Chapter

Kenya

Author(s):
International Monetary Fund
Published Date:
June 1985
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Overview of Nairobi, capital of Kenya

Courtesy World Bank, Kay Chernush

Financial System of Kenya

Introduction

The rapid development of the economy of Kenya has been accompanied by a marked expansion in the number, size, and operations of financial institutions. The growth of the economy has involved a sharply expanded volume of investment requiring a substantial mobilization of domestic savings, which has been facilitated by the increase in the number of financial institutions and the enlargement of their operations. In addition to the legal environment and the public sector’s role in fostering the growth of financial institutions, the nature of economic enterprise in Kenya (that of mixed enterprise with a distinct private sector dominance) has provided the underpinning for the development of both the financial institutions and capital and money markets.

The growth of the capital and money markets in Kenya was characterized at the outset by the need for funds in the private sector rather than by the Government’s need to borrow locally. Prior to Kenya’s independence in late 1963, public investment was rather modest and its financing was mainly through foreign borrowing and grants; hence, the minor role of the Government in spearheading the development of the capital and money markets as a borrower in those markets. For example, it was not until early 1969 that the Government began to issue treasury bills, both in a deliberate attempt to foster the growth of a money market and, increasingly, to meet the needs for short-term funds in financing the budget. However, the Government of Kenya has for many years provided the legal framework within which such a market could reasonably operate and through legislation has created a number of agencies, particularly nonbank financial institutions whose impact on the operations of the capital and money markets has been especially significant.

This introduction to Kenya’s banking legislation is aimed at providing the background to the scope of, and the limitations on, the controls exercised by the Central Bank of Kenya over the commercial banks and other financial institutions. After examining the structure and operations of the existing financial institutions, and the steps taken in the development of the capital and money markets, the statutory regulation and central bank control of the financial institutions are described.

Structure of Financial Institutions

Kenya’s complex of financial institutions can be grouped into three broad categories, namely, the banking system, the public nonbank financial institutions, and the private nonbank financial institutions.

The banking system comprises the Central Bank of Kenya and the commercial banks. There are, besides, both public and private nonbank financial institutions with an assortment of functions. In addition, there are several insurance companies (life and nonlife) engaged in the mobilization of liquid resources and participating in investment activities, a post office savings bank, and a development bank (the East African Development Bank) jointly established by the three partner states (Kenya, Tanzania, and Uganda) of the now defunct East African Community.

History1

The East African Currency Board, established in 1919, was authorized to issue currency in the territories of Kenya, Uganda, and what was then Tanganyika. The currency initially issued was the East African florin, but this was replaced in 1922 by the East African shilling. The silver rupees that had circulated earlier in East Africa were redeemed by the Board at a substantial loss owing to a redemption rate well in excess of their exchange value and the fact of their continuing depreciation over the redemption period. As a consequence of this, it was not until 1950 that the Board achieved the 100 per cent sterling currency cover that had been contemplated for the shilling. For many years, the Board was without any real influence on monetary conditions in the economy. Its function was limited to issuing and redeeming the East African shilling in exchange for sterling at par, subject only to commission charges. Beginning in 1955, however, the Board’s powers were increased in successive steps that permitted it first to subscribe to local securities, then to discount and rediscount certain negotiable instruments, and finally to influence interest rates. As Kenya, Uganda, and Tanzania approached independence, the concept of a common central bank which would succeed the Board generated some interest but ultimately failed to materialize.

Central Bank

The Central Bank of Kenya was established in March 1966 as a successor to the East African Currency Board and began operations on September 14, 1966. The main objectives of the Bank are broadly “to regulate the issue of notes and coins, to assist in the development and maintenance of a sound monetary, credit and banking system in Kenya conducive to the orderly and balanced economic development of the country and the external stability of the currency, and to serve as banker and financial adviser to the Government.”2

Commercial banks

There are 18 commercial banks operating in Kenya. Of these, several are local, of which the largest was established in late 1970 through the acquisition by the Government of a majority share holding in an existing expatriate bank, the National and Grindlays Bank, Ltd., to form Kenya Commercial Bank now wholly owned by the Government. The largest banks (including two local banks) are engaged in general banking business and have branches outside Nairobi (the capital city) and Mombasa. The smaller banks are more specialized. For example, Grindlays Bank International is engaged exclusively in international banking and extends credit primarily to exporters and importers, while the Cooperative Bank of Kenya, Ltd., accepts deposits from and extends credit to only rural cooperative societies.

Public nonbank financial institutions

In line with the Government’s active promotion of development, a number of public nonbank financial institutions have been established primarily to provide finance to the private sector, especially where existing institutions have failed to meet such needs. These institutions tend to have special areas to which they cater, e.g., agriculture, housing, and industrial development.

There are three institutions for the agricultural sector, reflecting the dominance of agriculture in the economy of Kenya and the special problems of providing agricultural finance. Because of the inadequacy of bank finance for agriculture, the Government established the Agricultural Finance Corporation, which absorbed the existing Land and Agricultural Bank of Kenya in 1963, to provide credit for farmers from public sources. In order to facilitate the capacity of farmers to borrow, the Government has embarked on changing the land tenure in the traditional African areas so that farmers are provided with title deeds to their land. Where necessary, it has also attempted to consolidate scattered holdings. The modernization of land tenure began in 1956, and by 1965 about 18 per cent of all registrable land had been registered.3 In addition, a land settlement program involving the purchase of land formerly owned by expatriate farmers facilitated the extension of credit to the agricultural sector. Of note is the One-Million Acre Settlement Scheme, which by the end of 1972 had settled farmers on 1.2 million acres. Other institutions engaged in extending credit to the agricultural sector include the Cereals and Sugar Finance Corporation, which provides funds to the Kenya Farmers’ Association (Cooperative), Ltd., for the financing of the cooperatives and to the National Cereals and Produce Board for the purchase of maize, which is Kenya’s main staple food, and the Agricultural Development Corporation.4

Of the remaining five institutions, the Housing Finance Company of Kenya, Ltd., functions in the field of housing, having taken over two other smaller institutions, while the Industrial and Commercial Development Corporation (icdc) provides funds for industrial development. The icdc, the most important public sector financial institution, was set up in 1954 with the objective of promoting industrialization by assisting in or initiating the establishment of industrial and commercial ventures and of facilitating participation by the public in commerce and industry.

The East African Development Bank was jointly established by Kenya, Tanzania, and Uganda to provide industrial development finance in all three countries. The Post Office Savings Bank collects deposits from small savers and is administered by the Kenya Posts and Telecommunications Corporation.

Private nonbank financial institutions

Most nonbank private financial institutions are licensed under the Banking Act, although two, the East African Building Society, Ltd., and Pioneer Building Society were licensed under the Societies Act. A number of them have been designated as “specified financial institutions,” in accordance with sec. 2 of the Central Bank of Kenya Act, so as to come within the ambit of the regulatory powers of the Central Bank. A notable aspect of these institutions is their ownership by, or strong links with, the commercial banks. These institutions provide medium- and long-term financing for a variety of activities. Broadly speaking, their activities fall within the fields of mortgage lending, hire purchase, and merchant banking, and the institutions tend to specialize. Their operations have increased substantially and they play a significant role in Kenya’s financial system through the collection of deposits and the extension of credit.

Insurance companies

Several insurance companies, mainly subsidiaries of foreign companies, operate in Kenya. After years of relative stability, their operations have expanded noticeably, particularly those of the life insurance companies. The total assets of the life insurance companies grew from K Sh 948,020,000 in 1974 to about K Sh 1,260,760,000 in 1978.5 The Government has encouraged the investment of these funds locally.

Development of Capital and Money Markets

Demand for capital

As indicated above, the Government’s role in fostering the expansion of capital and money markets in Kenya has been limited, primarily because current budget savings were for many years largely sufficient to meet the need for development financing not covered by external loans and grants.6 However, with more vigorous implementation of development plans, the need for greater domestic mobilization of savings arose, and increased use was made of the sale of debt instruments.

The extent to which the Government has contributed to the growth of the capital market is illustrated by the substantial expansion in its issuance of funded debt, which rose from K Sh 1,284,220,000 at the end of June 1971 to K Sh 8,065,190,000 at the end of June 1981. This debt is held by a number of institutions, of which the National Social Security Fund (nssf), commercial banks, and insurance companies are major holders. The nssf marks an aspect of the Government’s endeavor to mobilize domestic savings; the National Social Security Law was enacted in 1966, and in but a few years the fund established by it accounted for a substantial proportion of the public funded debt on the local register.

Supply of capital funds

With respect to the supply of capital to the economy, it is instructive to examine both the nature of the capital market and the structure of companies, having regard also to their ability to generate internal resources for expansion. In financing the Government’s capital formation in the period 1958–69, domestic borrowing accounted for only 11.3 per cent, while current budget savings provided 31.7 per cent and the remainder was in the form of external loans and grants. Private sector capital formation during the same period (1958–69) was financed largely by funds internally generated by business firms and by the raising of new capital on the domestic market. For example, between 1958 and 1965 new capital issues amounted to K Sh 2,640 million, somewhat in excess of depreciation funds, the two together financing 68.8 per cent of private sector capital formation. Indications are that the contribution of these sources of financing continued to increase in later years. Net foreign capital inflow has been of small importance in financing private sector investment in Kenya. The mobilization of domestic capital in the required magnitude stimulated the development of a capital market, as the capital of companies had to be structured in a manner that would enable them to raise public funds and facilities had to be provided for purchases and sales of securities.

The structure of companies and corporations registered in Kenya shows a preponderance of private companies.7 In practice, such private companies are largely family business and subsidiary firms. Of 11,443 local companies that were registered as of the end of 1975, only a fraction were public companies.8 The preponderance of private companies has not encouraged the expansion of the capital market, for in financing their operations such companies have usually relied on sources other than the public for funds, notably the individual resources of those launching the businesses and private placement of loans. In contrast, in some other countries the expansion of the capital market on a broad front has been attributable to the group of public companies that issues shares and debentures to investors. Although adequate data are not available for analysis with regard to the capital structure and the new capital funds raised, a gradual increase in the annual registration of new local public companies from 4 in 1962 to 157 in 1979 suggests the basis for an expanding capital market.

Financial intermediaries

Financial intermediaries such as private nonbank financial institutions, insurance companies, and building societies have contributed to the breadth of the capital market, playing a prominent role in the issuance of long-term and medium-term loans for capital expansion and in the mobilization of savings. Government action has also been of importance in this field. The extension of exchange control regulations to sterling area countries in mid-1965 facilitated the accumulation of domestic savings. Also, the Government’s policy of encouraging the investment of insurance funds locally to the point where local liabilities are covered by local assets has helped to increase the role of insurance companies in the process of mobilizing and allocating financial resources. In addition, the Government is responsible for the establishment of certain financial institutions.

Stock exchange

The establishment of a stock exchange and the flotation of shares and bonds on it has contributed to the development of the capital market. Through the initiative of the private sector, the Nairobi Stock Exchange was established in July 1954 to replace the earlier links with external markets in Rhodesia, South Africa, and the United Kingdom. Initially, the members of the exchange were the few stockbrokers who had earlier formed a stockbrokers’ association, and business continued to be transacted between these brokers from their respective offices, there being no “floor” trading of shares. From a system involving a weekly “call-over” in order to complete deals, there is now a daily “call-over,” reflecting the expansion in the volume of business.

The operations of the stock exchange remain limited compared with those of the exchanges in Europe or the United States of America. Institutions such as insurance companies, investment trusts, and semiofficial bodies comprise the bulk of traders on the Nairobi Stock Exchange. However, the number and activity of individual traders have increased as a result of larger flotation of company shares. Moreover, the volume of transactions on the exchange is believed to be rising. A significant increase has also occurred in the number of industrial shares and government stocks listed.

The Nairobi Stock Exchange operated for many years as a “regional” exchange serving the three countries (Kenya, Tanzania, and Uganda) that formed the East African Community. This was made possible by the establishment of companies on an East African basis, the maintenance of common market arrangements and common exchange regulations regarding capital movements to countries outside East Africa, and the virtually free movement of capital among the three countries. However, nationalization measures in Kenya’s partner states, the introduction of currency and exchange measures, and the breakup of the Community reduced the effectiveness of the regional aspect of the exchange.

Money market

Despite the existence of a wide network of financial institutions on a relatively well-developed scale, the emergence of an organized and effective money market in Kenya was retarded. Both the lending practices of commercial banks and the apparent inadequacy of short-term investment opportunities and instruments help to explain this delay. An additional factor was the early lack of a systematic approach to the raising of short-term funds to meet government needs. For example, the Kenya Government did not make any major use of the facility to place treasury bills with the East African Currency Board (eacb) as part of its fiduciary issue.9

Until March 1969 the Government of Kenya met its short-term borrowing needs through direct advances from commercial banks or through the machinery of the Cereals and Sugar Finance Corporation. Treasury bills were not issued except on one occasion (during the last quarter of 1965), when the Government issued an amount of K Sh 20 million to meet a temporary shortage of funds. The bills were quickly redeemed. However, in order to promote a money market in Kenya, a decision was made early in 1969 to borrow actively through the issuance of treasury bills. The Appropriations Act, 1968, which authorized short-term borrowing by the Government up to K Sh 200 million, provided the legal basis for issuing treasury bills. The first issue of treasury bills was made on March 24, 1969, and further issues followed at regular intervals.

Beginning in December 1969 the Government began to reduce the amount of bills outstanding, and by the end of April 1970 the total amount outstanding had been repaid. No new issues were made between February and December 1970, when the issuance of treasury bills resumed. The purpose of suspending new issues was to reduce the amount of short-term asset instruments available in the fledgling money market as the bills outstanding were retired. The relatively high liquidity of the commercial banks during the period 1969–70 played a significant part in the success of the earlier treasury bill issues.

Since treasury bills are included as eligible liquid assets for purposes of meeting the liquidity ratio requirement, commercial bank holdings of them have increased. However, bank lending through the discount of commercial bills remains modest in Kenya and accordingly has not aided the expansion of the money market. The preference of commercial banks for direct financing rather than use of commercial bills and other short-term lending instruments, and the initial prohibition of interbank lending, inhibited their participation in the development of a money market. However, interbank lending has been permitted since early 1973 and since that time has assisted in the development of the money market.

While the capital market has expanded rapidly, neither the needs of monetary management nor the mobilization of liquid resources initially activated or expanded the money market beyond the establishment of a network of financial institutions and the sale of a small volume of short-term asset instruments. Progress in the development of the money market had to occur slowly. That it has occurred may be appreciated from an examination of the growth of the market in treasury bills. As of June 30, 1971 the amount of treasury bills outstanding was K Sh 200 million, while as of June 30, 1981 this figure had increased to K Sh 1,940 million.10

Financial Mobilization and Allocation

Deposits with all financial institutions, public as well as private, including the commercial banks but excluding the Central Bank, have increased rapidly. This rapid increase reflects both the growth of the economy and its increased monetization. By way of illustration, total deposits in the commercial banks grew from K Sh 4,954,600,000 at the end of 1974 to K Sh 14,002,140,000 at the end of 1980.11 While commercial bank deposits substantially exceed those made with other financial institutions, deposits with the private nonbank financial institutions have increased more rapidly. Public nonbank financial institutions have also succeeded in increasing their rate of savings mobilization. In quantitative terms, deposits with nonbank financial institutions, taken as a group, have been estimated to have risen on average by 82 per cent a year, compared with an average annual rate of increase of 30 per cent in commercial banks’ deposit resources over the period December 1974 through December 1980. Accordingly, deposits in these institutions as a proportion of commercial bank deposits rose from 16 per cent in 1973 to 35 per cent by December 1980. This comparison in favor of the nonbank financial institutions may reflect the higher interest rates on deposits paid by these institutions (insofar as they are not subject to the interest rate controls applicable to commercial banks) and the fact that in certain respects they are more suited to the needs of small savers.

An important aspect of the role of money and capital markets is the machinery provided for the allocation of funds among possible users, i.e., credit and capital allocation. The commercial banks predominate in the provision of credit to the economy. However, commercial bank credit has been mainly short term and traditionally has been concentrated in the export-import, commercial, and manufacturing fields. While lending by private nonbank financial institutions is comparatively of lesser magnitude, it has been largely in the areas neglected by the banks, and to meet medium- and long-term needs. By way of example, in terms of amounts loaned, the sectors receiving the most financing from these institutions in 1979 were housing, personal, business, trades, and manufacturing.12 Public nonbank financial institutions have generally lent in agricultural and industrial activities. The lending operations of the private nonbank financial intermediaries have increased especially rapidly. As a general rule, the allocation of resources by financial institutions consists of direct lending to borrowers in the various sectors, and only a small part takes the form of purchases of securities from them or holdings of negotiable instruments.

In considering the network of financial institutions, the role of insurance companies in mobilizing financial resources needs to be mentioned. The total assets of these companies amounted to K Sh 2,116,600,000 at the end of 1978.13 A rapid increase in insurance premiums collected is evidence of the savings generated through this medium.

Central Bank and Financial System

At the apex of Kenya’s financial system is the Central Bank of Kenya, which is vested with certain statutory functions, including the control and inspection of commercial banks and other financial institutions. The Central Bank Act of 1967 spells out the role of the Central Bank and its regulatory duties vis-à-vis other financial institutions. The Banking Act of 1968 specifies the conditions governing the establishment and operation of commercial banks and specified financial institutions and their relationship with the Central Bank.

The Central Bank of Kenya has endeavored to develop and maintain sound monetary and credit policies and to carry out the functions vested in it by the enabling Act. In addition, the Central Bank has, since its inception, developed and implemented a system for regulating the banks and other financial institutions. Notable in this regard, is its ability to designate a nonbank financial institution as a “specified financial institution” so as to subject it to appropriate regulation and supervision. The Central Bank has taken over the foreign assets of the country, a policy that involved the surrender by the commercial banks and other institutions of their foreign asset holdings.

In the field of credit controls, the Central Bank, through the power conferred by the Banking Act of 1968, has gradually assumed regulatory functions over the lending practices (volume of credit), interest rate policy, and manner of operations, particularly through an inspection and reporting system, of commercial banks and nonbank financial institutions. This development arose as an aspect of monetary management as well as to safeguard the deposits with these institutions.

Two points concerning the power conferred by the Banking Act should be mentioned. First, the Act has enabled the Central Bank to impose a liquid assets ratio on the commercial banks.14 This is, of course, different from the power conferred by the Central Bank of Kenya Act, which enables it to require the commercial banks to keep on deposit with the Central Bank reserves of up to 20 per cent of their deposits and other liabilities. The second is the power of inspection.15 Through regular inspection the Central Bank can safeguard the soundness of banking and financial institutions’ operations. The purpose of such inspection is to ensure compliance with the law as well as to provide information as to the state of affairs of individual banks and other financial institutions. In addition, the Banking Act provides for minimum capital requirements (sec. 7) for all commercial banks (assigned capital in the case of banks not locally incorporated) and institutions licensed under the Act.

Under the Banking Act, commercial banks and licensed financial institutions are prohibited from specified activities. Of significance is the limitation on lending to any one customer; such lending must not exceed 5 per cent of deposit liabilities or 100 per cent of the lending institution’s capital plus unimpaired reserves, whichever is greater. Ordinary trading activities are prohibited, and a limit is put on the amount of real estate loans that can be made by a bank.16 In licensing new banks and financial institutions, opening new places of business, and changing the location of an existing place of business, the Central Bank acts in an advisory capacity to the Ministry of Finance which is vested with the power to grant licenses.17 Two kinds of licenses are prescribed: to transact banking business, which authorizes the holder to engage in any kind of banking business including acceptance of deposits subject to transfer by checks, and to engage in the business of a financial institution, with ability to accept deposits which are not subject to transfer through checks.

The Central Bank initially used its credit control powers sparingly, relying more on moral suasion. However, in late 1971 the Bank introduced a 5 per cent cash reserve requirement in addition to the 12½ per cent liquidity ratio requirement already in effect. Although early in 1972 the 5 per cent additional cash reserve requirement was rescinded, the liquidity ratio requirement was raised to 15 per cent. In 1976 quantitative limits on credit expansion were introduced and the liquidity ratio requirement was raised to 18 per cent, to which point it returned in 1978 after reaching 20 per cent the year before. In 1978 a cash ratio was reintroduced in the amount of 3 per cent dropped in April 1981. In June of the following year the liquidity ratio requirement was once again lowered, to 16 per cent and again to 15 per cent in March 1981. Interest rate policy has been used on occasion, while the Central Bank has attempted to influence the allocation of credit through sectoral credit targets and preferential interest rates.

Apart from its role of surveillance over Kenya’s financial system, the Central Bank plays an active role in fostering the development of capital and money markets in Kenya. With respect to money market operations, the Central Bank offers rediscount facilities to the commercial banks. In addition, it assumes the management of treasury bill issues and stands ready to discount these bills to ensure marketability. In other ways, for example, through the provision of rediscount facilities and the administration of the exchange control regulations, the influence of the Central Bank on the expansion of the capital market is quite important.

Summary and Prospects

The growth of financial institutions and their financial operations in Kenya has been rapid. This has been aided by the marked expansion in economic activities and the promotional efforts of the authorities. The capital and money markets have consequently grown to meet the needs of the rapidly expanding economy for the mobilization of savings.

Despite the existence of a wide network of financial institutions on a relatively well-developed scale, the emergence of an organized and effective money market was retarded due to the apparent dearth of short-term investment opportunities and the lack, at least initially, of a systematic approach to the raising of short-term funds to meet government needs. However, an increasing volume of treasury bill issues and the granting of permission for interbank lending have contributed to the growth of the money market. With respect to the capital market, the increasing volume of government bonds and industrial securities, the growth of the network of financial institutions, and the functioning of the Nairobi Stock Exchange have established a firm basis for sustained expansion. These developments are likely to foster mobilization of the large amount of capital required by the country for sustained economic growth.

The Central Bank of Kenya Act1

Commencement:

Parts I to IV: 23rd May 1966

Parts V to X: 14th September 1966

An Act of Parliament to establish the Central Bank of Kenya and to provide for the operation thereof; to establish the currency of Kenya and for matters connected therewith and related thereto

Part I—Preliminary

Short title.

1. This Act may be cited as the Central Bank of Kenya Act.

Interpretation.

