a) the amount secured on properties the payments in respect of which, whether of principal, interest or otherwise, were upwards of twelve months in arrear at the date of the society’s last preceding annual account and statement; and Section 22(4)(b) the amount secured on properties of which the society had been twelve months in possession at the date of such account and statement. Section 22(5) Money deposited with a building society as security for an advance made by the building society to a member, or as security for a guarantee given in respect of such an advance, shall be deemed to be money borrowed by the society. Section 22(6) A building society shall not accept a de...

Section 23. Power to hold land Section 23(1)(a) acquire and hold land which the society requires for its business premises or for the housing of its staff; and Section 23(1)(b) acquire by foreclosure or surrender land mortgaged to the society, Section 23(1A) Notwithstanding subsection (1) a building society may at a general meeting resolve to acquire and hold land and may acquire and hold land for the purposes of developing residential houses for its members in accordance with the rules of the building society. Section 23(2) A building society may let any part of its business premises which is not required for the immediate use of the society. [Act No. 28 of 1959 , s. 17, L.N. 142/1961, L.N. 147/1961, L.N. 457/1963, Act No. 34 of 1967 , 2nd Sch., Act No. 13 of 1987 , s. 8.]

Section 24. Power to make advances to members Section 24(1) A building society may, subject to this section, make advances to its members out of its funds upon the security of land. Section 24(2) No building society shall advance money on the security of land which is subject to a prior mortgage, unless the prior mortgage is in favour of the society making the advance; and if any advance is made in contravention of this subsection, the directors of the society who authorized the advance shall be jointly and severally liable for any loss on the advance occasioned to the society. Section 24(3)(a) grant or permit to be outstanding an advance or credit facility to any one of its members in excess on twenty-five per cent of its core capital; Section 24(3)(b) grant or permit to be outstanding any advance or credit facility to any of its directors or employees in excess of twenty per cent of its core capital. Section 24(4) In determining the amount of any advance made by a building society to one of its members upon the security of land, the society shall not take into account the value of any additional security taken by the society for the advance, other than a security of a class speci...

Section 25. Power to invest Section 25(1) A building society may, from time to time as its rules permit, invest any portion of its funds not immediately required for its purposes in or upon any stock, shares or securities for the time being authorized by law for the investment of trust moneys or in any other class or classes of investment authorized by the Cabinet Secretary by notice in the Gazette . Section 25(2) A building society may keep money on current account and deposit account at one or more banks or with the Kenya Post Office Savings Bank.

Section 26. Power to make further advances Section 26(1) For the purposes of facilitating repayment to a building society of an advance made or to be made by the society to a member upon the security of land, a society may make to the member, by way of addition to the advance, a further advance of the whole or part of such sum as may be necessary to enable payment to be made of a single premium payable in respect of a policy of life assurance upon the life of the member or the spouse or son or daughter of the member, being a policy which provides for payment, in the event of the death of the person upon whose life the policy is effected before the advance has been repaid, of a sum not exceeding a sum which is sufficient to defray the sums which are, at and after the time of the death, payable to the society in respect of the advance as increased by the additional advance made by the society under the power conferred by this subsection. Section 26(2)(a) of the amount of the advance being excessive; or Section 26(2)(b) of the amount of any excess advance included in the advance being greater than that which is authorized by this Act. Section 26(3) Where a society has made an advance...

Section 27. Notice to be given where security for advance to member is taken from third party Section 27(1)(a) stating, if the land is mortgaged or is to be mortgaged to the society as security for the advance, the maximum amount which the society would consider proper to advance upon the security of that land if no other security were taken by the society for the advance, and the amount, if any, by which the advance exceeds that maximum amount; and Section 27(1)(b) containing such particulars as may be prescribed relating to any security for the advance which is taken or is to be taken from any person other than the member, no sums shall be recoverable, Section 27(2) Where a society makes such an advance and takes such security without giving notice to the member in accordance with the foregoing provisions of this section, the court may, either upon an application for leave, or upon an application made by the member, reopen the transaction, and may make such orders as to the sums which may be recovered in respect of the advance and of any security given therefor, as to the exercise of any rights conferred by any such security and otherwise as the court considers just.

Section 28. Power to carry on business abroad Section no building society, other than an existing society, shall make any such investment within five years of its registration under this Act;

Section 29. Additional powers of building societies Section to borrow money at interest, other than in the form of deposit, from a bank, or, if the terms are approved in writing by the Registrar, from any person other than a banker, and to arrange overdraft facilities with a bank;

Section 30. Dividends payable only out of profits Section Notwithstanding anything to the contrary contained in its rules, no building society shall pay any dividend or interest on any of its shares otherwise than out of profits earned by the society.

Section 29A. Minimum holding of liquid assets Section 29A(1) Notwithstanding the provisions of this Part or any rules made thereunder, a building society shall maintain such minimum holding of liquid assets as the Central Bank shall, from time to time, determine. Section 29A(2)(a) notes and coins which are legal tender in Kenya; Section 29A(2)(b) balances held at the Central Bank; Section 29A(2)(c) balances in banks, financial institutions and other building societies in Kenya, after deducting therefrom balances owed to those banks, financial institutions or other building societies; Section 29A(2)(d) Kenya treasury bills and bonds of a maturity not exceeding ninety-one days which are freely marketable and rediscountable at the Central Bank; Section 29A(2)(e) such other assets as the Central Bank may, from time to time, specify. Section 29A(3) A building society which fails to comply, with any of the requirements of subsection (1), within such period as the Central Bank may specify, shall be liable to a penalty interest charge not exceeding one per cent of the amount of the deficiency for everyday on which the offence continues. [Act No. 12 of 1984 , Sch., Act No. 16 of 1985 , s. 6...