2. In this Act, except where the context otherwise requires—

“the Bank” means the Central Bank of Kenya (or the Banki Kuu ya Kenya) established by section 3 of this Act;

“Board” means the Board of Directors of the Bank appointed under Part IV of this Act;

“convertible”, in relation to any exchange, means exchange which is freely negotiable and transferable in international exchange markets at exchange rate margins consistent with the Articles of Agreement of the International Monetary Fund;2

“Minister” means the Minister for the time being responsible for finance;

“public entity” means the Government, the Organization, the Authority, any local authority, or any public body specified by the Minister, on the recommendation of the Bank, as a public entity for the purposes of this Act;

“shilling” means a Kenya shilling as provided in section 19 of this Act, or a shilling issued by the East African Currency Board for so long as it is legal tender in Kenya in accordance with this Act;

“specified bank” means any licensed bank within the meaning of the Banking Act which is specified by the Bank for the purposes of this Act;

“specified financial institution” means any financial institution specified by the Bank for the purposes of this Act.

Part II—Establishment, Constitution and Objects

Establishment of Bank and legal status.

3. (1) There is hereby established a bank which shall be known as the Central Bank of Kenya and which shall also be known by the alternative corporate name of the Banki Kuu ya Kenya.

(2) The Bank shall be a body corporate with perpetual succession and a common seal, with power to acquire, own, possess and dispose of property, to contract, and to sue and to be sued in its own name.

(3) The Bank shall exercise any type of central banking function unless specifically excluded under this Act, and shall enjoy all the prerogatives of a central bank.

(4) The Bank may make its own rules of conduct or procedure, not inconsistent with the provisions of this Act, for the good order and proper management of the Bank.

(5) The Bank shall not be subject to the Companies Act or the Banking Act.

Objects of Bank.

4. The principal objects of the Bank shall be to regulate the issue of notes and coins, to assist in the development and maintenance of a sound monetary, credit and banking system in Kenya conducive to the orderly and balanced economic development of the country and the external stability of the currency, and to serve as banker and financial adviser to the Government.

Head office and branches.

5. (1) The Bank shall have its head office in Nairobi:

Provided that during a time of national emergency the Bank may, unless the President otherwise directs, establish its head office temporarily or permanently in any other place within Kenya or elsewhere.

  • (2) (a) The Bank may establish or close branches in any place within Kenya.

  • (b) The Bank may, with the prior approval of the Minister, open or close branches outside Kenya.

Agents.

6. The Bank may, with the prior approval of the Minister, appoint, on such terms as it considers appropriate, or cancel the appointment of, agents, both within and outside Kenya.

Exemption from tax.

7. (1) The Bank shall not be liable to any taxation imposed by any law in respect of income or profits.

(2) No duty shall be chargeable under the Stamp Duty Act in respect of any instrument executed by or on behalf of or in favour of the Bank in any case where, but for this exemption, the Bank would be liable to pay such duty.

(3) The Minister may, whether for the purpose of removing any doubt as to the extent of the foregoing provisions of this section or for the purpose of extending the immunities of the Bank, by order published in the Gazette specify any tax, duty, fee, rate, levy, cess or other impost as one to which the Bank shall not be liable, and the law relating thereto shall have effect accordingly.

(4) This section shall have effect notwithstanding anything contained in any Act of the Organization.

Part III—Capital and Reserves

Authorized capital of Bank.

8. (1) The authorized capital of the Bank shall be twenty-six million shillings, which shall be paid up as a charge on and issued out of the consolidated fund as the Minister shall, at the request of the Bank, from time to time direct.

(2) The ownership of the entire paid up capital of the Bank shall be vested in the Permanent Secretary to the Treasury.

General Reserve Fund.

9. (1) The Bank shall establish and maintain a fund designated as the General Reserve Fund, to which shall be transferred at the end of each financial year, if the sums standing to the credit of the General Reserve Fund at the end of that year are less than the authorized capital of the Bank, one quarter of the net annual profits of the Bank after allowing for the expenses of operation and after provision has been made for bad and doubtful debts, depreciation in assets, contributions to staff benefit funds, and such other contingencies and accounting provisions as the Bank deems appropriate.

(2) Subject to subsection (1) of this section, the net annual profits of the Bank, calculated in accordance with that subsection, shall be paid into the consolidated fund.

(3) The amount of any net losses of the Bank in any financial year which is in excess of the sums standing to the credit of the general reserve fund of the Bank shall be charged upon and paid out of the consolidated fund without further appropriation than this Act.

Part IV—Management

Board of Directors.

10. There shall be a Board of Directors of the Bank, constituted as provided in section 11 of this Act, which shall, subject to the provisions of this Act, be responsible for determining the policy of the Bank.

Constitution of Board.

11. (1) The Board shall consist of—

  • (a) a Governor;

  • (b) a Deputy Governor;

  • (c) the Permanent Secretary to the Treasury, or, in his absence an official of the Treasury nominated by the Minister (hereinafter referred to as the representative of the Treasury); and

  • (d) four Directors.

(2) The Governor and the Deputy Governor shall be the Chairman and Deputy Chairman of the Board respectively, and shall be appointed by the President for terms of four years each and shall be eligible for reappointment:

Provided that in the case of a person who is not a citizen of Kenya any such appointment shall be at the pleasure of the President.

(3) The Directors shall be appointed by the President for terms of four years and shall be eligible for reappointment:

Provided that—

  • (i) for the four Directors first appointed, the appointments shall be for one, two, three and four years, respectively; and

  • (ii) if a Director’s appointment on the Board is terminated before his term of office has expired the President shall appoint a new Director to serve for the remainder of that term of office.

(4) Where the Governor, the Deputy Governor or a Director is unable to perform the functions of his office due to any temporary incapacity which is likely to be prolonged, the President may appoint a substitute for that member of the Board to act with the full powers of that member until such time as the President determines that the incapacity of that member has ceased.

Meetings of Board.

12. (1) The Governor, as Chairman of the Board, shall convene meetings of the Board not less than once in every two months, or whenever the business of the Bank so requires, or whenever he is so requested by at least two Directors, or by the representative of the Treasury.

(2) A quorum for any meeting of the Board shall be the Governor or the Deputy Governor, the representative of the Treasury and two Directors.

(3) Decisions of the Board shall be adopted by a majority of the votes of those present at that meeting, and in case of an equality of votes the Chairman or Deputy Chairman presiding at the meeting shall have a second or casting vote.

(4) The validity of any proceedings of the Board shall not be affected by any vacancy in the membership of the Board, or by any defect in the appointment or disqualification of any member which is discovered subsequent to those proceedings.

(5) Where the Governor and the representative of the Treasury consider that, because of exceptional circumstances, a decision is necessary before a full meeting of the Board can be convened, then that decision may be taken by the Governor with the concurrence of the representative of the Treasury and such decision shall be valid and binding on the Bank; and the Governor shall immediately convene a meeting of the Board and report any such decision to it.

(6) The Governor and the representative of the Treasury shall each have the right to suspend a vote by the Board and refer the matter to the Minister for a decision, and the decision of the Minister as to whether the vote shall stand or shall not stand shall be binding on the Board.

Governor.

13. (1) The Governor shall be the chief executive officer of the Bank and, subject to the general policy decisions of the Board, shall be responsible for the management of the Bank, including the organization, appointment and dismissal of the staff in accordance with the general terms and conditions of service established by the Board, and the Governor shall have authority to incur expenditure for the Bank within the administrative budget approved by the Board.

(2) The Governor shall be the principal representative of the Bank and shall, in that capacity, have authority—

  • (a) to represent the Bank in its relations with other public entities, persons or bodies;

  • (b) to represent the Bank, either personally or through counsel, in any legal proceedings to which the Bank is a party;

  • (c) to sign individually or jointly with other persons contracts concluded by the Bank, notes and securities issued by the Bank, reports, balance sheets, and other financial statements, correspondence and other documents of the Bank.

(3) The Deputy Governor shall act for the Governor and shall exercise all the powers and shall perform all of the functions conferred on the Governor under this Act whenever the Governor is temporarily absent, and shall perform such other functions as the Governor may from time to time assign to him.

(4) The Governor may delegate any of his powers provided for in this section to other officers of the Bank.

General disqualifications for all Board members.

14. (1) No person shall be appointed as Governor, Deputy Governor or a Director who is—

  • (a) a member of the National Assembly;

  • (b) a salaried employee of any public entity (except on a secondment basis);

  • (c) a director, officer, employee, partner in or shareholder of any specified bank or specified financial institution:

Provided that—

  • (i) paragraph (b) above shall not apply in the case of the representative of the Treasury; and

  • (ii) the President may in exceptional cases waive any of the above provisions with respect to any Director (other than the Governor or Deputy Governor) if such waiver is in the interests of the Bank and likely to promote the objects of the Bank under section 4 of this Act.

(2) The President shall terminate the appointment of a Governor, Deputy Governor or a Director who—

  • (a) becomes subject to any of the disqualifications described in subsection (1) of this section;

  • (b) is adjudged bankrupt or enters into a composition or scheme of arrangement with his creditors;

  • (c) is convicted of an offence involving dishonesty or fraud or moral turpitude; or

  • (d) becomes for any reason incapable of properly performing the functions of his office.

(3) The President shall terminate the appointment of any Director who absents himself from three consecutive meetings of the Board without leave of the Board.

Special disqualifications for Governor and Deputy Governor.

15. (1) The Governor and the Deputy Governor shall owe their allegiance entirely to the Bank and shall not engage in any paid employment or business or professional activity outside the duties of their respective offices:

Provided that nothing in this subsection shall prevent the Governor or Deputy Governor from accepting or holding any academic office or position in an institution of higher learning or any advisory position or membership in any committee or commission with public responsibility, or from serving in any international financial institution of which Kenya is a member or with which Kenya is associated, or any specialized financial institution established by the Government.

(2) If the Governor or the Deputy Governor engages in any paid employment or business or professional activity outside the duties of his office contrary to subsection (1) of this section, the President shall terminate his appointment.

(3) The President may specifically exempt any transactions or activities from the restrictions of this section.

Remuneration.

16. (1) The Governor, the Deputy Governor, and any substitute appointed under section 11(4) of this Act shall be paid by the Bank such salaries and allowances as may be determined from time to time by the President, but such salaries and allowances shall not be altered to the detriment of any person during his term of office.

(2) The Directors and any substitute appointed under section 11(4) of this Act shall be paid by the Bank such allowances as may from time to time be determined by the President.

Preservation of secrecy.

17. (1) Except for the purpose of the performance of his duties or the exercise of his powers, the Governor, the Deputy Governor, any Director or any other officer or employee of the Bank shall not disclose any information which he has acquired in the performance of his duties or the exercise of his powers.

(2) Any person who contravenes subsection (1) of this section shall be guilty of an offence and liable to a fine not exceeding two thousand shillings or to imprisonment for a term not exceeding one year, or to both such fine and such imprisonment, in addition to any disciplinary action which may be taken by the Board.

Declaration of interest.

18. The Governor, the Deputy Governor and any Director shall declare his interest in any specific proposal being considered or to be considered by the Board.

Part V—Currency

Currency of Kenya.

19. (1) The unit of currency of Kenya shall be the Kenya shilling, which shall be divided into one hundred cents.

(2) Twenty shillings shall equal one Kenya pound.

Par value.

20. The par value of the Kenya shilling in terms of gold shall be determined by the President, acting on the advice of the Bank and in accordance with any international agreement in that behalf to which Kenya is a party or with which it is associated, and shall be notified by notice in the Gazette.3

Use of Kenya shilling.

21. All monetary obligations or transactions entered into or made in Kenya shall be deemed to be expressed and recorded, and shall be settled, in Kenya currency unless otherwise provided for by law or agreed upon between the parties.

Issue of notes and coins, legal tender, and withdrawal.

22. (1) The Bank shall have the sole right to issue notes and coins in Kenya and, subject to subsection (4) of this section, only such notes and coins shall be legal tender in Kenya:

Provided that coins of a denomination of fifty cents shall be legal tender only for payments up to twenty shillings, and coins of a denomination of less than fifty cents shall be legal tender only for payments up to five shillings.

(2) The denominations, inscriptions, form, material and other characteristics of the notes and coins issued by the Bank shall be determined by the Minister, acting on the recommendations of the Bank, and shall be notified in the Gazette and in other media of public information likely to bring them to the attention of the public.

(3) The Bank shall have power to withdraw any notes or coins issued by the Bank, and the procedure for and effect of any such withdrawal shall be as follows—

  • (a) a notice published in the Gazette, and in such other manner as the Bank considers likely to bring that notice to the attention of the public, shall specify the issues, and the denominations forming part of such issues, of notes or coins that are to be withdrawn, the places where those notes or coins may be taken for exchange, and the date on which those notes or coins shall cease to be legal tender;

  • (b) the notice given under the foregoing paragraph may provide that, after such period as may be specified in the notice, the notes or coins to which the notice applies shall only be exchanged at the head office of the Bank;

  • (c) the notes or coins specified in a notice given under paragraph (a) of this subsection shall be exchanged at their face value for legal tender at the places and for the periods (which shall be of reasonable duration) specified in relation to those places in the notice, and shall cease to be legal tender on the date specified in the notice;

  • (d) the Bank may, by notice published in the same manner as notice given under paragraph (a) of this subsection, specify a period during which notes or coins which have ceased to be legal tender may nevertheless be exchanged at the head office of the bank, and after which such notes or coins shall no longer be exchanged.

(4) Notwithstanding subsection (1) of this section, the notes and coins of any issue or denomination issued by the East African Currency Board shall continue to be legal tender in Kenya for such time as the Minister may, on the recommendation of the Bank, determine.

Exchange of East African Currency Board notes and coins.

23. For so long as the East African Currency Board notes and coins continue to be legal tender in Kenya under section 22(4) of this Act, such notes and coins shall be exchanged at par for Kenya currency notes and coins at all offices of the Bank, and thereafter the Bank shall continue to exchange East African Currency Board notes and coins at par for such further periods as the Bank shall, with the approval of the Minister, determine and publish in the Gazette and other media of public information.

Exchange of mutilated notes and coins.

24. The Bank shall not be obliged to exchange any note or coin which is mutilated, defaced, soiled or otherwise defective, and the conditions subject to which the Bank may as a matter of grace exchange any such note or coin shall be within the absolute discretion of the Bank.

Bills of exchange, promissory notes, etc.

25. (1) The Minister may, if the Bank so recommends, by regulations published in the Gazette prohibit the issue by any person other than the Bank of any bill of exchange, promissory note or similar instrument for the payment of money to the bearer on demand, and any such regulations may make different provision for different cases or classes of case, and may impose penalties for any offence under the regulations of a fine not exceeding ten thousand shillings or of imprisonment for a term not exceeding two years, or of both such fine and such imprisonment.

(2) Subject to any regulations made under this section the issue of any such bill, note or instrument as is referred to in the foregoing subsection shall not be deemed to contravene the sole right of the Bank to issue notes in Kenya.

Part VI—External Relations

Ṙeserve of external assets.

26. (1) The Bank shall at all times use its best endeavours to maintain a reserve of external assets at an aggregate amount of not less than the value of four months imports as recorded and averaged for the last three preceding years; and subject to subsection (3) of this section such reserve shall consist of any or all of the following—

  • (a) gold;

  • (b) convertible foreign exchange in the form of—

    • (i) demand or time deposits with foreign central banks or with the Bank’s agents or correspondents outside Kenya;

    • (ii) documents and instruments customarily used for the making of payments or transfers in international transactions;

    • (iii) notes or coins;

  • (c) convertible and marketable securities of, or guaranteed by, foreign governments or international financial institutions.

(2) The Bank shall from time to time determine the type and form of convertible foreign exchange and the kinds of securities which may be held in the reserve of external assets pursuant to subsection (1) of this section.

(3) The Bank may include in its reserve of external assets any liquid external asset not included in subsection (1) of this section, or any readily available international drawing facility, which the Bank, after consultation with the International Monetary Fund and with the approval of the Minister, considers suitable for inclusion in such reserve.

Dealings in gold and foreign exchange.

27. (1) The Bank may buy, sell, import, export, hold or otherwise deal in gold or foreign exchange under such terms and conditions as it shall determine:

Provided that the buying and selling rates involved in such transactions shall be in accordance with international agreements to which Kenya is a party, or with which Kenya is associated.

(2) The Bank may hold balances, denominated in foreign currencies, with foreign central banks or with the Bank’s agents of correspondents abroad and, in its discretion, may invest such balances in marketable short-term foreign securities denominated in convertible currencies.

Institutions with which Bank may deal in foreign exchange.

28. The Bank may engage in foreign exchange transactions only with—

  • (a) specified banks;

  • (b) public entities;

  • (c) foreign central banks, foreign banks, or foreign financial institutions;

  • (d) foreign governments or agencies of foreign governments;

  • (e) international financial institutions;

  • (f) any other person or body of persons whom the Minister, on the recommendation of the Bank, may, by notice in the Gazette, prescribe for the purposes of this section.

Relations with foreign central banks, foreign banks and foreign financial institutions.

29. The Bank may open accounts for and accept deposits from, collect money and other monetary claims for and on account of, foreign central banks, foreign banks and foreign financial institutions, and may generally act as banker to such banks or institutions.

Exchange control.

30. The Bank shall administer any law relating to exchange control that may be in force at any time in Kenya.

Payments agreements.

31. The Bank shall administer any payments agreement entered into by Kenya, and the Bank shall be consulted by the Government in negotiating any payments agreement.

Fiscal agent for Government’s transactions with international financial institutions.

32. The Bank shall be the fiscal agent for all of the Government’s transactions with international financial institutions of which Kenya is a member or with which Kenya is associated.

Depository.

33. The Bank shall act as depository for Kenya currency holdings owned by international financial institutions of which Kenya is a member or with which Kenya is associated.

Part VII—Relations with Specified Banks

Banker to specified banks.

34. (1) The Bank shall open accounts for and accept deposits from, collect money and other monetary claims for and on account of, specified banks, and generally act as banker to specified banks.

(2) The Bank may provide any additional services or facilities that it considers desirable including inter-bank clearings to specified banks operating in Kenya.

Rediscounts.

35. The Bank may purchase from, sell to and rediscount on behalf of specified banks, bills of exchange, promissory notes and other credit instruments, bearing at least two good signatures, the last being the endorsement of a specified bank, maturing within one hundred and eighty days from the date of rediscount or acquisition by the Bank, and issued or made for the purpose of financing—

  • (a) the importation or exportation of goods, or the transportation of goods within Kenya;

  • (b) the storage of non-perishable goods and products which are duly insured or deposited under conditions assuring their preservation in authorized warehouses or in other places approved by the Bank;

  • (c) industrial or agricultural production:

Provided that—

  • (i) if the Bank finds it to be in the interest of the national economy, the Bank may from time to time declare acceptable for the purposes of this paragraph instruments relating to industrial or agricultural production maturing within two hundred and seventy days; and

  • (ii) the Bank may require the credit instruments accepted by it under this paragraph to be secured by a pledge, hypothecation or assignment of the related products or crops.

Loans.

36. The Bank may grant loans or advances for fixed periods not exceeding six months to specified banks which pledge the following as security for such loans or advances—

  • (a) the credit instruments referred to in section 35 of this Act; or

  • (b) negotiable securities issued or guaranteed by the Government, subject to the specifications and limitations provided for in sections 47, 48 and 49 of this Act.

Conditions for credit transactions.

37. Subject to the provisions of sections 35 and 36 of this Act, the Bank may determine the general terms and conditions under which it extends credit to specified banks, and in particular, the Bank shall determine and announce the rates of interest it will charge for rediscounting instruments, in accordance with section 35 of this Act, and granting loans or advances to specified banks in accordance with section 36 of this Act; and the Bank may determine different rates for different classes of transactions or maturities.

Reserve requirements.

38. (1) The Bank may, from time to time, require specified banks to maintain minimum cash balances on deposit with the Bank as reserves against their deposit and other liabilities:

Provided that such balances shall not exceed twenty per cent of each specified bank’s total liabilities.

(2) Subject to the limit specified in subsection (1) of this section, the Bank may specify different ratios for different types of liabilities and may further specify the method of computing the amount of the total liabilities of a specified bank:

Provided that the ratios specified shall be the same for all specified banks.

(3) Any specification of, or increase in, the minimum reserve requirements under subsection (1) or subsection (2) of this section shall take effect only after the expiration of thirty days’ notice to the specified banks of the Bank’s intention to take such action.

(4) The Bank may impose on any specified bank which fails to maintain sufficient minimum cash balances required under subsection (1) or subsection (2) of this section a penalty interest charge not exceeding one per cent per day on the amount of the deficiency for each day for which the deficiency continues.

(5) The Bank may, if in its opinion circumstances of an unusual nature render it desirable so to do, pay interest at such rates and subject to such qualifications as it may determine on minimum cash balances deposited with the Bank in accordance with this section.

Regulation of interest rates of specified banks or specified financial institutions.

39. The Bank may, from time to time, acting in consultation with the Minister, determine and publish the maximum and minimum rates of interest which specified banks or specified financial institutions may pay on deposits and charge for loans or advances:

Provided that the Bank may in consultation with the Minister determine different rates of interest—

  • (i) for different types of deposits and loans; and

  • (ii) for different types of specified banks and financial institutions.

Credit controls over specified banks.

40. (1) The Bank may issue instructions specifying in respect of any loans, advances or investments made by specified banks—

  • (a) the purposes for which they may or may not be granted;

  • (b) the maximum maturities or, in the case of loans and advances, the type and minimum amount of security which shall be required, and in the case of letters of credit, the minimum amount of margin deposit; or

  • (c) the limits for any particular categories of loans, advances or investments or for their total amount outstanding.

(2) Instructions issued under this section shall not have retrospective effect, shall apply uniformly to all specified banks engaging in the credit transactions covered by the instructions, and shall, together with their effective dates, be published in the Gazette.

Credit controls over specified financial institutions.

41. (1) The Bank may issue instructions designed to control the volume, terms and conditions of credit, including instalment facilities, in the form of loans, advances or investments, extended by specified financial institutions.

(2) Instructions issued under this section shall not have retrospective effect, shall apply uniformly to all specified financial institutions engaged in any credit transactions covered by the instructions and shall, together with their effective dates, be published in the Gazette.

Bank to be consulted in licensing, etc., of banking businesses.

42. Whenever under any law relating to banking for the time being in force, an application for a licence to transact banking business is to be granted or refused, the power to issue licences or to exempt from the necessity to obtain a licence shall only be exercised with the concurrence of the Bank.4

Information to be furnished by specified banks, etc.

43. (1) Every specified bank and specified financial institution shall furnish to the Bank, at such time and in such manner as the Bank may prescribe, all such information and data as the Bank may reasonably require for the proper discharge of its functions under this Act.

(2) The Bank may publish in whole or in part, at such times and in such manner as it may decide, any information or data furnished under this section:

Provided that no such information shall be published which would disclose the financial affairs of any person or undertaking unless the prior consent in writing of such person or undertaking has first been obtained by the Bank.

Part VIII—Relations with Public Entities

Fiscal agent and banker to public entities.

44. (1) The Bank shall act as fiscal agent of and banker to the Government.

(2) The Bank may also perform the functions of fiscal agent and banker for any other public entity in accordance with, and within the scope determined by, any special arrangements made between the Bank and the public entity concerned.

Functions as fiscal agent.

45. The Bank in its capacity as fiscal agent and banker to any public entity shall, subject to the instructions of that public entity, have power—

  • (a) to be the official depository of the public entity concerned and accept deposits and effect payments for the account of that public entity:

    Provided that the Bank may, after consultation with the Minister, select any specified bank to act in its name and for its account as the official depository of that public entity in places where the Bank has no office or branch;

  • (b) to maintain and operate special official accounts in accordance with arrangements made between the Bank and the public entity concerned;

  • (c) as an agent of the Government, to administer the public debt including the issuance of, payment of interest on, and redemption of, bonds and other securities of the Government;

  • (d) to pay, remit, collect or accept for deposit or custody funds in Kenya or abroad;

  • (e) to purchase, sell, transfer or accept for custody cheques, bills of exchange and securities;

  • (f) to collect the proceeds, whether principal or interest, resulting from the sale for, or accruing to the interest of, a public entity of securities or other property;

  • (g) to purchase, sell, transfer or accept for custody gold or foreign exchange.

Direct advances to Government.

46. (1) The Bank may make direct advances to the Government.

(2) Advances made under this section shall bear interest at such rate as may be determined by the Bank with the consent of the Minister, but in no event shall such rate be less than three per cent per annum.

Credit operations with Government securities.

47. The Bank may purchase, hold or sell negotiable securities of any maturity issued by the Government, or issued by any other public entity and guaranteed by the Government.

Limit on lending to Government.

48. The aggregate of—

  • (a) the Bank’s direct advances to the Government under the authority of section 46 of this Act;

  • (b) the value of securities owned by the Bank in accordance with section 47 of this Act; and

  • (c) the value of securities held by the Bank as security in accordance with section 36(b) of this Act,

shall not at any one time exceed two hundred and forty million shillings:

Provided that of this amount the value of securities which mature later than twelve months from the date of acquisition or acceptance as security by the Bank shall not at any one time exceed sixty million shillings.

Prohibition of other credit to public entities.

49. Except as provided in accordance with sections 36(b), 46, 47 and 48 of this Act, the Bank shall not extend any credit directly or indirectly to any public entity.

Adviser to Government.

50. (1) It shall be the duty of the Bank to advise the Minister on any matter which in its opinion is likely to affect the achievement of the principal objects of the Bank as specified in section 4 of this Act.

(2) The Bank may tender advice to the Minister on any matter in which the Bank is concerned.

(3) The Minister may request the Bank to give its advice on any particular measures, situations or transactions, or on monetary, banking and credit conditions in or outside Kenya, and the Bank shall give its advice accordingly.

Part IX—Miscellaneous Provisions

Revaluation profits.

51. (1) Profits or losses which are attributable to any revaluation of the Bank’s net assets or liabilities in gold, foreign exchange or foreign securities made as a result of any change in the par value of any currency unit shall be excluded from the computation of the annual profits and losses of the Bank.

(2) All profits or losses so excluded shall be transferred to a special account to be called the Revaluation Account.

Prohibited operations.

52. The Bank shall not—

  • (a) save as expressly authorized by this Act, engage in trade, or own or acquire any direct interest in any commercial, agricultural, industrial or similar undertaking, except in the course of obtaining satisfaction for any debt due to the Bank, provided that any such interest shall be disposed of at the earliest suitable opportunity;

  • (b) purchase, acquire or lease immovable property for commercial purposes or as an investment except for its own business requirements or for the use of its employees;

  • (c) draw or accept bills payable otherwise than on demand; or

  • (d) guarantee any loan, advance or investment.

Financial year.

53. The financial year of the Bank shall be the same as the Government’s financial year and the accounts of the Bank shall be closed at the end of each financial year.

Annual reports.

54. Within three months after the close of each financial year the Bank shall submit to the Minister a report on the Bank’s operations throughout that year, together with the balance sheet and the profit and loss account as certified by auditors appointed by the Bank and approved by the Minister.

Publication of reports, etc.

55. (1) After submission to the Minister the Bank shall publish the annual report referred to in section 54 of this Act.

(2) The Bank may also issue such other publications as it considers to be in the public interest.

Audit by Controller and Auditor-General.

56. The Minister may, in addition to the audit carried out under section 54 of this Act, if he thinks fit, require the Controller and Auditor-General to audit the accounts of the Bank.

[57. Spent.]

Part X—Transitional Provisions

Repeal. O.I.C., Group 17.

58. The East African Currency Board Regulations 1955, in so far as they apply to Kenya, may be repealed by the Minister, by notice in the Gazette, in whole or in part, as and when he considers necessary.

Taking over assets of East African Currency Board.

59. Kenya’s share of the assets of the East African Currency Board shall be transferred to the Bank as and when those assets become available and the Bank shall have the sole right to receive those assets.

Exclusion of fiduciary issue from the limits on Government credit.

60. Any Kenya securities or their equivalent on conversion received by the Bank as part of Kenya’s share of the assets of the East African Currency Board shall not be deemed to be credits to the Government for the purposes of computing the limits on credit specified in section 48 of this Act.

[61. Spent.]

[Schedule. Spent.]

{The Subsidiary Legislation is omitted from this volume.}

Treaty Amending and Re-Enacting the Charter of the East African Development Bank

Whereas the Governments of the United Republic of Tanzania, the Republic of Uganda, and the Republic of Kenya (hereinafter referred to as the Parties) did in Article 21 of the Treaty for East African Co-operation of 6 June 1967 (hereinafter referred to as the Treaty of 1967), agree to establish a development bank, known as the East African Development Bank (hereinafter referred to as the Bank), the Charter therefor (hereinafter referred to as the Charter) being set out in Annex VI of said Treaty of 1967;

Whereas the said Treaty of 1967 is no longer operative;

Whereas the Parties wish to adopt certain amendments to the Charter and to re-enact the Charter as thus amended;

Now therefore the Parties, being all the States members of the Bank, agree as follows:

Art. 1. amendments to the bank charter

  • The Parties adopt as amendments to the Charter all the modifications thereto incorporated in the text of the Charter in the Annex to this Treaty.

  • The Parties agree that the Charter, as amended in pursuance of the provisions of the preceding paragraph, shall henceforth derive its legal force from and be applied on the basis of this Treaty, and by operation of its provisions, without regard to the Treaty of 1967. The Charter shall therefore continue in force notwithstanding any termination, denunciation, suspension, amendment, modification, or any other event or occurrence affecting the validity or effectiveness of the Treaty of 1967 in whole or in part.

Art. 2. entry into force

This Treaty and the amendments to the Charter shall come into force when the last signature has been affixed to this Treaty.

Art. 3. depositary

This Treaty shall be deposited with the Secretary of the Bank who, as Depositary, shall register it with the Secretary-General of the United Nations, and shall send certified true copies to all the Parties and to the bodies corporate, enterprises or institutions members of the Bank. The aforementioned bodies corporate, enterprises or institutions members of the Bank may thereupon signify their acceptance of the amendments by transmitting Letters of Acceptance to the Depositary. The Depositary shall notify all members of the Bank of Letters of Acceptance as they are received.

In witness whereof the Parties have signed this Treaty in the English language on the dates and at the places indicated beneath their respective signatures.

For the Government of the United Republic of Tanzania:

Minister of Finance

7th January 1980

Dar-es-Salaam

For the Government of the Republic of Uganda:

Minister of Regional Cooperation

13th September 1979

Kampala

For the Government of the Republic of Kenya:

Minister of Planning and Economic Development

23rd July 1980

Nairobi

The Charter of the East African Development Bank

Whereas the Governments of the United Republic of Tanzania, the Sovereign State of Uganda and the Republic of Kenya have in Article 21 of the Treaty for East African Co-operation, of 6 June 1967 agreed to establish a Development Bank to be known as the East African Development Bank:

Whereas the said Governments have agreed in Article 22 of the Treaty that the Charter of the East African Development Bank shall be set out in an Annex to the Treaty:

Whereas the said Governments, by virtue of a Treaty amending and re-enacting the Charter of the East African Development Bank signed by them on 23.7.1980, have decided to confer legal force and existence on the Charter independent of the Treaty for East African Co-operation and to amend the Charter to make possible a wider membership of the Bank, to emphasize its consulting and promotion functions, and for other purposes:

And whereas the said Governments share a common desire to promote the equitable distribution of benefits available from the East African Development Bank among Member States:

Now therefore it is agreed that the East African Development Bank (hereinafter referred to as “the Bank”) be established and operate in accordance with the following provisions:

Chapter I. Objectives and Membership

Art. 1. objectives of the bank

The objectives of the Bank shall be—

  • (a) to provide financial assistance to promote the development of the Member States;

  • (b) to provide consulting, promotion, agency and other similar services for the region;

  • (c) to give attention, in accordance with the operating principles contained in this Charter, to economic development in the Member States, in such fields as industry, tourism, agriculture, infrastructure such as transport and telecommunications and similar or related fields of development;

  • (d) to generally promote the development of the region;

  • (e) to supplement the activities of the national development agencies of the Member States by joint financing operations, technical assistance and by the use of such agencies as channels for financing specific projects;

  • (f) to co-operate, within the terms of this Charter, with other institutions and organizations, public or private, national or international, which are interested in the development of the Member States; and

  • (g) to undertake such other activities and provide such other services as may advance the objectives of the Bank.

Art. 2. membership in the bank

  • The original members of the Bank shall be the Member States and such bodies corporate, enterprises or institutions who remain members of the Bank on the date of entry into force of the amendments to this Charter adopted by the Member States in the Treaty of 23.7.1980 amending and re-enacting this Charter.

  • Upon an affirmative decision of the Governing Council, any state in the region, body corporate, enterprise or institution, which has not become a member under paragraph 1 of this Article, may be admitted to membership of the Bank under such terms and conditions consistent with this Charter, as the Bank may determine.

Chapter II. Capital

Art. 3. authorized capital

  • The authorized capital stock of the Bank shall be 400,000,000 units of account and the value of the unit of account shall be 0.124414 grams of fine gold.

  • The authorized capital stock of the Bank shall be divided into 4,000 shares having a par value of 100,000 units of account each which shall be available for subscription only by members in accordance with Article 4 of this Charter.

  • The original authorized capital stock of the Bank shall be divided equally into paid-in shares and callable shares.

  • The authorized capital stock of the Bank may, after consultation with the Board of Directors, be increased by the Governing Council.

Art. 4. subscription of shares

  • Each member of the Bank shall subscribe to shares of the capital stock of the Bank.

  • Each subscription to the original authorized capital stock of the Bank shall be for paid-in shares and callable shares in equal parts.

  • The initial subscription of each of the Member States to the original authorized capital stock of the Bank shall be 800 shares and the initial subscriptions of other original members to the original authorized capital stock of the Bank shall be as determined by the Governments of the Member States.

  • The initial subscriptions of members, other than original members, to the authorized capital stock of the Bank shall be determined by the Bank but no subscription shall be authorized which would have the effect of reducing the percentage of capital stock held by the Member States below 51 per cent of the total subscribed capital stock.

  • If the authorized capital stock of the Bank is increased, the following provisions shall apply—

    • (a) subject to this Article, subscriptions to any increase of the authorized capital stock shall be subject to such terms and conditions as the Bank shall determine;

    • (b) the Member States shall subscribe to equal parts only of the increased capital stock; and

    • (c) each member, other than a Member State, shall be given a reasonable opportunity to subscribe to a proportion of the increase of stock equivalent to the proportion which its stock theretofore subscribed bears to the total subscribed capital stock immediately prior to such increase:

      • Provided that no such member shall be obligated to subscribe to any part of an increase of capital stock;

      • Provided that the foregoing provisions of sub-paragraphs (b) and (c) of this paragraph 5 shall not apply in respect of any increase or portion of an increase in the authorized capital stock which is intended solely to give effect to determinations of the Bank under paragraph 4; and

      • Provided further that subscriptions shall be restricted proportionately to the extent necessary to ensure that the percentage of capital stock held by the Member States remains not less than 51 per cent of the total subscribed capital stock.

  • Shares of stock initially subscribed for by the original members shall be issued at par. Other shares shall be issued at par unless the Bank, by a vote representing a majority of the total voting power of members, decides in special circumstances to issue them on other terms.

  • Shares of stock shall not be pledged or encumbered in any manner whatsoever and they shall not be transferable except to the Bank;

    Provided that if any shares of stock which are transferred to the Bank are subsequently subscribed for by or otherwise transferred to the Member States, they shall take up such shares in equal parts only.

  • The liability of the members on shares shall be limited to the unpaid portion of the issue price of the shares.

  • No member shall be liable, by reason of its membership in the Bank, for obligations of the Bank.

Art. 5. payment of subscriptions

  • Payment of the amount initially subscribed by the original members to the paid-in capital stock of the Bank shall be made in four instalments the first of which shall be 10 per cent of such amount and the remaining instalments shall each be 30 per cent of such amount. The first instalment payable by each Member State shall be paid within 30 days after the coming into force of the Treaty to which this Charter is annexed and in the case of original members other than Member States, the first instalment shall be paid within 30 days of their becoming a member. The second instalment shall be paid six calendar months after the date on which the Treaty comes into force. The remaining two instalments shall each be paid successively six calendar months from the date on which the preceding instalment becomes due under this paragraph.

  • Notwithstanding the provisions of paragraph 1 of this Article, in respect of any instalment, other than the first instalment of the initial subscriptions to the original paid-in capital stock, the Bank shall, if the funds are not immediately required, either defer the due date for payment of such instalment or require that part only of such instalment be payable on the due date and at the same time prescribe a due date for the remainder of such instalment.

  • Of each instalment for the payment of subscriptions by each of the Member States to the original paid-in capital stock—

    • (a) 50 per cent shall be paid in convertible currency;

    • (b) 50 per cent shall be paid in the currency of the Member State concerned.

  • Each payment of a Member State in its own currency under subparagraph (b) of paragraph 3 of this Article shall be in such amount as the Bank, after such consultation with the International Monetary Fund as the Bank may consider necessary, determines to be equivalent to the full value in terms of the unit of account as expressed in paragraph 1 of Article 3 of this Charter of the portion of the subscription being paid.

  • This initial payment of a Member State under sub-paragraph (b) of paragraph 3 of this Article shall be in such amount as the member considers appropriate but shall be subject to such adjustment, to be effected within 90 days of the date on which such payment was made, as the Bank shall determine to be necessary to constitute the full value of such payment in terms of the unit of account as expressed in paragraph 1 of Article 3 of this Charter.

  • Each instalment for the payment of subscriptions by members other than Member States to the original paid-in capital stock shall be paid in convertible currency.

  • Payment of the amount subscribed for callable shares in the capital stock of the Bank shall be subject to call by the Board of Directors from time to time but such calls shall only be made as and when the amount thereof shall be required by the Bank—

    • (a) To repay moneys raised by the Bank in capital markets borrowed or otherwise acquired by the Bank for the purpose of making or participating in direct loans;

    • (b) to pay or repay any loans or loans guaranteed in whole or in part by the Bank in furtherance of its objectives.

  • In the event of a call being made in terms of paragraph 7 of this Article, payment may be made at the option of the member in convertible currency or in the currency required to discharge the obligations of the Bank for the purposes for which the call is made. Calls on unpaid subscriptions shall be uniform in percentage on all callable shares.

  • The Bank shall determine the place for any payment of subscriptions, provided that, until the first meeting of its Board of Directors, the payment of the first instalment referred to in paragraph 1 of this Article shall be made to the Bank of Uganda as Trustee for the Bank.

Chapter III. Ordinary Capital Resources and Special Funds

Art. 6. ordinary capital resources

In the context of this Charter, the term “ordinary capital resources” of the Bank shall include—

  • (a) the authorized capital stock of the Bank including both paid-in and callable shares subscribed pursuant to Article 4 of this Charter;

  • (b) funds raised by borrowings of the Bank by virtue of powers conferred by Article 19 of this Charter to which the commitment to calls provided for in paragraph 7 of Article 5 of this Charter is applicable;

  • (c) funds received in repayment of loans or guarantees made with the resources specified in paragraphs (a) and (b) of this Article;

  • (d) income derived from loans made from the above-mentioned funds or from guarantees to which the commitment to calls provided for in paragraph 7 of Article 5 of this Charter is applicable; and

  • (e) any other funds or income received by the Bank which do not form part of its Special Funds referred to in Article 7 of this Charter.

Art. 7. special funds

  • The Bank may accept for administration, from such sources as it considers appropriate, Special Funds which are designed to promote the objectives of the Bank.

  • Special Funds accepted by the Bank under paragraph 1 of this Article shall be used in such manner and on such terms and conditions as are not inconsistent with the objectives of the Bank and the agreement under which such funds are accepted by the Bank for administration.

  • The Board of Directors shall make such regulations as may be necessary for the administration and use of each Special Fund, Such regulations shall be consistent with the provisions of this Charter, other than those provisions which expressly relate only to the ordinary operations of the Bank.

  • The term “Special Funds” as used in this Charter shall refer to the resources of any Special Fund and shall include—

    • (a) funds accepted by the Bank in any Special Fund;

    • (b) funds repaid in respect of loans or guarantees financed from any Special Fund which, under the regulations of the Bank covering that Special Fund, are received by such Special Fund; and

    • (c) income derived from operations of the Bank in which any of the above-mentioned resources or funds are used or committed if, under the regulations of the Bank covering the Special Fund concerned, that income accrues to such Special Fund.

Chapter IV. Operations of the Bank

Art. 8. use of resources

The resources and facilities of the Bank shall be used exclusively to implement the objectives of the Bank as set forth in Article 1 of this Charter.

Art. 9. ordinary and special operations

  • The operations of the Bank shall consist of ordinary operations and special operations. Ordinary operations shall be those financed from the ordinary capital resources of the Bank and special operations shall be those financed from the Special Funds referred to in Article 7 of this Charter.

  • The ordinary capital resources and the Special Funds of the Bank shall at all times and in all respects be held, used, committed, invested or otherwise disposed of entirely separately from each other.

  • The ordinary capital resources of the Bank shall not be charged with, or used to discharge, losses or liabilities arising out of special operations for which Special Funds were originally used or committed.

  • Expenses relating directly to ordinary operations shall be charged to ordinary capital resources of the Bank and those relating to special operations shall be charged to the Special Funds. Any other expenses shall be charged as the Bank shall determine.

Art. 10. methods of operation

Subject to the conditions set forth in this Charter, the Bank may provide finances or facilitate financing in any of the following ways to any agency, entity or enterprise operating in the territories of the Member States—

  • (a) by making or participating in direct loans with its unimpaired paid-in capital and, except in the case of its Special Reserve as defined in Article 17 of this Charter, with its reserves and undistributed surplus or with the unimpaired Special Funds;

  • (b) by making or participating in direct loans with funds raised by the Bank in capital markets or borrowed or otherwise acquired by the Bank for inclusion in its ordinary capital resources;

  • (c) by investment of funds referred to in paragraphs (a) and (b) of this Article in the equity capital of an institution or enterprise; or

  • (d) by guaranteeing, in whole or in part, loans made by others for industrial development.

Art. 11. limitations on operations

  • The total amount outstanding of loans, equity investments and guarantees made by the Bank in its ordinary operations shall not at any time exceed one and a half times the total amount of its unimpaired subscribed capital, reserves and surplus included in its ordinary capital resources, excluding the Special Reserve and any other reserves not available for ordinary operations.

  • The total amount outstanding in respect of the special operations of the Bank relating to any Special Fund shall not at any time exceed the total amount of the unimpaired special resources appertaining to that Special Fund.

  • In the case of loans made with funds borrowed by the Bank to which the commitment to calls provided for in paragraph 7 of Article 5 of this Charter is applicable, the total amount of principal outstanding and payable to the Bank in a specific currency shall not at any time exceed the total amount of the principal of outstanding borrowings by the Bank that are payable in the same currency.

  • In the case of funds invested in equity capital out of the ordinary capital resources of the Bank, the total amount invested shall not exceed 10 per cent of the aggregate amount of the unimpaired paid-in capital stock of the Bank actually paid up at any given time together with the reserves and surplus included in its ordinary capital resources, excluding the Special Reserve.

  • The amount of any equity investment in any entity or enterprise shall not exceed such percentage of the equity capital of that entity or enterprise as the Board of Directors shall in each specific case determine to be appropriate. The Bank shall not seek to obtain by such investment a controlling interest in the entity or enterprise concerned, except where necessary to safeguard the investment of the Bank.

  • In the case of guarantees given by the Bank in the course of its ordinary operations, the total amount guaranteed shall not exceed 10 per cent of the aggregate amount of the unimpaired paid-in capital stock of the Bank actually paid up at any given time together with the reserves and surplus included in its ordinary capital resources excluding the Special Reserve.

Art. 12. provision of currencies for direct loans

In making direct loans or participating in them, the Bank may provide finance in the following ways—

  • (a) by furnishing the borrower with currencies other than the currency of the Member State in whose territory the project is located, which are needed by the borrower to meet the foreign exchange costs of the project; or

  • (b) by providing, when local currency required for the purposes of the loan cannot be raised by the borrower on reasonable terms, local currency but not exceeding a reasonable portion of the total local expenditure to be incurred by the borrower.