Section 56. Determination of disputes by arbitrators or the Registrar Section 56(1) Where the rules of a building society direct that a dispute shall be referred to arbitration by arbitrators, arbitrators shall be nominated in the manner provided by the rules, or, if there is no such provision, may be elected at a general meeting of the society, none of the arbitrators being beneficially interested, directly or indirectly, in the funds of the society. Section 56(2) Not less than three arbitrators shall be chosen by ballot in each case of dispute, the number of the arbitrators and mode of ballot being determined by the rules of the society. Section 56(3) In the case of the death or refusal or neglect of any of the arbitrators to act, the society shall nominate, or elect in general meeting, as the case may require, an arbitrator to act in the place of the arbitrator dying, or refusing or neglecting to act. Section 56(4) The names of all arbitrators nominated or elected to act under the provisions of this section shall be entered in the minute book of the society. Section 56(5) Any award made by arbitrators or the major part of them shall determine the dispute. Section 56(6) Where the...

Section 57. Determination of disputes by the High Court Section if it appears to the Court, upon the petition of any person concerned, that application has been made by either party to the dispute to the other party for the purpose of having the dispute settled by arbitration under the rules of the society and that the application has not within forty days been complied with or that the arbitrators have refused or for a period of twenty-one days have neglected to make any award; or

Section 58. Determination of disputes by arbitrators or the Registrar to be final Section 58(1) Subject to subsection (2), a determination by arbitrators or by the Registrar under this Act of a dispute shall be binding and conclusive on all parties and shall be final to all intents and purposes, and shall not be subject to appeal and shall not be removed or removable into any court or restrained or restrainable by the injunction of any court. Section 58(2) The arbitrators or the Registrar, as the case may be, may, at the request of either party, state a case for the opinion of the High Court on a question of law (but shall not be compelled to do so), and may grant to either party in the dispute such discovery as to documents and otherwise as might be granted by the High Court, discovery to be made on behalf of the society by such officer of the society as the arbitrators or the Registrar may determine.

Section 31. Annual general meeting Section A building society shall within five months of the end of its financial year hold a general meeting as its annual general meeting in addition to any other meetings in that year, and shall specify the meeting as such in the notices calling it.

Section 32. Other meetings Section The board of directors of a building society shall call such other general or special meetings as may be required by the rules of the society or as they may consider desirable, and shall, notwithstanding anything contained in the rules of the society, call a general or special meeting on the application of not less than one-tenth of the whole number of members or of not less than fifty members, whichever is the less.

Section 33. Annual accounts and statement Section 33(1) A building society shall, as soon as is practicable and not more than four months after the expiration of its financial year, cause to be prepared an account of all the income and expenditure of the society during that financial year and a general statement of its funds and effects, liabilities and assets; and the account and statement shall be attested to by the auditors of the society and shall be counter-signed by at least two directors thereof. Section 33(2)(a) the amounts due to the holders of the various classes of shares respectively; Section 33(2)(b) the amounts due to depositors and creditors for loans; Section 33(2)(c) the balance due or outstanding on the security of mortgages (not including prospective interest); and Section 33(2)(d) the amount invested by the society in other securities, showing separately investments in and investments outside Kenya. Section 33(3) Every auditor in attesting an annual account or statement shall either certify that it is correct, duly vouched and in accordance with the law or specially report to the society in what respect he finds it incorrect, unvouched or not in accordance with...

Section 34. Returns of sales and transfers Section every property which has, during the period to which the return relates, been sold by the society in the exercise of its powers as mortgagee thereof;

Section 35. Books and records to be kept by building societies Section 35(1)(a) a minute book recording all proceedings of general meetings; Section 35(1)(b) a minute book recording all proceedings of the board of directors; Section 35(1)(c) a register of directors, showing the full names of every director, his postal and residential address, his nationality and, if that nationality is not his nationality of origin, his nationality of origin, the date of his appointment and the date of his ceasing to hold office as such director; and Section 35(1)(d) such books of account as may be necessary to show the receipts and expenditure of the society, the amounts due to the holders of the various classes of shares respectively and to depositors and creditors for loans, the balance due or outstanding on the security of mortgages and the amount invested by the society. Section 35(2)(a) the amount at which the land was assessed and the name of the person by whom the assessment was made; and Section 35(2)(b) particulars of any additional security taken by the society, including the amount at which it was assessed and the name of the person by whom the assessment was made. Section 35(3) A build...

Section 36. Rules to be binding on members and others Section The rules of a building society as for the time being registered under this Act shall be binding on the several members and officers of the society and on all persons claiming on account of a member or under the rules, all of whom shall be deemed and taken to have full notice thereof.

Section 37. Duty to supply copies of rules Section A building society shall supply to any person requiring it a complete printed copy of its rules, with a copy of the certificate of registration appended thereto, and may charge therefor a sum not exceeding five shillings.

Section 38. Evidence of rules Section A copy of the rules of a building society, certified by the secretary or other officer of the society to be a true copy of its registered rules, shall, in the absence of any evidence to the contrary, be admissible as evidence of the rules.

Section 39. Persons under twenty-one Section 39(1) A person who is under the age of twenty-one years may be admitted as a member of a building society the rules of which do not prohibit his admission. Section 39(2)(a) give all necessary acquaintances; Section 39(2)(b) consent to the dissolution of the society; and Section 39(2)(c) vote at any meeting of the society; Section 39(2)(c)(i) vote at any meeting of the society; Section 39(2)(c)(ii) hold any office in the society; Section 39(2)(c)(iii) transfer any share standing in his name; or Section 39(2)(c)(iv) execute a mortgage to secure advances made to him by the society.

Section 40. Shares may be held jointly Section Two or more persons may jointly hold a share of shares in a building society; but the right to vote at a meeting of the society shall be limited to one of those shareholders.