Art. 13. operating principles

The operations of the Bank shall be conducted in accordance with the following principles—

  • (a) the Bank shall be guided by sound banking principles in its operations and shall finance only economically sound and technically feasible projects, and shall not make loans or undertake any responsibility for the discharge or re-financing of earlier commitments by borrowers;

  • (b) in selecting projects, the Bank shall always be guided by the need to pursue the objectives set forth in Article 1 of this Charter, and shall also always adhere to the principle of equitable distribution of benefits of the Bank;

  • (c) the Bank shall so conduct its operations as to earn a reasonable return on its capital;

  • (d) the operations of the Bank shall provide principally for the financing directly of specific projects within the Member States but may include loans to or guarantees of loans made to the national development agencies of the Member States so long as such loans or guarantees are in respect of and used for specific projects which are agreed to by the Bank;

  • (e) the Bank shall seek to maintain a reasonable diversification in its investments;

  • (f) the Bank shall seek to revolve its funds by selling its investments in equity capital to other investors wherever it can appropriately do so on satisfactory terms;

  • (g) the Bank shall not undertake any operation in the territory of any State if that State objects to such operation;

  • (h) before a loan is granted or guaranteed or an investment made, the applicant shall have submitted an adequate proposal to the Bank, and the Director-General of the Bank shall have presented to the Board of Directors a written report regarding the proposal, together with his recommendations;

  • (i) in considering an application for a loan or guarantee, the Bank shall pay due regard to the ability of the borrower to obtain finance or facilities elsewhere on terms and conditions that the Bank considers reasonable for the recipient, taking into account all pertinent factors;

  • (j) in making or guaranteeing a loan, the Bank shall pay due regard to the prospects that the borrower and its guarantor, if any, will be able to meet their obligations under the loan contract;

  • (k) in making or guaranteeing a loan, the rate of interest, other charges and the schedule for repayment of principal shall be such as are, in the opinion of the Bank, appropriate for the loan concerned;

  • (l) in guaranteeing a loan made by other investors, the Bank shall charge a suitable fee or commission for its risk;

  • (m) in the case of a direct loan made by the Bank, the borrower shall be permitted by the Bank to draw the loan funds only to meet payments in connection with the project as they fall due;

  • (n) the Bank shall take all necessary measures to ensure that the proceeds of any loan made, guaranteed or participated in by the Bank are used only for the purposes for which the loan was granted and with due attention to considerations of economy and efficiency; and

  • (o) the Bank shall ensure that every loan contract entered into by it shall enable the Bank to exercise all necessary powers of entry, inspection and supervision of operations in connection with the project and shall further enable the Bank to require the borrower to provide information and to allow inspection of its books and records during such time as any part of the loan remains outstanding.

Art. 14. prohibition of political activity

  • The Bank shall not accept loans, Special Funds or assistance that may in any way prejudice, limit, deflect or otherwise alter its objectives or functions.

  • The Bank, its Director-General and officers and staff shall not interfere in the political affairs of any state, nor shall they be influenced in their decisions by the political character of a State. Only economic considerations shall be relevant to their decisions and such considerations shall be weighed impartially to achieve and carry out the objectives and functions of the Bank.

Art. 15. terms and conditions for direct loans and guarantees

  • In the case of direct loans made or participated in or loans guaranteed by the Bank, the contract shall establish, in conformity with the operating principles set out above and subject to the other provisions of this Charter, the terms and conditions for the loan or the guarantee concerned, including payment of principal, interest, commitment fee and other charges, maturities and dates of payment in respect of the loan, or the fees and other charges in respect of the guarantee, respectively.

  • The contract shall provide that all payments to the Bank under the contract shall be made in the currency loaned, unless, in the case of a loan made or guaranteed as part of special operations, the regulations of the Bank provide otherwise.

  • Guarantees by the Bank shall also provide that the Bank may terminate its liability with respect to interest if, upon default by the borrower or any other guarantor, the Bank offers to purchase, at par and interest accrued to a date designated in the offer, the bonds or other obligations guaranteed.

  • Whenever it considers it appropriate, the Bank may require as a condition of granting or participating in a loan that the Member State in whose territory a project is to be carried out, or a public agency or instrumentality of that Member State acceptable to the Bank, guarantee the repayment of the principal and the payment of interest and other charges on the loan in accordance with the terms thereof.

  • The loan or guarantee contract shall specifically state the currency in which all payments to the Bank thereunder shall be made.

Art. 16. commission and fees

  • In addition to interest, the Bank shall charge a commission on direct loans made or participated in as part of its ordinary operations at a rate to be determined by the Board of Directors and computed on the amount outstanding on each loan or participation.

  • In guaranteeing a loan as part of its ordinary operations, the Bank shall charge a guarantee fee at a rate determined by the Board of Directors payable periodically on the amount of the loan outstanding.

  • Other charges, including commitment fee, of the Bank in its ordinary operations and any commission, fees or other charges in relation to its special operations shall be determined by the Board of Directors. Such charges shall be set at such a level that said charges, together with interest and other expected earnings, shall enable the Bank to earn a reasonable return on its capital.

Art. 17. special reserve

The amount of commissions and guarantee fees received by the Bank under the provisions of Article 16 of this Charter shall be set aside as a Special Reserve which shall be kept for meeting liabilities of the Bank in accordance with Article 18 of this Charter. The Special Reserve shall be held in such liquid form as the Board of Directors may decide but the Board of Directors shall ensure that any part of the Special Reserve which it may decide to invest in the territories of the Member States shall be invested, as nearly as possible, in equal proportions in each Member State.

Art. 18. defaults on loans and methods of meeting liabilities of the bank

  • In cases of default on loans made, participated in or guaranteed by the Bank in its ordinary operations, the Bank shall take such action as it considers appropriate to conserve its investment including modification of the terms of the loan, other than any term as to the currency of repayment.

  • Payments in discharge of the Bank’s liabilities on borrowings or guarantees chargeable to the ordinary capital resources shall be charged firstly against the Special Reserve and then, to the extent necessary and at the discretion of the Bank, against other reserves, surplus and capital available to the Bank.

  • Whenever necessary to meet contractual payments of interest, other charges or amortization on borrowings of the Bank in its ordinary operations, or to meet its liabilities with respect to similar payments in relation to loans guaranteed by it, chargeable to its ordinary capital resources, the Bank may call an appropriate amount of the uncalled subscribed callable capital in accordance with paragraphs 7 and 8 of Article 5 of this Charter.

Chapter V. Miscellaneous Powers and Duties of the Bank

Art. 19. miscellaneous powers

In addition to the powers specified elsewhere in this Charter, the Bank shall be empowered—

  • (a) to borrow funds in the territories of the Member States, or elsewhere, and in this connection to furnish such collateral or other security therefore as the Bank shall determine:

    Provided that—

    • (i) before selling its obligations or otherwise borrowing in the territory of a country, the Bank shall obtain the approval of the Government of that country to the sale; and

    • (ii) before deciding to sell its obligations or otherwise borrowing in a particular country, the Bank shall consider the amount of previous borrowing, if any, in that country with a view to diversifying its borrowing to the maximum extent possible;

  • (b) to buy and sell securities which the Bank has issued or guaranteed or in which it has invested;

  • (c) to guarantee securities in which it has invested in order to facilitate their sale;

  • (d) to invest funds not immediately needed in its operations in such obligations as it may determine and invest funds held by the Bank for pensions or similar purposes in marketable securities, but the Bank shall ensure that any funds which it may decide to invest in the territories of the Member States shall be invested, as nearly as possible, in equal proportions in each Member State;

  • (e) to charge for such technical advice and assistance as it may provide; and

  • (f) to study and promote the investment opportunities within the Member States.

Art. 20. allocation of net income

  • The Board of Directors shall determine annually what part of the net income of the Bank, including the net income accruing to the Special Funds, shall be allocated, after making provision for reserves to surplus and what part, if any, shall be distributed to the members.

  • Any distributions to members made pursuant to paragraph 1 of this Article shall be in proportion to the number of shares held by each member and payments shall be made in such manner and in such currency as the Board of Directors shall determine.

Art. 21. power to make regulations

The Board of Directors may make such regulations, including financial regulations, being consistent with the provisions of this Charter as it considers necessary or appropriate to further the objectives and functions of the Bank.

Art. 22. notice to be placed on securities

Every security issued or guaranteed by the Bank shall bear on its face a conspicuous statement to the effect that it is not an obligation of any Government, unless it is in fact the obligation of a particular Government, in which case it shall so state.

Chapter VI. Currencies

Art. 23. determination of convertibility

Whenever it shall become necessary under this Charter to determine whether any currency is convertible, such determination shall be made by the Bank after consultation with the International Monetary Fund.

Art. 24. use of currencies

  • The Member States may not maintain or impose any restriction on the holding or use by the Bank or by any recipient from the Bank for payments in any country of the following—

    • (a) currencies received by the Bank in payment of subscriptions to its capital stock;

    • (b) currencies purchased with the currencies referred to in subparagraph (a) of this paragraph;

    • (c) currencies obtained by the Bank by borrowing for inclusion in its ordinary capital resources;

    • (d) currencies received by the Bank in payment of principal, interest, dividends or other charges in respect of loans or investments made out of any of the funds referred to in sub-paragraphs (a), (b) and (c) of this paragraph or in payment of fees in respect of guarantees made by the Bank; and

    • (e) currencies received from the Bank in distribution of the net income of the Bank in accordance with Article 20 of this Charter.

  • The Member States may not maintain or impose any restriction on the holding or use by the Bank or by any recipient from the Bank, for payments in any country, of currency received by the Bank which does not come within the provisions of paragraph 1 of this Article unless such currency forms part of the Special Funds of the Bank and its use is subject to special regulations.

  • The Member States may not maintain or impose any restriction on the holding or use by the Bank, for making amortization payments or for repurchasing in whole or in part the Bank’s own obligations, of currencies received by the Bank in repayment of direct loans made out of its ordinary capital resources.

  • Each Member State shall ensure, in respect of projects within its territories, that the currencies necessary to enable payments to be made to the Bank in accordance with the provisions of the contracts referred to in Article 15 of this Charter shall be made available in exchange for currency of the Member State concerned.

Art. 25. maintenance of value of currency holdings

  • Whenever the par value 1 of the International Monetary Fund of the currency of a Member State is reduced or the foreign exchange value of the currency of a Member State has, in the opinion of the Bank, depreciated to a significant extent within the territory of that Member State, such Member State shall pay to the Bank within a reasonable time an additional amount of its own currency sufficient to maintain the value, as of the time of subscription, of the amount of the currency of such Member State paid in to the Bank by that Member State under sub-paragraph (b) of paragraph 3 of Article 5 of this Charter, and currency furnished under the provisions of this paragraph, provided, however, that the foregoing shall apply only so long as and to the extent that such currency shall not have been initially disbursed or exchanged for another currency.

  • Whenever the par value 1 of the International Monetary Fund of the currency of a Member State is increased, or the foreign exchange value of the currency of a State has, in the opinion of the Bank, appreciated to a significant extent within the territory of that Member State, the Bank shall return to such Member State within a reasonable time an amount of the currency of that Member State equal to the increase in the value of the amount of such currency to which the provisions of paragraph 1 of this Article are applicable.

Chapter VII. Organization and Management of the Bank

Art. 26. structure

The Bank shall have a Governing Council, a Board of Directors, a Director-General and such other officers and staff as it may consider necessary.

Art. 27. governing council

  • The Governing Council shall have the following functions and powers:

    • (a) to discuss and give guidance to the Board of Directors as appropriate with respect to:

      • (i) the operations of the Bank;

      • (ii) the Annual Report of the Bank; and

      • (iii) any matters which the Board of Directors may refer to it;

    • (b) to approve the annual accounts of the Bank;

    • (c) to approve any distribution or other allocation of net income by the Board of Directors; and

    • (d) to approve the appointment of external auditors or such other experts as may be necessary to examine and report on the general management of the Bank.

  • The Governing Council shall also take decisions, in pursuance of other provisions of this Charter, on:

    • (a) the admission of new members, under Article 2, paragraph 2;

    • (b) any increases in the authorized capital stock, under Article 3, paragraph 4;

    • (c) the election of the Chairman and Vice-Chairman of the Board of Directors, under Article 29, paragraph 2;

    • (d) the appointment, or cessation in office, of the Director-General, under Article 31;

    • (e) the termination of the operations of the Bank, under Article 40; and

    • (f) any amendment to the Charter, under Article 53.

  • The Governing Council shall consist of Ministers so designated by the Member States. It shall determine its own procedure, including that for convening its meetings, for the conduct of business thereat and at other times, and for the rotation of the office of Chairman among the Members.

  • Where a specific rule of voting is not established by another provision of this Charter, any member of the Governing Council may record his objection to a proposal submitted for the decision of the Governing Council and, if any such objection is recorded, the Governing Council shall not proceed with the proposal unless the objection is withdrawn.

Art. 28. board of directors

  • All the powers of the Bank shall, subject to this Charter, be vested in the Board of Directors.

  • The Board of Directors shall consist of as many members as may result from the operation of the following provisions:

    • (a) each Member State shall be represented by, and shall appoint a director;

    • (b) up to two shall be elected by members other than Member States, unless the Governing Council decides otherwise:

    Provided that no single member shall be represented by more than one director.

  • All directors shall be persons possessing high competence and wide experience in economic, financial and banking affairs.

  • Directors shall hold office for a term of three years and shall be eligible for reappointment or re-election:

    Provided that—

    • (a) of the first directors of the Bank two, who shall be chosen by the directors by lot, shall hold office for two years;

    • (b) a director shall remain in office until his successor has been appointed or elected;

    • (c) a director appointed or elected in place of one whose office has become vacant before the end of his term shall hold office only for the remainder of that term;

    • (d) a director appointed by a Member State may be required at any time by that Member State to vacate his office.

  • There shall be appointed or elected, as the case may be, an alternate director in respect of each substantive director and an alternate director shall be appointed or elected in the same manner and for the same term of office as the director to whom he is an alternate; and an alternate director shall remain in office until his successor has been appointed or elected.

  • An alternate director may participate in meetings but may vote only when he is acting in place of and in the absence of the director to whom he is an alternate.

  • While the office of a director is vacant the alternate of the former director shall exercise the powers of that director.

Art. 29. procedure of the board of directors

  • The Board of Directors shall normally meet at the principal office of the Bank and shall meet at least once every three months or more frequently if the business of the Bank so requires.

  • The Governing Council shall elect from among the members of the Board of Directors a Chairman and a Vice-Chairman of the Board. The Chairman, or in his absence, the Vice-Chairman, shall act as presiding officer of the Board. Meetings of the Board shall be convened by the Chairman, or in his absence, by the Vice-Chairman. Meetings other than regular meetings shall be so convened:

    • (a) whenever the Chairman or, in his absence, the Vice-Chairman deems it necessary or desirable; or

    • (b) whenever the Director-General so requests; or

    • (c) whenever a majority of the members of the Board or of the members of the Bank so requests.

  • A quorum for any meeting of the Board of Directors shall be either; (i) four directors, including three directors appointed by the Member States, or, if there is no member other than the Member States, then three directors; or (ii) if there be six or more Member States, a majority of the total number of directors including a majority of the directors appointed by the Member States.

    Provided that if within two hours of the time appointed for the holding of a meeting of the Board of Directors a quorum is not present the meeting shall automatically stand adjourned to the next day, at the same time and place, or if that day is a public holiday, to the next succeeding day which is not a public holiday at the same time and place, and if at such adjourned meeting a quorum is not present within two hours from the time appointed for the meeting, the directors present shall constitute a quorum and may transact the business for which the meeting was called.

  • The Board of Directors may, by regulation, establish a procedure whereby a decision in writing signed by all the Directors of the Bank shall be as valid and effectual as if it had been made at a meeting of the Board of Directors.

Art. 30. voting

  • The voting power of each member of the Bank shall be equal to the number of shares of the capital stock of the Bank held by that member.

  • In voting in the Board of Directors—

    • (a) an appointed director shall be entitled to cast the number of votes of the Member State which appointed him;

    • (b) each elected director shall be entitled to cast the number of votes of those members of the Bank whom he represents, which votes need not be cast as a unit; for the purposes of this provision, each member (not being a Member State) shall notify the Bank which elected director represents that member; and

    • (c) except as otherwise expressly provided in this Charter, all matters before the Board of Directors shall be decided by a majority of the total voting power of the members of the Bank.

Art. 31. director-general of the bank

  • There shall be a Director-General of the Bank who shall be appointed by the Governing Council, and who, while he remains Director-General, may not hold office as a director or an alternate to a director, or any other directorship. Nor shall he perform any function outside the Bank which in the opinion of the Board is incompatible with his office in the Bank.

  • Subject to paragraph 3 of this Article, the Director-General shall hold office for a term of five years and may be re-appointed.

  • The Director-General shall vacate his office if the Governing Council so decides.

  • If the office of Director-General becomes vacant for any reason, a successor shall be appointed for a new term of five years.

  • The Director-General shall be the legal representative of the Bank.

  • The Director-General shall be chief of the staff of the Bank and shall conduct under the direction of the Board of Directors the current business of the Bank. He shall be responsible for the organization, appointment and dismissal of the officers and staff in accordance with regulations adopted by the Board of Directors.

  • In appointing officers and staff the Director-General shall, subject to the paramount importance of securing the highest standards of efficiency and technical competence, pay due regard to the recruitment of citizens of the Member States.

  • The Board shall make arrangements for another officer of the Bank to perform the duties and exercise the powers of the Director-General in the event of the temporary absence or incapacity of the Director-General.

  • Decisions of the Governing Council concerning the appointment or cessation in office of the Director-General shall be taken by a vote representing not less than 75 per cent of the total voting power of the members of the Bank.

Art. 32. loyalties of director-general and officers and staff

The Director-General and officers and staff of the Bank, in the discharge of their offices, owe their duty entirely to the Bank and to no other authority. Each member of the Bank shall respect the international character of this duty and shall refrain from all attempts to influence the Director-General or any of the officers and staff in the discharge of their duties.

Art. 33. offices of the bank

The principal office of the Bank shall be located at Kampala in Uganda and the Bank may establish offices or agencies elsewhere.

Art. 34. channel of communications and depositories

  • Each member of the Bank shall designate an appropriate official, entity or person with whom the Bank may communicate in connection with any matter arising under this Charter.

  • Each Member State shall designate its central bank, or such other agency as may be agreed upon with the Bank, as a depository with which the Bank may keep its holdings of currency and other assets.

Art. 35. working language

The working language of the Bank shall be English.

Art. 36. accounts and reports

  • The Board of Directors shall ensure that proper accounts and proper records are kept in relation to the operations of the Bank and such accounts shall be audited in respect of each financial year by auditors of high repute selected by the Board of Directors.

  • The Bank shall prepare and transmit to the Governing Council and to the members of the Bank, and shall also publish, an annual report containing an audited statement of its accounts.

  • The Bank shall prepare and transmit to its members quarterly a summary statement of its financial position, and a profit and loss statement showing the results of its operations.

  • All financial statements of the Bank shall show ordinary operations and the operations of each Special Fund separately.

  • The Bank may also publish such other reports as it considers desirable in carrying out its objectives and functions, and such reports shall be transmitted to members of the Bank.

Chapter VIII. Withdrawal and Suspension of Members

Art. 37. withdrawal of members

  • A Member State may not withdraw from the Bank.

  • Any member, other than a Member State, may withdraw from the Bank at any time by delivering a notice in writing to the Bank at its principal office.

  • Withdrawal by a member under paragraph 2 of this Article shall become effective, and its membership shall cease, on the date specified in its notice but in no event less than six months after the date that notice has been received by the Bank. However, at any time before the withdrawal becomes finally effective, the member may notify the Bank in writing of the cancellation of its notice of intention to withdraw.

Art. 38. suspension of membership

  • If a member of the Bank, other than a Member State, fails to fulfil any of its obligations to the Bank, the Board of Directors may suspend such member by a majority vote of the total number of Directors representing not less than 75 per cent of the total voting power of the members including the affirmative votes of each of the Member States.

  • The member so suspended shall automatically cease to be a member of the Bank six months from the date of its suspension unless the Board of Directors decides, within that period and by the same majority necessary for suspension, to restore the member to good standing.

  • While under suspension, a member shall not be entitled to exercise any rights under this Charter but shall remain subject to all its obligations.

Art. 39. settlement of accounts

  • (a) For the purposes of this paragraph the words “the relevant date” shall mean in respect to any member either the date on which that member delivered a withdrawal notice in accordance with Article 37 hereof (if such member ceased to be a member as a result of such notice) or, as the case may be, the date on which that member ceased to be a member in accordance with Article 38 hereof;

    (b) after the relevant date, a member shall remain liable for any balance required by the Bank to be paid by the member on account of the amount originally subscribed for its shares and for any calls made by the Bank pursuant to Article 5(7) hereof in respect of the member’s shares on or before the relevant date and also for the contingent liability of that member for any calls made by the Bank in respect of that member’s shares after the relevant date to meet obligations of the Bank resulting from any loans or guarantees contracted by the Bank before the relevant date; but such member shall not incur liability with respect to loans and guarantees entered into by the Bank after the relevant date nor shall it share either in the income or the expense of the Bank after the relevant date.

  • At the time a member ceases to be a member, the Bank may arrange for the repurchase of its shares as a part of the settlement of accounts with such member in accordance with the provisions of paragraphs 3 and 4 of this Article. For this purpose, the repurchase price of the shares shall be the amount certified by auditors of high repute selected by the Board of Directors on the date the member ceases to be a member.

  • The payment for shares repurchased by the Bank under this Article shall be governed by the following conditions—

    • (a) any amount due to the member concerned for its shares shall be withheld so long as that member remains liable immediately, in the future or contingently as a borrower or guarantor, to the Bank and such amount may, at the option of the Bank, be applied on any such liability as it matures. No amount shall be withheld on account of the contingent liability of the member for future calls on its subscription for shares in accordance with paragraph 7 of Article 5 of this Charter. In any event, no amount due to a member for its shares shall be paid six months after the date on which the member ceases to be a member;

    • (b) payments for shares may be made from time to time, upon their surrender by the member concerned, to the extent by which the amount due as the repurchase price in accordance with paragraph 2 of this Article exceeds the aggregate amount due immediately, in the future or contingently from such member as a borrower from or a guarantor to the Bank as referred to in sub-paragraph (a) in this paragraph, until the former member has received the full repurchase price;

    • (c) payments shall be made in such available currencies as the Bank determines, taking into account its financial position;

    • (d) if losses are sustained by the Bank on any guarantees or loans which were outstanding on the date when a member ceased to be a member and the amount of such losses exceeds the amount of any reserve specifically provided against such losses on that date, the member concerned shall repay, upon demand, the amount by which the repurchase price of its shares would have been reduced if the losses had been taken into account when the repurchase price was determined. In addition, the former member shall remain liable on any call for unpaid subscriptions in accordance with paragraph 7 of Article 5 of this Charter, to the same extent that it would have been required to respond if the impairment of capital had occurred and the call had been made at the time the repurchase price of its shares was determined; and

    • (e) nothing herein contained shall render any member, whether or not he shall cease to be a member, liable in his capacity as a member or former member of the Bank for any sum or sums in excess of the portion of the issue price of his shares for the time being unpaid.

  • If the Bank terminates its operations pursuant to Article 40 of this Charter within six months of the date upon which any member ceases to be a member, all rights of the member concerned shall be determined in accordance with the provisions of Articles 40 to 42 of this Charter. Such member shall be considered as still a member for the purposes of such Articles but shall have no voting rights.

Chapter IX. Termination of Operations

Art. 40. termination of operations

  • The Bank may terminate its operations by resolution of the Governing Council approved by a vote representing not less than 85 per cent of the total voting power of the members.

  • After such termination, the Bank shall forthwith cease all activities, except those incidental to the orderly realization, conservation and preservation of its assets and the settlement of its obligations.

Art. 41. liability of members and payment of claims

  • In the event of termination of the operations of the Bank, the liability of all members for uncalled subscriptions to the capital stock of the Bank shall continue until all claims of creditors, including all contingent claims, shall have been discharged.

  • All creditors holding direct claims shall first be paid out of the assets of the Bank and then out of payments to the Bank on unpaid or callable subscriptions. Before making any payments to creditors holding direct claims, the Board of Directors shall make such arrangements as are necessary, in its judgment, to ensure a pro rata distribution among holders of direct and contingent claims.

Art. 42. distribution of assets

  • No distribution of assets shall be made to members on account of their subscriptions to the capital stock of the Bank until all liabilities to creditors shall have been discharged or provided for and any such distribution shall be approved by the Board of Directors by a vote representing not less than 85 per cent of the total voting power of the members.

  • Any distribution of the assets of the Bank to the members shall be in proportion to the capital stock held by each member and shall be effected at such times and under such conditions as the Bank shall consider fair and equitable. The shares of assets distributed need not be uniform as to type of asset. No member shall be entitled to receive its share in such a distribution of assets until it has settled all of its obligations to the Bank.

  • Any member receiving assets distributed pursuant to this Article shall enjoy the same rights with respect to such assets as the Bank enjoyed prior to their distribution.

Chapter X. Status, Immunities and Privileges

Art. 43. purpose of chapter

To enable the Bank effectively to fulfil its objectives and carry out the functions with which it is entrusted, the status immunities, exemptions and privileges set forth in this Chapter shall be accorded to the Bank in the territories of each of the Member States.

Art. 44. legal status

The Bank shall possess full juridical personality and, in particular, full capacity—

  • (a) to contract;

  • (b) to acquire, and dispose of, immovable and movable property; and

  • (c) to institute legal proceedings.

Art. 45. judicial proceedings

  • Actions may be brought against the Bank in the territories of the Member States only in a court of competent jurisdiction in a Member State in which the Bank has an office, has appointed an agent for the purpose of accepting service or notice of process, or has issued or guaranteed securities.

  • No action shall be brought against the Bank by members or persons acting for or deriving claims from members. However members shall have recourse to such special procedures for the settlement of controversies between the Bank and its members as may be prescribed in this Charter, in the regulations of the Bank or in contracts entered into with the Bank.

Art. 46. immunity of assets

  • Property and other assets of the Bank, wheresoever located and by whomsoever held, shall be immune from requisition, confiscation, expropriation or any other form of taking or foreclosure by executive or legislative action and premises used for the business of the Bank shall be immune from search.

  • The Bank shall prevent its premises from becoming refuges for fugitives from justice, or for persons subject to extradition, or persons avoiding service of legal process or a judicial proceeding.

Art. 47. immunity of archives

The archives of the Bank and all documents belonging to it, or held by it, shall be inviolable wherever located.

Art. 48. freedom of assets from restriction

To the extent necessary to carry out the objectives and functions of the Bank and subject to the provisions of this Charter, all property and other assets of the Bank shall be free from restrictions, regulations, controls and moratoria of any nature.

Art. 49. personal immunities and privileges

  • All directors, alternates, officers and employees of the Bank—

    • (a) shall be immune from civil process with respect to acts performed by them in their official capacity; and

    • (b) shall be accorded such immunities from immigration restrictions or alien registration, and where they are not citizens of a Member State, such facilities in relation to exchange regulations as are accorded by Member States to the representatives, officials and employees of comparable rank of other Member States.

  • Experts or consultants rendering services to the Bank shall be accorded the same immunities and privileges as in paragraph 1 above, unless the Member State concerned determines otherwise.

Art. 50. exemption from taxation

  • The Bank shall be enabled to import free of customs duty any goods required for the purpose of its operations except such goods as are intended for sale, or are sold, to the public.

  • The Bank shall be exempted from income tax and stamp duty.

Art. 51. implementation

Each Member State shall promptly take such action as is necessary to make effective within that Member State the provisions set forth in this Chapter and shall inform the Bank of the action which it has taken on the matter.

Art. 52. waiver of immunities

  • The Bank at its discretion may waive any of the privileges immunities and exemptions conferred under this Chapter in any case or instance, in such manner and upon such conditions as it may determine to be appropriate in the best interests of the Bank.

  • The Bank shall take every measure to ensure that the privileges, immunities, exemptions and facilities conferred by this Charter are not abused and for this purpose shall establish such regulations as it may consider necessary and expedient.

Chapter XI. Amendment, Interpretation and Arbitration

Art. 53. amendment of the charter

  • This Charter may be amended only by a resolution of the Governing Council approved by a vote representing not less than 85 per cent of the total voting power of the members.

  • When an amendment has been adopted the Bank shall certify it in a formal communication addressed to all members. Amendments shall enter into force for all members three calendar months after the month in which such communication is issued, unless the resolution referred to in paragraph 1 of this Article specifies therein a different period.

  • Notwithstanding the provisions of paragraph 1 of this Article, the unanimous agreement of the Governing Council shall be required for the approval of any amendment of the Charter modifying—

    • (a) the right of a member, other than a Member State, to withdraw from the Bank as provided in Article 37 of this Charter;

    • (b) the right to subscribe to capital stock of the Bank as provided in paragraph 5 of Article 4 of this Charter; and

    • (c) the limitation on liability as provided in paragraphs 8 and 9 of Article 4 of this Charter.

Art. 54. interpretation or application

Any question of interpretation or application of the provisions of this Charter arising between any member and the Bank or between two or more members of the Bank shall be submitted to the Board of Directors for decision.

Art. 55. arbitration

  • If a disagreement shall arise between the Bank and a member or between the Bank and a former member of the Bank including a disagreement in respect of a decision of the Board of Directors under Article 54 of this Charter, such disagreement shall be submitted to arbitration by a tribunal of three arbitrators. One of the arbitrators shall be appointed by the Bank, another by the member or former member concerned and the third, unless the parties otherwise agree, by the Executive Secretary of the Economic Commission for Africa or such other authority as may have been prescribed by regulations made by the Board of Directors.

  • A majority vote of the arbitrators shall be sufficient to reach a decision which shall be final and binding on the parties and a decision of the arbitrators may include an order as to payment of costs and expenses.

  • The third arbitrator shall be empowered to settle all questions of procedure in any case where the parties are in disagreement with respect thereto.

Chapter XII. Final Provisions

Art. 56. acquisition of membership: depositary

  • States which the Governing Council decides to admit to membership of the Bank in pursuance of Article 2, paragraph 2 of this Charter, may become members by accession thereto. The Government of any such State shall deposit, on or before the date appointed by the Council, an Instrument of Accession with the Secretary of the Bank who, as Depositary, shall notify such deposit and the date thereof to the Bank and to its members. Upon such deposit, the State shall become a member of the Bank on the appointed date.

  • Any body corporate, enterprise or institution which the Governing Council decides to admit to membership of the Bank in pursuance of Article 2, paragraph 2 of this Charter may become a member by accepting its provisions. It shall deposit, on or before the date appointed by the Board, a Letter of Acceptance of the provisions of this Charter, with the Secretary of the Bank who shall notify such deposit and the date thereof to the members. Upon such deposit, the body corporate, enterprise or institution concerned shall become a member of the Bank on the appointed date.

Art. 57. entry into force

This Charter shall enter into force at the same time as does the Treaty to which it is annexed.

Art. 58. commencement of operations

  • As soon as this Charter enters into force, the directors shall be appointed or elected in accordance with the provisions of Article 28 of this Charter and the Director-General of the Bank shall call the first meeting of the Board of Directors.2

The Banking Act1

Commencement: 3rd June, 1969

An Act of Parliament to regulate the business of banking, and for matters incidental thereto and matters connected therewith

Part I—Preliminary

Short title.

1. This Act may be cited as the Banking Act.

Interpretation.

2. In this Act, except where the context otherwise requires—

“the appointed day” means such day as the Minister may, by notice in the Gazette, appoint to be the appointed day for the purposes of section 3(1) of this Act;

“bank” means any company carrying on banking business in Kenya and includes the Co-operative Bank of Kenya Limited; all branches and offices in Kenya of a bank incorporated outside Kenya shall be deemed to be one bank for the purpose of this Act;

“banking business” means any business which includes the accepting of deposits of money from the public repayable on demand or after a fixed period or after notice, the employing of those deposits in whole or in part by lending or any other means for the account and at the risk of the person accepting the deposits and the paying and collecting of cheques;

“branch” means the second and each subsequent premises at which a bank or financial institution transacts banking business;

“the Central Bank” means the Central Bank of Kenya established by the Central Bank of Kenya Act; “company” means—

  • (a) a company within the meaning of the Companies Act; or

  • (b) a foreign company within the meaning of Part X of the Companies Act which has complied with the requirements of that Part;

“convertible”, in relation to any exchange, means that the exchange is freely negotiable and transferable in international exchange markets at exchange rate margins consistent with the Articles of Agreement of the International Monetary Fund;2

“financial institution” means a company, other than a bank, which in Kenya accepts deposits of money from the public repayable on demand or after a fixed period or after notice and employs those deposits in whole or in part by lending or any other means for the account and at the risk of the person accepting the deposits, and any other company carrying on financial business which the Minister may by notice in the Gazette, declare to be a financial institution for the purposes of this Act;

“licence” means a licence granted under section 4;

“municipality”, “town council” and “urban council” have the meanings assigned to them in the Local Government Act;

“officer”, in relation to a bank or financial institution, means any person by whatever name he may be called who carries out or is empowered to carry out functions relating to the overall direction in Kenya of that Bank or financial institution or takes part in its general management in Kenya;

“public entity” means the Government, a local authority, or a public body declared by the Minister to be a public entity for the purposes of this Act;

“total deposit liabilities” means the total deposits in Kenya in any bank or financial institution which are repayable on demand or after a fixed period or after notice.

Part II—Licensing of Banks and Financial Institutions

Restriction on carrying banking business.

3. (1) No person other than a licensed bank shall after the appointed day—

  • (a) transact banking business in Kenya;

  • (b) without the consent of the Minister, use the word “bank” or any of its derivatives or any other word indicating the transaction of banking business, or the equivalent of the foregoing in any other language, in the name, description or title under which that person transacts business in Kenya, or makes any representation that it transacted banking business, in any bill head, letter paper, notice, advertisement or in any other manner whatsoever.

(2) Any person who contravenes subsection (1) shall be guilty of an offence and liable to a fine not exceeding ten thousand shillings or to imprisonment for a term not exceeding one year, or to both such fine and imprisonment.

Licensing of banks and financial institutions.

4. The Minister may grant a licence to a bank or financial institution to carry on business as such.

Licence application.

5. (1) Every bank and financial institution proposing to transact banking business in Kenya shall, before commencing business, apply in writing to the Minister for a licence.

(2) In considering an application for a licence, the Minister may require to be satisfied as to the financial condition and history of the bank or financial institution, the character of its management, the adequacy of its capital structure and earning prospects and the convenience and needs of the community to be served, and that the public interest will be served by the granting of the licence.

(3) The fees set out in the Schedule3 shall be payable on the granting of a licence and on each anniversary of the granting of a licence, for so long as the licence is in force, in respect of each bank or financial institution licensed.

Revocation of licence.

6. The Minister may, by notice in writing to the licensee, revoke a Rev licence if the licensee—

  • (a) ceases to carry on business in Kenya or goes into liquidation or is wound up or otherwise dissolved; or

  • (b) fails to comply with this Act, the Central Bank of Kenya Act or the Exchange Control Act, or any rules, regulations, orders or directions issued under any of those Acts:

    Provided that—

    • (i) the Minister, before revoking a licence, shall give to the licensee not less than twenty-eight days’ notice in writing of his intention, and shall consider any representations made to him in writing by the licensee within that period before revoking the licence;

    • (ii) a bank or financial institution may, notwithstanding that its licence has been revoked under this subsection, continue to carry on for the purpose of winding up its affairs for such period as the Minister may determine so long as it does not accept new deposits or make fresh loans.

Minimum capital requirements.

7. (1) Subject to this Act, a licence shall not be granted to a bank, Mi and a bank may not carry on banking business, unless—

  • (a) in the case of a bank incorporated in Kenya, its paid-up capital is at least two hundred and fifty thousand Kenya pounds and its paid-up capital and unimpaired reserves are not less than five per cent of its total deposit liabilities;

  • (b) in the case of a bank incorporated outside Kenya, its paid-up capital is not less than two million, five hundred thousand Kenya pounds, and in addition the board of management or other controlling authority has given an undertaking satisfactory to the Minister to keep within Kenya at all times during the currency of its licence, out of its own funds, a capital assigned to its Kenya branches (in this Act referred to as assigned capital) amounting to not less than five per cent of its total deposit liabilities in Kenya with a minimum of five hundred thousand Kenya pounds.

(2) Subject to this Act, a licence shall not be granted to a financial institution, and a financial institution shall not carry on business, unless—

  • (a) in the case of a financial institution incorporated in Kenya, its paid-up capital is at least fifty thousand Kenya pounds;

  • (b) in the case of a financial institution incorporated outside Kenya, its paid-up capital is at least two hundred and fifty thousand Kenya pounds, and in addition the board of management or other controlling authority gives an undertaking satisfactory to the Minister to keep within Kenya at all times during the currency of its licence, out of its own funds, assigned capital amounting to not less than five per cent of its total deposit liabilities in Kenya with a minimum of fifty thousand Kenya pounds.

Location of places of business.

8. (1) No licensed bank or licensed financial institution shall open in Kenya a new place of business, or change the location of an existing place of business, in Kenya (otherwise than to another place of business within the same town), without the approval of the Minister.

(2) Before granting approval under subsection (1) the Minister may require to be satisfied as to the history and financial condition of the bank or financial institution, the general character of its management, the adequacy of its capital structure and earning prospects and the convenience and needs of the community to be served, and that the public interest will be served by the opening or, as the case may be, change of location of the place of business.

(3) No licensed bank or licensed financial institution shall close any of its places of business in Kenya without first giving to the Minister six months’ written notice of its intention to do so, or such shorter period of notice as the Minister may allow.

Merger.

9. (1) No bank or financial institution operating in Kenya shall be merged or consolidated with any other bank or financial institution in Kenya and no bank or financial institution incorporated in Kenya shall be merged or consolidated with any other bank or financial institution, without the approval of the Minister.

(2) To enable him to consider whether to give his approval under subsection (1), the Minister shall have power to call for such information as he may require.

Part III—Prohibited Business

Advances, credits and guarantees.

10. (1) A licensed bank or licensed financial institution shall not in Kenya—

  • (a) grant to any person any advance or credit facility or give any financial guarantee or incur any other liability on behalf of any person, so that the total value of the advances, credit facilities, financial guarantees and other liabilities in respect of that person at any time exceed five per cent of the total deposit liabilities of that bank or financial institution or more than one hundred per cent of its paid-up capital or assigned capital and unimpaired reserves, whichever is the greater:

    Provided that this paragraph does not apply to transactions with a public entity, or to transactions between banks or between branches of a bank, or to the purchase of or advances made against clean or documentary bills of exchange or documents of title to goods entitling some person to payment outside Kenya for exports; or

  • (b) grant any advance or credit facility against the security of its own shares; or

  • (c) grant or permit to be outstanding any unsecured advances in respect of any of its officers or employees, or members of their families, or any company of which the officer or employee or member of their families is a shareholder, director or employee.

(2) A licensed financial institution shall not grant or permit to be outstanding any advance or credit facilities or give any financial guarantee or incur any other liability to, or in favour of, or on behalf of, any company in which the financial institution has an equity interest, whether directly or indirectly, exceeding twenty-five per cent of the share capital of that company.

Restrictions on trading and investment by licensed banks.

11. A licensed bank shall not in Kenya—

  • (a) engage on its account, alone or with others, in wholesale or retail trade, including the import or export trade, except in the course of the satisfaction of debts due to it; and any trading interest carried on by a licensed bank at the commencement of this Act shall be disposed of by the bank within such time as the Central Bank may allow;

  • (b) acquire, or hold any part of the share capital of, or otherwise have a direct interest in, any financial, commercial, agricultural, industrial or other undertaking where the value of the bank’s interest would exceed in the aggregate twenty-five per cent of the sum of the paid-up capital and published reserves of that bank (or, in the case of a bank incorporated outside Kenya, the assigned capital and unimpaired reserves in Kenya of the bank):

    Provided that—

    • (i) a bank may take an interest in such an undertaking in satisfaction of a debt due to it, but if it does so it shall dispose of the interest within such time as the Central Bank may allow;

    • (ii) a shareholding in any corporation established for the purpose of promoting development in Kenya and approved by the Minister shall not be included in the said percentage;

  • (c) purchase or acquire any immovable property or any interest or right therein, except as may be reasonably necessary for the purpose of conducting its business or of housing or providing amenities for its staff:

    Provided that this paragraph does not prevent a bank—

    • (i) letting part of any building which is used for the purpose of conducting its business;

    • (ii) securing a debt on immovable property and, in the event of default in payment of the debt, holding such property for so long as in the opinion of the Central Bank is needed for its realization;

    • (iii) acquiring land for the purpose of its own development.

Restrictions on licensed banks making loans on security of immovable property.

12. (1) No licensed bank shall make loans or advances on the security of immovable property for the purpose of purchasing, improving or altering the property, so that the aggregate amount of those loans or advances exceeds fifteen per cent (or with the approval of the Central Bank, thirty per cent) of the amount of its total deposit liabilities.

(2) For the purposes of subsection (1), a loan or advance secured solely by a mortgage, deed of trust or other instrument upon immovable property, or by notes or other obligations which are so secured, is a loan or advance secured by immovable property, and a loan or advance secured in part by mortgage, deed of trust, or other instrument upon immovable property, or by notes or other obligations which are so secured, and by any other form of security is a loan or advance secured by immovable property, to the extent only of the value of the immovable property security as determined by the Central Bank.

(3) Subsection (1) does not prevent a licensed bank accepting as security for a loan or advance made in good faith without security or upon security since found to be inadequate a mortgage, deed of trust, or other instrument upon immovable property, or notes or other obligations which are so secured.

13. {Spent.}

Part IV—Dividends and Accounts

Dividends.

14. No licensed bank or licensed financial institution which is incorporated in Kenya shall pay any dividend on its shares until all its capitalized expenditure (including preliminary expenses, organization expenses, share-selling commission, brokerage, amount of losses incurred and items of expenditure not represented by tangible assets) has been written off.

Books and accounts to be kept in English.

15. All entries in any books and all accounts kept by a licensed bank or licensed financial institution shall be recorded and kept in the English language, using the system of numerals employed in Government accounts.

Balance sheet.

16. A licensed bank or licensed financial institution shall exhibit throughout the year in a conspicuous position in every office and branch in Kenya a copy of its last audited balance sheet together with the full and correct names of all persons who are officers of the bank or financial institution in Kenya, and shall cause a copy of the balance sheet to be published in a national newspaper.

Furnishing of information.

17. (1) A licensed bank or licensed financial institution shall, not later than six months after the end of its financial year, submit to the Central Bank an audited balance sheet showing its assets and liabilities in Kenya, and an audited profit and loss account covering its activities in Kenya, in the prescribed form.

(2) A licensed bank or licensed financial institution which is incorporated outside Kenya, and a licensed bank or licensed financial institution which is incorporated in Kenya and maintains branches outside Kenya, shall submit to the Central Bank, at least once in every year beginning on the 1st January and not more than fifteen months after the submission of the last ones, an audited balance sheet and an audited profit and loss account of the bank or institution as a whole.

(3) The Central Bank may require a licensed bank or licensed financial institution to furnish to it, at such time and in such manner as it may direct, such information as the Central Bank may reasonably require for the proper discharge of its functions.

(4) The Central Bank may publish in whole or in part, at such times and in such manner as it thinks fit, any information furnished to it under subsection (3):

Provided that information so furnished shall not be published if it would disclose the financial affairs of any person, unless the consent in writing of that person has first been given.

(5) The Minister may require the Central Bank, a licensed bank or a licensed financial institution to furnish to him, at such time and in such manner as he may direct, such information as the Minister may reasonably require.

(6) Where the Central Bank, a licensed bank or a licensed financial institution is required to furnish information under subsection (3) or subsection (5), it shall furnish that information and any supplemental material that may be required as a result of that information within the period specified in the direction or within such reasonable period thereafter as may be agreed.

Part V—Minimum Liquid Assets

Minimum holdings of liquid assets.

18. (1) A licensed bank or licensed financial institution shall maintain such minimum holding of liquid assets as the Central Bank may from time to time determine.

(2) The Central Bank shall determine the method of computing the amounts of liquid assets to be held by banks and financial institutions.

(3) For the purposes of this section, “liquid assets” means all or any of the following—

  • (a) notes and coins which are legal tender in Kenya;

  • (b) balances held at the Central Bank;

  • (c) balances at other banks in Kenya after deducting therefrom balances owed to those other banks;

  • (d) balances at banks abroad withdrawable on demand, and money at call abroad after deducting therefrom balances owed to banks abroad, as may be determined by the Central Bank, where the balances and money at call and short notice are denominated in convertible currencies; and in this paragraph “bank abroad” means a bank outside Kenya or an office outside Kenya of any bank;

  • (e) Kenya treasury bills of a maturity not exceeding ninety-one days which are freely marketable and rediscountable at the Central Bank;

  • (f) such other assets as the Minister may specify.

(4) Any licensed bank or licensed financial institution which fails to comply, within such reasonable time as the Central Bank may fix, with any requirement of subsection (1) shall be liable to pay, on being called upon to do so by the Central Bank, a penalty interest charge not exceeding one tenth of one per cent of the amount of the deficiency for every day on which the offence continues.

Part VI—Inspection of Banks and Financial Institutions

Inspection of banks and financial institutions.

19. (1) The Central Bank or any person authorized by the Central Bank in writing may, and if so directed by the Minister shall, cause an inspection to be made of any licensed bank or licensed financial institution and of its books and accounts, and where it does so it shall supply to that bank or financial institution a report of the inspection.

(2) Where an inspection is made under subsection (1), the bank or financial institution concerned shall produce to the officer or authorized person making the inspection all such books, accounts and other documents in his custody or power and to furnish the officer or authorized person with such statements or information relating to the affairs in Kenya of the bank or financial institution, as the officer or authorized person may require of him, within such reasonable time as the officer or authorized person may specify:

Provided that—

  • (i) books, accounts and other documents may be required to be produced only at the premises of the bank or financial institution concerned; and

  • (ii) all information obtained in the course of inspection shall be treated as confidential and used solely for the purposes of this Act and the Central Bank of Kenya Act.

Central Bank may issue orders after inspection.

20. (1) If it is found upon an inspection under section 19 that the affairs of the bank or financial institution concerned are being conducted in a manner detrimental to the interests of the depositors or to the interests of the bank or financial institution, the Central Bank may issue directions to the bank or financial institution requiring it to take such corrective action as the Central Bank considers to be necessary or to discontinue the harmful practices or procedures.

(2) No directions shall be issued under subsection (1) unless the bank or financial institution has been given an opportunity to present its views.

(3) A bank or financial institution which receives directions under subsection (1) shall, within the period specified in the directions, comply with the directions and show to the Central Bank that it has done so.

(4) The Minister may, upon representations made to him or on his own initiative, modify or cancel any directions issued under subsection (1), and in so modifying or cancelling them he may impose such conditions as he thinks fit subject to which the modification or cancellation shall have effect.

Part VII—Audit

Appointment of auditor.

21. (1) Every licensed bank and every licensed financial institution shall appoint annually an auditor qualified under section 161 of the Companies Act and approved by the Central Bank, whose duty it shall be to audit and make a report upon the annual balance sheet and profit and loss account which are to be submitted to the Central Bank under section 17(1) of this Act.

(2) The bank or financial institution shall send a copy of the auditor’s report to the Central Bank.

Appointment of auditor by Central Bank.

22. If a licensed bank or licensed financial institution fails to appoint an approved auditor under section 21(1), or to fill any vacancy for auditor which may arise, the Central Bank may appoint an auditor and fix the remuneration to be paid by the bank or financial institution to him.

Part VIII—Miscellaneous

Restriction on increase in bank charges.

23. No licensed bank or licensed financial institution shall increase its rate of banking or other charges except with the prior agreement of the Minister.

Minister to consult with Central Bank.

24. The Minister shall consult with the Central Bank in the exercise of his functions under this Act.

Bank holidays.

25. Where the Minister considers that it is in the public interest that banks, or a particular bank, or a particular branch of a bank, should remain closed on a day which is not a public holiday, he may, by notice in the Gazette, declare that day to be a bank holiday for all banks, or for that particular bank, or for that particular branch, as the case may be, and every licensed bank, or that particular bank, or that particular branch, as the case may be, shall remain closed on that day.

Order by High Court.

26. (1) The High Court, on application made ex parte by the Minister may, if it considers it to be in the interests of the depositors of a licensed bank or licensed financial institution, make an order—

  • (a) prohibiting the bank or financial institution from carrying on business; and

  • (b) staying the commencement or continuance of any actions or proceedings against the bank or financial institution in regard to any business for a specified period of time on such terms and conditions as it considers reasonable,

and may from time to time extend the specified period up to a total of six months from the beginning of the stay.

(2) So long as an order under subsection (1) remains in force, the licence granted to the bank or financial institution under this Act shall be deemed to be suspended.

Disqualification of officers.

27. (1) A person who is an officer of a licensed bank or licensed financial institution shall cease to hold office if he—

  • (a) becomes bankrupt or suspends payment or compounds with his creditors; or

  • (b) is convicted of an offence involving dishonesty or fraud; or

  • (c) is directly or indirectly concerned with the management of a bank or financial institution which has been compulsorily wound up.

(2) Any person who continues to act as an officer of a licensed bank or licensed financial institution after he has been disqualified by virtue of this section shall be guilty of an offence and liable to a fine not exceeding five thousand shillings or to imprisonment for a term not exceeding six months, or to both such fine and imprisonment.

Penalties for contraventions by banks and financial institutions.

28. Where any licensed bank or licensed financial institution contravenes any of sections 8, 9, 16, 19, 20 and 21

  • (a) it shall be guilty of an offence and liable to a fine not exceeding twenty thousand shillings; and

  • (b) every officer of the bank or financial institution shall be guilty of the offence and liable to a fine not exceeding five thousand shillings or to imprisonment for a term not exceeding six months, or to both such fine and imprisonment, unless he proves that, through no act or omission on his part, he was not aware that the contravention was taking place or was intended or about to take place, or that he took all reasonable steps to prevent it taking place.

Penalties for default by officers.

29. (1) Any officer of a licensed bank or licensed financial institution who—

  • (a) fails to take all reasonable steps to secure the compliance of the bank or financial institution with this Act; or

  • (b) fails to take all reasonable steps to secure the accuracy and correctness of any statement submitted under this Act or any other written law applicable to banks,

shall be guilty of an offence and liable to imprisonment for a term not exceeding one year or to a fine not exceeding ten thousand shillings or to both such imprisonment and fine.

(2) It shall be a defence to a charge under subsection (1) for an officer to show that he reasonably thought that another competent person had been charged with the responsibility or duty in respect of which the default arose.

Exemption.

30. The Minister may, by notice in the Gazette, exempt any corporation from all or any of the provisions of this Act.

Exceptions.

31. This Act does not apply in respect of—

  • (a) the Kenya Post Office Savings Bank established under the Kenya Post Office Savings Bank Act;

  • (b) the Agricultural Finance Corporation established under the Agricultural Finance Corporation Act;

  • (c) a society registered as a co-operative society under the Cooperative Societies Act, other than the Co-operative Bank of Kenya Limited; or

  • (d) a society registered as a building society under the Building Societies Act.

Regulations.

32. The Minister may make regulations generally for carrying out the purposes and provisions of this Act.

{The Schedule and the Subsidiary Legislation are omitted from this volume.}

The Money-Lenders Act1

Commencement: 1st January, 1933

An Act to make provision with respect to persons carrying on business as money-lenders

1. This Act may be cited as the Money-lenders Act.

Short title.

2. (1) In this Act, except where the context otherwise requires—

Interpretation.

“authorized name” and “authorized address” mean respectively the name under which and the address at which a money-lender is authorized by a certificate granted under this Act to carry on business as a money-lender;

“business name” means the name or style under which any business is carried on whether in partnership or otherwise; “company” means any body corporate being a money-lender;

“firm” means an unincorporate body of two or more individuals, or one or more individuals and one or more corporations, or two or more corporations, who have entered into partnership with one another with a view to carrying on business for profit;

“interest” does not include any sum lawfully charged in accordance with the provisions of this Act by a money-lender for or on account of costs, charges or expenses, but, save as aforesaid, includes any amount, by whatsoever name called, in excess of the principal, paid or payable to a money-lender in consideration of or otherwise in respect of a loan;

“money-lender” includes every person whose business is that of money-lending, or who advertises or announces himself or holds himself out in any way as carrying on that business, but does not include—

  • (a) a pawnbroker licensed under the Pawnbrokers Act, in respect of business carried on by him in accordance with that Act; or

  • (b) a building society registered under the Building Societies Act, or lawfully carrying on the business of a building society before the commencement of that Act; or

  • (c) a company licensed under the Banking Act, or lawfully and bona fide carrying on the business of banking before the commencement of that Act; or

  • (d) a person bona fide carrying on the business of insurance; or

  • (e) a person bona fide carrying on a business not having for its primary object the lending of money, in the course of which and for the purposes whereof he lends money; or

  • (f) a person for the time being exempted from the provisions of this Act, or from any of them, by order of the Minister;

“principal” means in relation to a loan the amount actually lent to the borrower.

(2) Where by a contract for the loan of money by a money-lender the interest charged on the loan is not expressed in terms of a rate, any amount paid or payable to the money-lender under the contract (other than simple interest charged in accordance with the proviso to section 12 of this Act) shall be appropriated to principal and interest in the proportion that the principal bears to the total amount of the interest, and the rate per cent per annum represented by the interest charged as calculated in accordance with the provisions of the Schedule2 to this Act shall be deemed to be the rate of interest charged on the loan.

Transactions to which the Act does not apply.

3. (1) The provisions of this Act shall not apply—

  • (a) to any money-lending transaction where the security for repayment of the loan or of interest thereon is effected by execution of a chattels transfer in which the interest provided for is not in excess of nine per centum per annum;

  • (b) to any money-lending transaction where the security for repayment of the loan or of interest thereon is effected by execution of a legal or equitable mortgage upon immovable property or of a charge upon immovable property or of any bona fide transaction of money-lending upon such mortgage or charge.

(2) The exemption provided for in this section shall apply whether the transactions referred to are effected by a money-lender or not.

Reopening of transactions of money-lenders.

4. (1) Where proceedings are taken in any court by a money-lender for the recovery of any money lent after the commencement of this Act, or the enforcement of any agreement or security made or taken after the commencement of this Act, in respect of money lent either before or after the commencement of this Act, and there is evidence which satisfies the court that the interest charged in respect of the sum actually lent is excessive, or that the amounts charged for expenses, inquiries, fines, bonus, premium, renewals or any other charges, are excessive, and that, in either case, the transaction is harsh and unconscionable, or is otherwise such that a court of equity would give relief, the court may reopen the transaction, and take an account between the money-lender and the person sued, and may, notwithstanding any statement or settlement of account or any agreement purporting to close previous dealings, and create a new obligation, reopen any account already taken between them, and relieve the person sued from payment of any sum in excess of the sum adjudged by the court to be fairly due in respect of such principal, interest and charges, as the court, having regard to the risk and all the circumstances, may adjudge to be reasonable; and if any such excess has been paid, or allowed in account, by the debtor, may order the creditor to repay it; and may set aside, either wholly or in part, or revise or alter any security given or agreement made, in respect of money lent by the money-lender, and if the money-lender has parted with the security may order him to indemnify the borrower or other person sued.

(2) Any court in which proceedings might be taken for the recovery of money lent by a money-lender shall have and may, at the instance of the borrower or surety or other person liable, exercise the like powers as may be exercised under this section, where proceedings are taken for the recovery of the money lent, and the court shall have power, notwithstanding any provision or agreement to the contrary, to entertain any application under this Act by the borrower or surety, or other person liable, notwithstanding that the time for repayment of the loan, or any instalment thereof, may not have arrived.

(3) On any application relating to the admission or amount of a proof by a money-lender in any bankruptcy proceedings, the court may exercise the like powers as may be exercised under this section when proceedings are taken for the recovery of money.

(4) The foregoing provisions of this section shall apply to any transaction which, whatever its form may be, is substantially one of money-lending by a money-lender.

(5) Nothing in the foregoing provisions of this section shall affect the rights of any bona fide assignee or holder for value without notice.

(6) Nothing in this section shall be construed as derogating from the existing powers or jurisdiction of any court.

Penalty for false statements and representations.

5. If any money-lender, or any manager, agent or clerk of a moneylender, or if any person being a director, manager or other officer of any corporation carrying on the business of a money-lender, by any false, misleading or deceptive statement, representation or promise, or by any dishonest concealment of material facts, fraudulently induces or attempts to induce any person to borrow money or to agree to the terms on which money is or is to be borrowed, he shall be guilty of an offence and liable to imprisonment for a term not exceeding two years, or to a fine not exceeding ten thousand shillings, or to both.

Licences to be taken out by money-lenders.

6. (1) Except as hereinafter provided, every money-lender and every company carrying on business as a money-lender shall take out annually in respect of every address at which he or it carries on his or its business as such, a licence (in this Act referred to as a moneylender’s licence) which shall expire on the 31st December in every year, and there shall be charged on every money-lender’s licence the fee prescribed in pursurance of the provisions of subsection (2) of this section:

Provided that if one partner in a firm of money-lenders has duly taken out a money-lender’s licence, every other partner in the firm shall, subject to the provisions of section 7 of this Act, be issued with a money-lender’s licence free of charge for the business of the firm for such time as he shall remain a member of the firm.

(2) Subject to the provisions of this Act, money-lenders’ licences shall be in such form as the Minister may direct, and shall be granted on payment of the licence fee by any officer authorized by the Minister to grant them, and regulations made by the Minister may make provision as to the procedure to be followed in making application for moneylenders’ licences and as to the fee or fees payable therefor:

Provided that a money-lender’s licence shall be taken out by a money-lender in his true name, and shall be void if it be taken out in any other name, but every money-lender’s licence shall also show the money-lender’s authorized name and authorized address.

(3) If any person—

  • (a) takes out a money-lender’s licence in any name other than his true name; or

  • (b) carries on business as a money-lender without having in force a proper money-lender’s licence authorizing him so to do, or being licensed as a money-lender, carries on business as such in any name other than his authorized name, or at any other place than his authorized address or addresses; or

  • (c) enters into any agreement in the course of his business as a money-lender with respect to the advance or repayment of money, or takes any security for money in the course of his business as a money-lender, otherwise than in his authorized name,

he shall be guilty of an offence and liable to a penalty of two thousand shillings:

Provided that, on a second or subsequent conviction of any person (other than a company) for an offence under this subsection, the court may, in lieu of or in addition to ordering the offender to pay the penalty aforesaid, order him to be imprisoned for a term not exceeding three months, and an offender being a company shall on a second or subsequent conviction be liable to a penalty of ten thousand shillings.

Certificate required for grant of moneylender’s licence.

7. (1) A money-lender’s licence shall not be granted except to a person who holds a certificate granted in accordance with the provisions of this section authorizing the grant of the licence to that person, and a separate certificate shall be required in respect of every separate licence; and any money-lender’s licence granted in contravention of this subsection shall be void.

(2) Certificates under this section (in this Act referred to as certificates) shall be granted by the subordinate court of the first or second class having jurisdiction in the district in which the money-lender’s business is to be carried on.

(3) Every certificate granted to a money-lender shall show his true name and the name under which, and the address at which, he is authorized by the certificate to carry on business as such, and a certificate shall not authorize a money-lender to carry on business at more than one address, or under more than one name, or under any name which includes the word “bank”, or otherwise implies that he carries on banking business, and no certificate shall authorize a money-lender to carry on business under any name except—

  • (a) his true name; or

  • (b) the name of a firm in which he is a partner, not being a firm required by the Registration of Business Names Act to be registered; or

  • (c) a business name, whether of an individual or of a firm in which he is a partner, under which he or the firm has, at the commencement of this Act, been registered for not less than three years under the Registration of Business Names Act.

(4) A certificate shall come into force on the date specified therein, and shall expire on the next following 31st December.

(5) The Minister may make rules with respect to the procedure to be followed in making applications for certificates (including the notices to be given of intention to make such an application), and certificates shall be in such form as may be prescribed by rules so made.

(6) A certificate shall not be refused except on some one or more of the following grounds—

  • (a) that satisfactory evidence has not been produced of the good character of the applicant, and in the case of a company of the persons responsible for the management thereof;

  • (b) that satisfactory evidence has been produced that the applicant, or any person responsible or proposed to be responsible for the management of his business as a money-lender, is not a fit and proper person to hold a certificate;

  • (c) that the applicant, or any person responsible or proposed to be responsible for the management of his business as a moneylender, is by order of a court disqualified for holding a certificate;

  • (d) that the applicant has not complied with the provisions of any rules made under this section with respect to applications for certificates.

(7) Any person aggrieved by the refusal of a subordinate court of the first or second class to grant a certificate may appeal to the High Court.

Suspension and forfeiture of money-lenders’ certificates.

8. (1) Where any person, being the holder of a certificate, is convicted of any offence under this Act, the court—

  • (a) may order that any certificate held by that person, and in the case of a partner in a firm by any other partner in the firm, shall either be suspended for such time as the court thinks fit, or shall be forfeited, and may also, if the court thinks fit, declare any such person, or any person responsible for the management of the money-lending business carried on by the person convicted, to be disqualified for obtaining a certificate for such time as the court thinks fit; and

  • (b) shall cause particulars of the conviction and of any order made by the court under this subsection to be endorsed on every certificate held by the person convicted or by any other person affected by the order, and shall cause copies of those particulars to be sent to the authority by whom any certificate so endorsed was granted:

Provided that, where by order of a court a certificate held by any person is suspended or forfeited, or any person is disqualified for obtaining a certificate, he may, whether or not he is the person convicted, appeal against the order in the same manner as any person convicted may appeal against his conviction, and the court may, if it thinks fit, pending the appeal, defer the operation of the order.

(2) Any certificate required by a court for endorsement in accordance with the foregoing provisions of this section shall be produced, in such manner and within such time as may be directed by the court, by the person by whom it is held, and any person who, without reasonable cause, makes default in producing any certificate so required shall, in respect of each offence, be liable on conviction by a subordinate court of the first or second class to a penalty not exceeding one hundred shillings for each day during which the default continues.

(3) Where a certificate held by any person is ordered to be suspended or to be forfeited under the foregoing provisions of this section, any money-lender’s licences granted to that person, whether in pursuance of that or any other certificate, shall be suspended during the period for which the certificate is ordered to be suspended or become void, as the case may be.

Names to be stated on documents issued by money-lenders.

9. (1) Without prejudice to the provisions of the last foregoing section and of section 23 of the Registration of Business Names Act, a money-lender shall not, for the purposes of his business as such, issue or publish, or cause to be issued or published, any advertisement, circular, business letter or other similar document which does not show in such manner as to be not less conspicuous than any other name, the authorized name of the money-lender, and any money-lender who acts in contravention of this subsection shall be guilty of an offence and liable on conviction by a subordinate court of the first or second class to a fine not exceeding four hundred shillings in respect of each offence.

(2) If a money-lender, for the purposes of his business as such, issues or publishes, or causes to be issued or published, any advertisement, circular or document of any kind whatsoever containing expressions which might reasonably be held to imply that he carries on banking business, he shall be guilty of an offence and, on conviction by a subordinate court of the first or second class, liable to a fine not exceeding two thousand shillings, and on a second or subsequent conviction, in lieu of or in addition to such a fine as aforesaid, to imprisonment for a term not exceeding three months, or, in the case of a second or subsequent conviction of an offender being a company, to a fine not exceeding ten thousand shillings.

Restrictions on money-lending advertisements.

10. (1) No person shall knowingly send or deliver or cause to be sent or delivered to any person except in response to his written request any circular or other document advertising the name, address or telephone number of a money-lender, or containing an invitation—

  • (a) to borrow money from a money-lender;

  • (b) to enter into any transaction involving the borrowing of money from a money-lender;

  • (c) to apply to any place with a view to obtaining information or advice as to borrowing any money from a money-lender.

(2) Subject as hereinafter provided, no person shall publish or cause to be published in any newspaper or other printed paper issued periodically for public circulation, or by means of any poster or placard, an advertisement advertising any such particulars, or containing any such invitation, as aforesaid:

Provided that an advertisement in conformity with the requirements of this Act relating to the use of names on money-lenders’ documents may be published by or on behalf of a money-lender in any newspaper or in any such paper as aforesaid or by means of a poster or placard exhibited at any authorized address of the money-lender, if it contains no addition to the particulars necessary to comply with the said requirements, except any of the following particulars, that is to say, any authorized address at which he carries on business as a money-lender, and the telegraphic address and telephone number thereof, any address at which he formerly carried on business, a statement that he lends money with or without security, and of the highest and lowest sums that he is prepared to lend, and a statement of the date on which the business carried on by him was first established.

(3) No money-lender or any person on his behalf shall employ any agent or canvasser for the purpose of inviting any person to borrow money or to enter into any transaction involving the borrowing of money from a money-lender, and no person shall act as such agent or canvasser, or demand or receive, directly or indirectly, any sum or other valuable consideration by way of commission or otherwise for introducing or undertaking to introduce to a money-lender any person desiring to borrow money.

(4) Where any document issued or published by or on behalf of a money-lender purports to indicate the terms of interest upon which he is willing to make loans or any particular loan, the document shall either express the interest proposed to be charged in terms of a rate per centum per annum or show the rate per centum per annum represented by the interest proposed to be charged as calculated in accordance with the provisions of the Schedule to this Act.

(5) Any person who contravenes any of the provisions of this section shall be guilty of an offence and liable to imprisonment for a term not exceeding three months or a fine not exceeding two thousand shillings, or to both such imprisonment and fine.

(6) Where it is shown that a money-lending transaction was brought about by a contravention of any of the provisions of this section, the transaction shall, notwithstanding that the money-lender was duly licensed under this Act, be illegal unless the money-lender proves that the contravention occurred without his consent or connivance.

Form of money-lenders’ contracts.

11. (1) No contract for the repayment by a borrower of money lent to him or to any agent on his behalf by a money-lender after the commencement of this Act or for the payment by him of interest on money so lent, and no security given by the borrower or by any such agent as aforesaid in respect of any such contract shall be enforceable, unless a note or memorandum in writing of the contract be made and signed personally by the borrower, and unless a copy thereof be delivered or sent to the borrower within seven days of the making of the contract; and no such contract or security shall be enforceable if it is proved that the note or memorandum aforesaid was not signed by the borrower before the money was lent or before the security was given, as the case may be.

(2) The note or memorandum aforesaid shall contain all the terms of the contract, and in particular shall show the date on which the loan is made, the amount of the principal of the loan, and either the interest charged on the loan expressed in terms of a rate per centum per annum, or the rate per centum per annum represented by the interest charged as calculated in accordance with the provisions of the Schedule to this Act.

Prohibition of compound interest and provision as to defaults.

12. Subject as hereinafter provided, any contract made after the commencement of this Act for the loan of money by a money-lender shall be illegal in so far as it provides directly or indirectly for the payment of compound interest or for the rate or amount of interest being increased by reason of any default in the payment of sums due under the contract:

Provided that provision may be made by any such contract that if default is made in the payment upon the due date of any sum payable to the money-lender under the contract, whether in respect of principal or interest, the money-lender shall be entitled to charge simple interest on that sum from the date of the default until the sum is paid, at a rate not exceeding the rate payable in respect of the principal apart from any default, and any interest so charged shall not be reckoned for the purposes of this Act as part of the interest charged in respect of the loan.

Obligation of money-lender to supply information as to state of loan and copies of documents relating thereto.

13. (1) In respect of every contract for the repayment of money lent by a money-lender, whether made before or after the commencement of this Act, the money-lender shall, on any reasonable demand in writing being made by the borrower at any time during the continuance of the contract and on tender by the borrower of the sum of one shilling for expenses, supply to the borrower or, if the borrower so requires, to any person specified in that behalf in the demand, a statement signed by the money-lender or his agent showing—

  • (a) the date on which the loan was made, the amount of the principal of the loan and the rate per centum per annum of interest charged; and

  • (b) the amount of any payment already received by the moneylender in respect of the loan and the date on which it was made; and

  • (c) the amount of every sum due to the money-lender, but unpaid, and the date upon which it became due, and the amount of interest accrued due and unpaid in respect of every such sum; and

  • (d) the amount of every sum not yet due which remains outstanding, and the date upon which it will become due.

(2) A money-lender shall, on any reasonable demand in writing by the borrower, and on tender of a reasonable sum for expenses, supply a copy of any document relating to a loan made by him or any security therefor, to the borrower, or, if the borrower so requires, to any person specified in that behalf in the demand.

(3) If a money-lender to whom a demand has been made under this section fails without reasonable excuse to comply therewith within one month after the demand has been made, he shall not, so long as the default continues, be entitled to sue for or recover any sum due under the contract on account either of principal or interest, and interest shall not be chargeable in respect of the period of the default, and if such default is made or continued after proceedings have ceased to lie in respect of the loan, the money-lender shall be guilty of an offence and liable on conviction by a subordinate court of the first or second class to a fine not exceeding one hundred shillings for every day on which the default continues.

Provisions as to bankruptcy proceedings for moneylenders’ loans.

  • 14. (1) (a) Where a debt due to a money-lender in respect of a loan made by him after the commencement of this Act includes interest, that interest shall, for the purposes of the provisions of the Bankruptcy Act relating to the presentation of a bankruptcy petition, voting at meetings, compositions and schemes of arrangement and dividend, be calculated at a rate not exceeding five per centum per annum, but nothing in the foregoing provision shall prejudice the right of the creditor to receive out of the estate, after all the debts proved in the estate have been paid in full, any higher rate of interest to which he may be entitled.

  • (b) The provisions of this subsection shall, in relation to such a debt as aforesaid, have effect in substitution for the provisions of subsection (1) of section 70 of the Bankruptcy Act.

(2) No proof of a debt due to a money-lender in respect of a loan made by him shall be admitted for any of the purposes of the Bankruptcy Act unless the affidavit verifying the debt is accompanied by a statement showing in detail—

  • (a) the amount of the sums actually lent to the debtor and the dates on which they were lent, and the amount of every payment already received by the money-lender in respect of the loan and the date on which every such payment was made; and

  • (b) the amount of the balance which remains unpaid, distinguishing the amount of the principal from the amount of interest included therein, the appropriation between principal and interest being made in accordance with the provisions of this Act where the interest is not expressed by the contract for the loan in terms of a rate; and

  • (c) where the amount of interest included in the unpaid balance represents a rate per centum per annum exceeding five per centum, the amount of interest which would be so included if it were calculated at the rate of five per centum per annum.

(3) Rules may be made under section 122 of the Bankruptcy Act for the purpose of carrying into effect the objects of this section.

Interest at a rate exceeding 24 per cent to be deemed harsh and unconscionable.

15. (1) Where, in any proceedings in respect of any money lent by a money-lender after the commencement of this Act or in respect of any agreement or security made or taken after the commencement of this Act in respect of money lent either before or after the commencement of this Act, it is found that the interest charged exceeds the rate of twenty-four per centum per annum, or the corresponding rate in respect of any other period, the court shall presume, for the purposes of section 4 of this Act, that the interest charged is excessive and that the transaction is harsh and unconscionable, but this provision shall be without prejudice to the powers of the court under that section where the court is satisfied that the interest charged, although not exceeding forty-eight per centum per annum, is excessive.

(2) Where a court reopens a transaction of a money-lender under section 4 of this Act, the court may require the money-lender to produce any certificate granted to him in accordance with the provisions of this Act, and may cause such particulars as the court thinks desirable to be endorsed on any such certificate, and a copy of the particulars to be sent to the authority by whom the certificate was granted.

(3) The powers of a court under section 4 of this Act with respect to the reopening of the transactions of money-lenders shall extend to any transaction effected under a special contract made in accordance with the provisions of section 20 of the Pawnbrokers Act, and accordingly, for the purposes of the first-mentioned section, the provisions of paragraph (a) of the definition of the term “money-lender” in section 2 of this Act shall not apply with respect to any such transaction.

(4) The powers of a court under subsection (2) of section 4 of this Act may, in the event of the bankruptcy of the borrower, be exercised at the instance of the trustee in bankruptcy, notwithstanding that he may not be a person liable in respect of the transaction.

(5) The powers of a court under subsection (2) of section 4 of this Act may be exercised notwithstanding that the money-lender’s right of action for the recovery of the money lent is barred.

Courts for proceedings on money-lending transactions.

16. Subject as hereinafter provided, no action by a money-lender for the recovery of money lent by him or for enforcing any agreement or security relating to any such money shall be brought in any subordinate court other than a subordinate court of the first class:

Provided that the Chief Justice may by order direct that any subordinate court specified in the order shall have the same jurisdiction as respects such actions as aforesaid as it would have had but for the provisions of this section, and any such order may contain such provisions as appear to the Chief Justice expedient with respect to the making of rules for regulating the procedure to be followed in the case of any such action.

Prohibition of charge for expenses on loans by money-lenders.

17. Any agreement between a money-lender and a borrower or intending borrower for the payment by the borrower or intending borrower to the money-lender of any sum on account of costs, charges or expenses incidental to or relating to the negotiations for or the granting of the loan or proposed loan shall be illegal, and if any sum is paid to a money-lender by a borrower or intending borrower as for or on account of any such costs, charges or expenses, that sum shall be recoverable as a debt due to the borrower or intending borrower, or, in the event of the loan being completed, shall, if not so recovered, be set off against the amount actually lent and that amount shall be deemed to be reduced accordingly.

Limitation of time for proceedings.

18. (1) No proceedings shall lie for the recovery by a money-lender of any money lent by him after the commencement of this Act or of any interest in respect thereof, or for the enforcement of any agreement made or security taken after the commencement of this Act in respect of any loan made by him, unless the proceedings are commenced before the expiration of twelve months from the date on which the cause of action accrued:

Provided that—

  • (i) if, during the period of twelve months aforesaid or at any time within any subsequent period during which proceedings may by virtue of this proviso be brought, the debtor acknowledges in writing the amount due and gives a written undertaking to the money-lender to pay that amount, proceedings for the recovery of the amount due may be brought at any time within a period of twelve months from the date of the acknowledgment and undertaking;

  • (ii) the time limited by the foregoing provisions of this section for the commencement of proceedings shall not begin to run in respect of any payments from time to time becoming due to a money-lender under a contract for the loan of money until a cause of action accrues in respect of the last payment becoming due under the contract;

  • (iii) if, at the date on which the cause of action accrues or on which any such acknowledgment and undertaking as aforesaid is given by the debtor, the person entitled to take the proceedings is non compos mentis, the time limited by the foregoing provisions of this section for the commencement of proceedings shall not begin to run until that person ceases to be non compos mentis or dies, whichever first occurs; and

  • (iv) if, at the date on which the cause of action accrues or on which any such acknowledgment and undertaking as aforesaid is given by the debtor, the debtor is out of Kenya, the time limited by the foregoing provisions of this section for the commencement of proceedings shall not begin to run until he returns to Kenya.

(2) Without prejudice to the powers of a court under section 4 of this Act, if, at the time when proceedings are taken by a money-lender in respect of a default in the payment of any sum due to him under a contract for the loan of money, any further amount is outstanding under the contract but not yet due, the court may determine the contract and order the principal outstanding to be paid to the money-lender with such interest thereon, if any, as the court may allow up to the date of payment.

Special provisions as to pawnbrokers’ loans.

19. (1) The provisions of sections 11, 17 and 18 of this Act shall not apply in relation to any loan by a pawnbroker on a pledge, or in relation to any debt in respect of such a loan, or any interest thereon, notwithstanding that the loan is not made in the course of the business carried on by the pawnbroker in accordance with any law for the time being in force in relation to pawnbrokers, so long as the following conditions are complied with in respect of the loan—

  • (a) the pawnbroker shall deliver or send to the pawner within seven days a note or memorandum containing all the terms of contract, and in particular showing the date on which the loan is made, the amount of the principal of the loan, the interest charged on the loan expressed in terms of a rate per centum per annum, and any other charges payable by the pawner under the contract, and the rate of interest charged shall not exceed the rate of twenty per centum per annum;

  • (b) subject as hereinafter provided, the pawner shall not be charged any sum on account of costs, charges or expenses incidental to or relating to the negotiations for or the granting of the loan or proposed loan, except a charge for the preparation of documents relating to the loan not exceeding the sum of one shilling, and a charge equal to the actual amount of any stamp duty paid by the pawnbroker upon any such document:

Provided that a pawnbroker shall not be deemed to have failed to comply with the foregoing conditions by reason of his having made in good faith and in accordance with the terms of the contract for the loan—

  • (i) a reasonable charge in respect of the storage or care of any pledge which is not physically delivered to him or which, although so delivered, is of such weight or size that it would not under the East African Postal Regulations for the time being in force be received for transmission by parcel post; or

  • (ii) a charge for interest at a rate not exceeding twenty per centum per annum upon any sum reasonably expended by the pawnbroker in respect of the storage or care of the pledge; or

  • (iii) a charge not exceeding one shilling for rendering any account of the sale of any pledge; or

  • (iv) a charge not exceeding one shilling in respect of any inspection of the pawnbroker’s books.

(2) Any charge authorized by this section for the preparation of documents relating to a loan, or in respect of stamp duty upon any such document, may be deducted by the pawnbroker from the amount of the loan, and, if so deducted, shall be deemed for the purposes of this Act to be included in the principal.

Notice and information to be given on assignment of money-lenders’ debts.

20. (1) Where any debt in respect of money lent by a moneylender whether before or after the commencement of this Act or in respect of interest on any such debt or the benefit of any agreement made or security taken in respect of any such debt or interest is assigned to any assignee, the assignor (whether he is the money-lender by whom the money was lent or any person to whom the debt has been previously assigned) shall, before the assignment is made—

  • (a) give to the assignee notice in writing that the debt, agreement or security is affected by the operation of this Act; and

  • (b) supply to the assignee all information necessary to enable him to comply with the provisions of this Act relating to the obligation to supply information as to the state of loans and copies of documents relating thereto,

and any person contravening any of the provisions of this section shall be liable to indemnify any other person who is prejudiced by the contravention, and shall also be guilty of an offence and liable to imprisonment for a term not exceeding two years, or to a fine not exceeding ten thousand shillings, or to both such imprisonment and fine.

(2) In this section the expression “assigned” means assigned by any assignment inter vivos other than an assignment by operation of law, and the expressions “assignor” and “assignee” have corresponding meanings.

Application of Act as respects assignees.

21. (1) Subject as hereinafter provided, the provisions of this Act shall continue to apply as respects any debt to a money-lender in respect of money lent by him after the commencement of this Act or in respect of interest on money so lent or of the benefit of any agreement made or security taken in respect of any such debt or interest, notwithstanding that the debt or the benefit of the agreement or security may have been assigned to any assignee, and, except where the context otherwise requires, references in this Act to a money-lender shall accordingly be construed as including any such assignee as aforesaid:

Provided that notwithstanding anything in this Act—

  • (i) any agreement with, or security taken by, a money-lender in respect of money lent by him after the commencement of this Act shall be valid in favour of any bona fide assignee or holder for value without notice of any defect due to the operation of. this Act and of any person deriving title under him; and

  • (ii) any payment or transfer of money or property made bona fide by any person, whether acting in a fiduciary capacity or otherwise, on the faith of the validity of any such agreement or security, without notice of any such defect shall, in favour of that person, be as valid as it would have been if the agreement or security had been valid; and

  • (iii) the provisions of this Act limiting the time for proceedings in respect of money lent shall not apply to any proceedings in respect of any such agreement or security commenced by a bona fide assignee or holder for value without notice that the agreement or security was affected by the operation of this Act, or by any person deriving title under him.

but in every such case the money-lender shall be liable to indemnify the borrower or any other person who is prejudiced by virtue of this section, and nothing in this proviso shall render valid an agreement or security in favour of, or apply to proceedings commenced by, an assignee or holder for value who is himself a money-lender.

(2) Nothing in this section shall render valid for any purpose any agreement, security or other transaction which would, apart from the provisions of this Act, have been void or unenforceable.

{The Schedule is omitted from this volume.}

The Pawnbrokers Act 1

Commencement: 13th October, 1913

An Act to regulate the business of pawnbroking

Short title.

1. This Act may be cited as the Pawnbrokers Act.

Interpretation.

2. In this Act—

“pawnbroker” includes every person who carries on the business of taking goods and chattels in pawn;

“pawner” means a person delivering an article for pawn to a pawnbroker;

“pledge” means an article pawned with a pawnbroker;

“shop” includes dwelling-house and warehouse, or other place of business or place where business is transacted;

“unfinished goods or materials” includes any goods of any manufacturer or of any part or branch of any manufacture either mixed or separate or any material whatever plainly intended for the composing or manufacturing of any goods, after such goods or materials are put into a state or course of manufacture or into a state for any process or operation to be performed thereupon or therewith and before the same are completed or finished for the purpose of wear or consumption.

Application of Act to keepers of certain shops.

3. In order to prevent evasion of the provisions of this Act, the following persons shall be deemed to be persons carrying on the business of taking goods and chattels in pawn; that is to say, every person who keeps a shop for the purchase or sale of goods or chattels, or for taking in goods or chattels by way of security for money advanced thereon, and who purchases or receives or takes in goods or chattels and pays or advances or lends thereon any sum of money not exceeding three hundred shillings with or under an agreement or understanding expressed or implied, or to be from the nature and character of the dealing reasonably inferred, that those goods or chattels may be afterwards redeemed or repurchased on any terms; and every such transaction, article, payment, advance and loan shall be deemed a pawning, pledge and loan respectively within this Act.

Executors of pawnbrokers.

4. The provisions of this Act relating to pawnbrokers shall extend to and include the executors or administrators of deceased pawnbrokers, except that an executor or administrator shall not be answerable for any penalty or forfeiture personally or out of his own estate, unless the same is incurred by his own act or neglect.

Servants, apprentices and agents of pawnbrokers.

5. For the purposes of this Act, anything done or omitted by the servant, apprentice or agent of a pawnbroker in the course of or in relation to the business of the pawnbroker shall be deemed to be done or omitted (as the case may be) by the pawnbroker; and anything by this Act authorized to be done by a pawnbroker may be done by his servant, apprentice or agent.

Assigns and executors of pawners.

6. The rights, powers and benefits by this Act reserved to and conferred on pawners shall extend to the assigns of pawners, and to the executors or administrators of deceased pawners; but any person representing himself to a pawnbroker to be the assign, executor or administrator of a pawner shall, if required by the pawnbroker, produce to the pawnbroker the assignment, probate, letters of administration or other instrument under which he claims.

Application of Act according to amount of loan.

7. (1) This Act shall apply—

  • (a) to every loan by a pawnbroker of sixty shillings or under;

  • (b) to every loan by a pawnbroker of above sixty shillings and not above three hundred shillings, except as in this Act otherwise provided in relation to cases where a special contract respecting the terms of the loan (as authorized by this Act) is made between the pawner and the pawnbroker at the time of the pawning.

(2) Notwithstanding anything in this Act, a person shall not be deemed a pawnbroker by reason only of his paying, advancing or lending on any terms any sum or sums of above three hundred shillings.

Pawnbrokers to keep books, as in First Schedule.

8. (1) A pawnbroker shall keep and use in his business such books and documents as are specified in the First Schedule2 to this Act in the forms therein specified, or to the like effect, and shall from time to time as occasion requires enter therein in English and in a fair and legible manner the particulars indicated in and in accordance with the directions of that Schedule, and shall make all inquiries necessary for that purpose.

(2) If a pawnbroker fails in any respect to comply with the requisitions of this section he shall be guilty of an offence.

Pawnbrokers to exhibit name, table of rates, etc., and to permit police to enter premises.

9. (1) A pawnbroker shall always keep exhibited in large characters over the outer door of his shop his name or names with the word “pawnbroker”.

(2) A pawnbroker shall always keep placed in a conspicuous part of his shop (so as to be legible by every person pawning or redeeming pledges standing in any box or part of the shop provided for persons pawning or redeeming pledges) the same information as is by the First Schedule to this Act required to be printed on pawntickets.

(3) A pawnbroker shall allow the police at any time to enter and inspect his premises and any article or thing taken in pawn and his books and papers relating to his business, on production of an order from a magistrate or a Superintendent or Assistant Superintendent of Police.

(4) If a pawnbroker fails in any respect to comply with the requisitions of this section he shall be guilty of an offence.

Pawning, Redemption, Sale

Pawntickets.

10. A pawnbroker shall on taking a pledge in pawn give to the pawner a pawnticket in the prescribed form, and shall not take a pledge in pawn unless the pawner takes the pawnticket.

Profits and charges allowed to pawnbrokers.

11. (1) A pawnbroker may take profit on a loan on a pledge at a rate not exceeding that specified in the Second Schedule 3 to this Act.

(2) A pawnbroker may demand and take the charges specified in the said Schedule, in the cases and according to the rules therein stated and prescribed.

(3) A pawnbroker shall not, in respect of a loan on a pledge, take any profit or demand or take any charge or sum whatever other than those specified in the said Schedule.

(4) A pawnbroker shall, if required at the time of redemption, give a receipt for the amount of loan and profit paid to him.

Period for redemption.

12. (1) Every pledge pawned for fifteen shillings or under shall be redeemable within six months from the day of pawning, exclusive of that day; and there shall be added to that six months of redemption seven days of grace within which every such pledge (if not redeemed within the six months of redemption) shall continue to be redeemable.

(2) Every pledge pawned for above fifteen shillings shall be redeemable within twelve months from the date of pawning, exclusive of that day; and there shall be added to that twelve months of redemption seven days of grace within which every such pledge (if not redeemed within the year of redemption) shall continue redeemable.

Pledges for Sh. 15 or under forfeited if not redeemed in time.

13. A pledge pawned for fifteen shillings or under, if not redeemed within the six months and days of grace, shall at the end of the days of grace become and be the pawnbroker’s absolute property.

Pledges above Sh. 15 redeemable until sale.

14. A pledge pawned for above fifteen shillings shall further continue redeemable until it is disposed of as in this Act provided, although the year of redemption and days of grace are expired.

Pledge above Sh. 15 to be sold by auction.

15. (1) A pledge pawned for more than fifteen shillings shall, when disposed of by the pawnbroker, be disposed of by public auction, and not otherwise; and the regulations in the Third Schedule4 to this Act shall be observed with reference to the sale.

(2) A pawnbroker may bid for and purchase at a sale by auction, made or purporting to be made under this Act, a pledge pawned with him; and on such purchase he shall be deemed the absolute owner of the pledge purchased.

Offences by auctioneers.

16. If an auctioneer does anything in contravention of the provisions of this Act relating to auctioneers, or fails to do anything which he is required by this Act to do, he shall be guilty of an offence.

Power to inspect sale book.

17. At any time within three years after the auction at which a pledge pawned for above fifteen shillings is sold, the holder of the pawnticket may inspect the entry of the sale in the pawnbroker’s book, and in the filled-up catalogue of the auction (authenticated by the signature of the auctioneer), or in either of them.

Pawnbroker to account for surplus within three years, subject to set-off.

18. (1) Where a pledge pawned for above fifteen shillings is sold and appears from the pawnbroker’s book to have been sold for more than the amount of the loan and profit due at the time of sale, the pawnbroker shall on demand pay the surplus to the holder of the pawnticket, in case the demand is made within three years after the sale, the necessary costs and charges of the sale being first deducted.

(2) If on any such demand it appears from the pawnbroker’s book that the sale of a pledge or pledges has resulted in a surplus, and that within twelve months before or after that sale the sale of another pledge or other pledges of the same person has resulted in a deficit, the pawnbroker may set off the deficit against the surplus, and shall be liable to pay the balance only after such set-off.

Offences as to pledges above Sh.15.

19. If, with respect to pledges for loans of above fifteen shillings, a pawnbroker—

  • (a) does not bona fide according to the directions of this Act sell a pledge pawned with him;

  • (b) enters in his book a pledge as sold for less than the sum for which it was sold or fails duly to enter the same;

  • (c) refuses to permit any person entitled under this Act to inspection of an entry of sale in the pawnbroker’s book, or of a filled-up catalogue of the auction authenticated by the auctioneer’s signature, to inspect the same;

  • (d) fails without lawful excuse (proof whereof shall lie on him) to produce such a catalogue on lawful demand;

  • (e) refuses to pay on demand the surplus to the person entitled to receive the same;

he shall in every such case be guilty of an offence and liable to forfeit to the person aggrieved a sum not exceeding three hundred shillings.

Special Contracts

Power to make special contract for pledge above Sh. 60.

20. (1) Notwithstanding anything in this Act, a pawnbroker may make a special contract with the pawner in respect of a pledge on which the pawnbroker makes a loan of above sixty shillings:

Provided that—

  • (i) the pawnbroker at the time of the pawning shall deliver to the pawner a special contract pawnticket signed by the pawnbroker;

  • (ii) a duplicate of the special contract pawnticket shall be signed by the pawner.

(2) The provisions of this Act, save as far as the application thereof is excluded by the terms of the special contract, shall apply thereto.

(3) A special contract pawnticket or the duplicate thereof shall not be subject to stamp duty.

Delivery Up of Pledge

Holder of pawnticket entitled to redeem.

21. The holder for the time being of a pawnticket shall be presumed to be the person entitled to redeem the pledge, and, subject to the provisions of this Act, the pawnbroker shall accordingly (on payment of the loan and profit) deliver the pledge to the person producing the pawnticket, and he is hereby indemnified for so doing.

Production of pawnticket on redemption.

22. A pawnbroker shall not (except as in this Act provided) be bound to deliver back a pledge unless the pawnticket for it is delivered to him.

Liability of pawnbroker in case of fire.

23. (1) Where a pledge is destroyed or damaged by or in consequence of fire, the pawnbroker shall nevertheless be liable on application within the period during which the pledge would have been redeemable to pay the value of the pledge after deducting the amount of the loan and profit, such value to be the amount of the loan and profit and twenty-five per centum on the amount of the loan.

(2) A pawnbroker shall be entitled to insure to the extent of the value so estimated.

Compensation for depreciation of pledge.

24. If a person entitled and offering to redeem a pledge shows to the satisfaction of a magistrate that the pledge has become or has been rendered of less value than it was at the time of the pawning thereof by or through the default or neglect or wilful misbehaviour of the pawnbroker, the magistrate may if he thinks fit award a reasonable satisfaction to the owner of the pledge in respect of the damage, and the amount awarded shall be deducted from the amount payable to the pawnbroker, or shall be paid by the pawnbroker (as the case requires) in such manner as the magistrate directs.

Protection of owners and of pawners not having pawntickets.

25. (1) The following provisions shall have effect for protection of owners of articles pawned, and of pawners not having their pawntickets to produce—

  • (a) any person claiming to be the owner of a pledge but not holding the pawnticket, or any person claiming to be entitled to hold a pawnticket but alleging that the same has been lost, mislaid, destroyed or stolen or fraudulently obtained from him, may apply to the pawnbroker for a printed form of declaration, which the pawnbroker shall deliver to him;

  • (b) if the applicant delivers back to the pawnbroker the declaration duly made before a magistrate or justice of the peace by the applicant and a person identifying him, the applicant shall thereupon have as between him and the pawnbroker all the same rights and remedies as if he had produced the pawnticket:

    Provided that such a declaration shall not be effectual for that purpose unless it is duly made and delivered back to the pawnbroker within five days after the day on which the form is delivered to the applicant by the pawnbroker;

  • (c) the pawnbroker is hereby indemnified for not delivering the pledge to any person until the expiration of the period aforesaid;

  • (d) the pawnbroker is further hereby indemnified for delivering the pledge or otherwise acting in conformity with the declaration, unless he has actual or constructive notice that the declaration is fraudulent or is false in any material particular.

(2) If a person makes a declaration under this Act, either as an applicant or as identifying an applicant, which is false, and which he either knows or believes to be false or does not believe to be true, he shall be guilty of an offence and liable to imprisonment for a term not exceeding three years or to a fine not exceeding three thousand shillings, or to both such imprisonment and such fine.

Delivery to owner of property unlawfully pawned.

26. In each of the following cases—

  • (a) if any person is convicted under this Act before a court of knowingly and designedly pawning with a pawnbroker anything being the property of another person, the pawner not being employed or authorized by the owner thereof to pawn the same; or

  • (b) if any person is convicted before a court of dishonestly taking or misappropriating fraudulently or dishonestly obtaining any goods or chattels, and it appears to the court that the same have been pawned with a pawnbroker; or

  • (c) if in any proceedings before a court it appears to it that any goods and chattels brought before it have been unlawfully pawned with a pawnbroker;

the court may, if it thinks fit, on proof of the ownership of the goods and chattels, order the delivery thereof to the owner either on payment to the pawnbroker of the amount of the loan or of any part thereof or without payment thereof or of any part thereof, as it thinks fit.

Summary order for delivery of pledge to person entitled.

27. If a pawnbroker without reasonable excuse (proof whereof shall lie on him) neglects or refuses to deliver a pledge to the person entitled to delivery thereof under this Act, he shall be guilty of an offence, and a magistrate may, if he thinks fit, with or without imposing a penalty, order the delivery of the pledge on payment of the amount of the loan and profit.

General Restrictions on Pawnbrokers

Prohibition of taking pledges from children and other restrictions.

28. If a pawnbroker does any of the following things—

  • (a) takes an article in pawn from any person appearing to be under the age of fourteen years, or to be intoxicated;

  • (b) purchases or takes in pawn or exchange a pawnticket issued by another pawnbroker;

  • (c) employs any person under fourteen years of age to take pledges in pawn;

  • (d) under any pretence purchases, except at public auction, any pledge while in pawn with him;

  • (e) suffers any pledge while in pawn with him to be redeemed with a view to his purchasing it;

  • (f) makes any contract or agreement with any person pawning or offering to pawn any article, or with the owner thereof, for the purchase, sale or disposition thereof within the time of redemption;

  • (g) sells or otherwise disposes of any pledge pawned with him except at such times and in such manner as authorized by this Act,

he shall be guilty of an offence.

Unlawful Pawning and Taking in Pawn

Unlawful pawning of goods not property of pawner.

29. If any person does any of the following things—

  • (a) knowingly and designedly pawns with a pawnbroker anything being the property of any other person, the pawner not being employed or authorized by the owner thereof to pawn the same;

  • (b) offers to a pawnbroker an article by way of pawn, being unable or refusing to give a satisfactory account of the means by which he became possessed of the article;

  • (c) wilfully gives false information to a pawnbroker as to whether an article offered by him in pawn to the pawnbroker is his own property or not, or as to his name or address, or as to the name and address of the owner of the article;

  • (d) not being entitled, and not having any colour of title by law, to redeem a pledge, attempts or endeavours to redeem the same,

he shall be guilty of an offence.

Prohibition of taking in pawn linen, apparel or unfinished goods or materials.

30. If a pawnbroker knowingly takes in pawn any linen or apparel or unfinished goods or materials entrusted to any person to wash, scour, iron, mend, manufacture, work up, finish or make up, he shall be guilty of an offence and liable on conviction to forfeit a sum not exceeding double the amount of the loan, and shall also be liable to restore the pledge to the owner thereof in the presence of the magistrate, or as he shall direct.

Licences

Yearly licence.

31. (1) Every pawnbroker shall take out from the District Commissioner of the district in which he is carrying on his business a yearly licence for carrying on his business, on which licence there shall be charged and paid a fee of forty shillings.

(2) Every licence shall be dated on the day on which it is issued, and shall expire on the 31st December following.

(3) A separate licence shall be taken out and paid for by the pawnbroker for each pawnbroker’s shop kept by him.

(4) Every licence shall specify the premises on which the licensee may conduct his business, and the licensee shall not carry on his business except on the premises specified without the sanction in writing of the District Commissioner.

(5) If a person acts as a pawnbroker without having in force a proper licence, he shall be guilty of an offence and liable to a fine not exceeding one thousand five hundred shillings.

Cesser of licence on conviction.

32. If a pawnbroker is convicted of any fraud in his business or of receiving stolen goods knowing them to be stolen, the court by which he is convicted may, if it thinks fit, direct that his licence shall cease to have effect, and the same shall so cease accordingly.

Notice of first application.

33. A person intending to apply for the first time for a licence under this Act shall, twenty-one days at least before the application, give notice in writing to the officer in charge of the police in the district in which he intends to carry on business, and shall in the notice set forth his name and address.

Grounds of refusal of licence.

34. A licence shall not be refused except on one of the following grounds—

  • (a) that the applicant has failed to produce satisfactory evidence of good character;

  • (b) that the shop in which he intends to carry on the business of pawnbroker, or any adjacent house or place owned or occupied by him, is frequented by thieves or persons of bad character;

  • (c) that he has not complied with section 33 of this Act.

Penalties and Legal Proceedings

General penalty.

35. If a pawnbroker or other person is guilty of an offence under this Act in respect whereof a specific forfeiture or penalty is not prescribed by this Act, he shall be liable to a fine not exceeding six hundred shillings, and in default of payment to six months’ imprisonment.

Application of penalties.

36. Penalties recovered under this Act, not directed to be otherwise applied, may be applied under direction of the court in which they are recovered, as follows—

  • (a) where the complainant is the party aggrieved, one moiety of the penalty may be paid to him;

  • (b) where the complainant is not the party aggrieved, there shall be paid to him no part or such part only of the penalty as the court thinks fit.

Detention of persons offering forged pawntickets.

37. If any person utters, produces, shows or offers to a pawnbroker a pawnticket which the pawnbroker reasonably suspects to have been counterfeited, forged or altered, the pawnbroker may seize and detain the person and the ticket, or either of them, and shall deliver the person and the ticket, or either of them (as the case may be) as soon as may be into the custody of a police officer, who shall, as soon as may be, convey the person if so detained before a magistrate to be dealt with according to law.

Production of books before magistrate.

38. (1) A pawnbroker shall at any time, when ordered or summoned by a court, attend before the court and produce all books and papers relating to his business which he is required by the court to produce.

(2) If he fails to do so, he shall be guilty of an offence.

Contracts not void on account of offences.

39. Where a pawnbroker is guilty of an offence under this Act (not being an offence under any provision of this Act relating to licences), any contract of pawn or other contract made by him in relation to his business of pawnbroker shall nevertheless not be void by reason only of that offence, nor shall he by reason only of that offence lose his lien on or right to the pledge or to the loan and profit; but nothing in this section shall restrict the operation of any provision of this Act providing for the delivery of any goods and chattels, or the restoration of any linen, apparel, goods, materials or article to the owner, under the order of any court.

Rules.

40. The Minister may make rules for the better carrying out of this Act.

{The First, Second, and Third Schedules are omitted from this volume.}

The Building Societies Act1

Commencement: 6th July, 1956

An Act to provide for the formation and registration of building societies; and for matters incidental thereto and connected therewith

Part I—Preliminary

Short title.

1. This Act may be cited as the Building Societies Act.

Interpretation.

2. In this Act, except where the context otherwise requires—

“basic advance”, in relation to any 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 any 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 and registered in accordance with the provisions of this Act;

“continuing arrangement” means any 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 land, that person undertakes to give to the society a series of guarantees, each of which is to secure sums payable to the society in respect of such an advance;

“director” means a member of a board of directors;

“dispute” means a dispute between a building society and a member, or any representative of a member in his capacity as a member of the society, unless by the rules of any society for the time being it is otherwise expressly provided; and, in the absence of such express provision, shall not apply to any dispute between any such society and any member thereof, or other person whatever, as to the construction or effect of any instrument of mortgage or any contract contained in any document, other than the rules of the society, and shall not prevent any society, or any member thereof, or any person claiming through or under him, from obtaining in the ordinary course of law any remedy in respect of any such mortgage or other contract to which he or the society would otherwise be by law entitled;

“excess advance” means, in relation to any advance, the amount by which the advance exceeds the basic advance;

“existing society” means any society, association, partnership or company, whether incorporated or registered in or outside Kenya, which was carrying on business as a building society in Kenya immediately before the commencement of this Act;

“land” includes freehold or leasehold land and all buildings thereon, whether the same were erected before, or are erected during, the period for which any mortgage on such land in favour of a building society subsists;

“mortgage” includes a legal charge, and “mortgagor” and “mortgagee” shall be construed accordingly;

“register” means the register of building societies to be kept by the Registrar under section 7 of this Act;

“Registrar” means the Registrar of Building Societies appointed under section 3 of this Act, and includes a Deputy Registrar and an Assistant Registrar;

“special resolution” means a resolution passed by not less than three-fourths of the members of a building society present and entitled to vote at any general meeting of which notice specifying the intention to propose that resolution has been duly given according to the rules of the society.

Appointment of Registrar.

3. The Minister 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.

Certificates, etc., to be evidence.

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.

(2) Any other document relating to a building society and purporting to be signed by the Registrar shall, in the absence of any evidence to the contrary, be admissible as evidence in any court without proof of the signature.

Indemnity of the Registrar and other persons.

5. 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 under this Act.

Part II—Formation and Registration

Formation of building societies.

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 such society and by obtaining registration under this Act.

(2) Subject to the provisions of 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 such rules.

(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.

(4) The Registrar shall issue a certificate of registration in the prescribed form to every building society registered under this section.

Maintenance of register.

7. The Registrar shall keep a register of building societies in which he shall record, in respect of all building societies registered under section 6 or section 75 of this Act, the following particulars, that is to say—

  • (a) the name of the society;

  • (b) the situation and postal address of the head office in Kenya of the society;

  • (c) such other information as may be prescribed.

Effect of registration.

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

Names of building societies.

9. (1) No building society shall be registered by a name which is identical with that of any other building society previously incorporated or registered, or by a name which so nearly resembles the same as to be likely to deceive, unless such other society is in course of being terminated or dissolved and consents to such registration.

(2) The name of every building society shall end with the words “Building Society”.

(3) A building society shall not use any name or title other than its registered name.

(4) The Registrar may, unless otherwise ordered by the Minister, 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.

Contents of rules of building societies.

10. The rules of every building society shall set forth—

  • (a) the name of the society and the situation and postal address of the chief office of the society;

  • (b) the principal objects of the society;

  • (c) the manner in which a person may become a member, and may cease to be a member, of the society;

  • (d) the manner in which the funds of the society are to be raised, the purposes to which they are to be applied and the manner in which surplus funds are to be invested;

  • (e) the classes of shares to be issued, the conditions of redemption or repayment of shares and the preferential and other special rights attaching to each class of shares;

  • (f) the terms upon which shares are to be issued and withdrawn and the manner in which contributions are to be paid to the society;

  • (g) the conditions upon which the society will accept and repay deposits;

  • (h) the manner in which and the conditions upon which advances upon the security of a mortgage or otherwise are to be made and repaid and the conditions upon which a borrower can redeem the amount due from him before the expiration of the period for which the advance was made, with tables, where applicable in the opinion of the Registrar, showing the amounts due from the borrower after each stipulated payment;

  • (i) the manner in which profits or losses are to be ascertained and dealt with or provided for;

  • (j) whether the society intends to borrow money and, if so, within what limits not exceeding those prescribed by this Act;

  • (k) the limits of loans to or deposits by any one person;

  • (l) the manner of altering and rescinding the rules of the society and of making additional rules;

  • (m) the manner of appointing, remunerating and removing the board of directors, their qualifications, powers and duties, and the manner of appointing, remunerating and removing members of local boards or committees and of auditors and other officers of the society;

  • (n) the manner of calling general and special meetings of the members, the quorum necessary for the transaction of business at such meetings and the right to and manner of voting thereat;

  • (o) provision for an annual or more frequent audit of the accounts and inspection by the auditors of the mortgages and other securities belonging to the society;

  • (p) whether disputes between the society and any of its members, or any person claiming by or through any member, or under the rules, shall be settled by reference to the Supreme Court, to the Registrar or to arbitration;

  • (q) provision for the device, custody and use of the common seal of the society;

  • (r) provision for the custody of the instruments of mortgage and of other securities belonging to the society;

  • (s) the charges, fees, fines and forfeitures which may be demanded from or imposed on members of the society and borrowers;

  • (t) the manner in which the society shall be dissolved;

  • (u) the financial year of the society; and

  • (v) such other matters as may be prescribed from time to time.

Common seal.

11. (1) Every building society shall have a common seal which shall bear the registered name of the society.

(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 situate 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.

(3) A deed or other document to which an official seal of a foreign building society registered under section 75 of this Act is duly affixed shall bind the society as if it had been sealed with the common seal of the society.

Head office and postal address.

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

Part III—Management of Building Societies

Directors.

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.

(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 any advance to be made by the society are such as may be reasonably expected to ensure that the adequacy of any 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 such arrangements as aforesaid by reason only that the arrangements provide for the assessment of the adequacy of such security by himself or any other director of the society.

Secretary.

14. (1) Every building society shall have a secretary.

(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.

Auditors.

15. Every building society shall have one or more auditors, who shall be a person or persons approved for that purpose by the Registrar, and one at least of whom shall be a person who publicly carries on the business of an accountant in Kenya.

Officers to give security.

16. 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.

Officers to account.

17. 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 of 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.

Officers not to accept gifts.

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 connexion with any transaction whatsoever relating to the business of the society.

(2) Any 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 any such 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 such gift, bonus, commission or benefit, and in default of such payments shall be liable to imprisonment for a term not exceeding six months.

19. (1) It shall not be lawful—

Restriction of payment of commissions.

  • (a) for a person having a financial interest in the disposition of any land to receive or to agree to receive any 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 connexion with the disposition of the land or in consideration of a promise to introduce such business to the society; or

  • (b) for a building society, or any officer, servant or agent of a building society, to offer to give or agree to give any 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 any land or to be a servant of a person having such an interest, for any such consideration as is mentioned in paragraph (a) of this subsection.

(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 any land by a person who has a financial interest in the said disposition shall be treated, so far as relates to the disposition of that land, as a servant of the person having the said interest, unless he carries on, independently of that person, the business of an advocate, estate agent, surveyor or auctioneer.

(3) Where a building society has a financial interest in the disposition of any land, nothing in this section shall prohibit—

  • (a) the society, or any officer, servant or agent of the society, from offering or giving or agreeing to give, in relation to the disposition of that land, any commission or gift to a servant of the society (not being a person who, to the knowledge of the society, officer, servant or agent, as the case may be, either himself has a financial interest in the disposition of the land or is, in addition to being a servant of the society, also the servant of any person other than the society who has such an interest) for any such consideration as is mentioned in subsection (1) of this section; or

  • (b) a servant of the society (not being a person who himself has a financial interest in the disposition of that land, or who is, in addition to being the servant of the society, also the servant of any person other than the society who has such an interest) from receiving or agreeing to receive, in relation to the disposition of that land, any commission or gift from the society, or from any officer, servant or agent of the society, for any such consideration as aforesaid.

(4) Any person who contravenes the provisions of this section shall be guilty of an offence and liable to a fine not exceeding ten thousand shillings or to imprisonment for a term not exceeding six months, or to both such fine and such imprisonment.

Provisions excluding liability of officers forbidden.

20. Any provision, whether contained in the rules of a building society or in any contract with a building society or otherwise, for exempting any director, manager or officer of a building society, or any person (whether an officer of the society or not) employed by the society as auditor, from, or indemnifying him against, any 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 any such provision as aforesaid, indemnify any such director, manager, officer or auditor against any liability incurred by him in defending any proceedings, whether civil or criminal, in which judgment is given in his favour or in which he is acquitted or in connexion with any application under section 21 of this Act in which relief is granted to him by the court.

Powers of court to grant relief in certain cases.

21. (1) If, in any proceedings for negligence, default, breach of duty or breach of trust against any 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, that court may relieve him either wholly or partly from his liability on such terms as the court may think fit.

(2) Where any person to whom this section applies has reason to apprehend that any claim will or might be made against him in respect of any negligence, default, breach of duty or breach of trust, he may apply to the Supreme Court for relief, and the Supreme 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 trust had been brought.

(3) The persons to whom this section applies are the directors, the members and officers of a building society, and any person employed by a building society as an auditor, whether he is or is not an officer of the society.

Part IV—Powers of Building Societies

Power to borrow.

22. (1) Subject to the provisions of the 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.

(2) The total amount so received on deposit or loan and not repaid by the society shall not at any time exceed two-thirds of the amount for the time being secured to the society by mortgages from its members.

(3) The amount of such deposits or loans from any one person shall be within any limits prescribed by the rules of the society.

(4) In calculating the amount for the time being secured to a building society by mortgages from its members for the purposes of subsection (2) of this section, there shall be disregarded—

  • (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

  • (b) the amount secured on properties of which the society had been twelve months in possession at the date of such account and statement.

(5) Money deposited with a building society as security for an advance made by the building society to a member, or as security for any guarantee given in respect of such an advance, shall be deemed to be money borrowed by the society.

(6) A building society shall not accept any deposit or loan except on the terms that not less than one month’s notice may be required by the society before repayment or withdrawal.

(7) Every deposit book or acknowledgment or security of any kind given for a deposit or loan by a building society shall have printed or written therein or thereon the whole of this section.

(8) If a building society contravenes this section, the society and every director, secretary or other officer of the society who is a party to the contravention shall be guilty of an offence and liable to a fine not exceeding two thousand shillings.

(9) If any building society receives loans or deposits in excess of the limits prescribed by this Act, the directors of the society shall be personally liable for the amount so received in excess.

Power to hold land.

23. (1) Subject to the provisions of the Crown Lands Act, the Trust Land Act, and the Land Control Act, it shall be lawful for a building society—

  • (a) to acquire and hold any land which the society requires for its business premises or for the housing of its staff; and

  • (b) to acquire by foreclosure or surrender any land mortgaged to the society:

Provided that any land acquired by a building society under paragraph (b) of this subsection shall be sold and converted into money within a period of two years or such longer period as the Registrar may authorize in writing.

(2) A building society may let any part of its business premises which is not required for the immediate use of the society.

Power to make advances to members.

24. (1) A building society may, subject to the provisions of this section, make advances to its members out of its funds upon the security of land:

Provided that no building society shall advance money on the security of any land which is subject to a prior mortgage, unless such prior mortgage is in favour of the society making the advance; and if any advance is made in contravention of this proviso, 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.

(2) No building society shall make an advance in excess of such amount as may be prescribed without the consent in writing of the Registrar.

(3) In determining the amount of any advance made by a building society to one of its members upon the security of any 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 specified in the Schedule to this Act.

(4) Where a charge upon a policy of life assurance is taken as additional security for an advance, the value of the policy shall be assessed at an amount not exceeding the surrender value thereof at the time when the advance is made.

(5) Where a guarantee given in pursuance of a continuing arrangement is taken as additional security for such an advance as aforesaid, the advance shall not exceed such amount as may be prescribed or ninety per centum of the amount of the purchase price for the defraying of which the advance is made, whichever is the less, without the consent in writing of the Registrar; and in any such case the basic advance shall not exceed sixty-five per centum of that amount and the excess advance shall not exceed twenty-five per centum of that amount.

(6) Where a building society takes as additional security for an advance to a member a guarantee given in pursuance of a continuing arrangement, the terms of the advance shall not provide for the payment of any sums to the society in respect of the advance after the expiration of a period of twenty years (or such other period, being either longer or shorter, as the Registrar may authorize in writing) from the date on which the advance is made, nor, after any such advance as aforesaid has been made by the society, shall the society make any agreement which has the effect of rendering any sums payable to the society in respect of the advance after the expiration of the said period:

Provided that nothing in this subsection shall affect the power of a society to make any such agreement as aforesaid in relation to any advance which has been made by the society not less than one year before the making of the agreement if, in the opinion of the directors, it is desirable so to do in order to avoid hardship to a member of the society.

Power to invest.

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 Minister by notice in the Gazette.

(2) A building society shall have power to keep money on current account and deposit account at one or more banks or with the Post Office Savings Bank.

Power to make further advances.

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 shall have power to make to the member, by way of addition to the advance aforesaid, 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 any sum not exceeding such sum as 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.

(2) Where, in pursuance of the power conferred by subsection (1) of this section, a society has added any sum to an advance made by the society upon the security of land, the sum so added to the advance shall not be deemed to form part thereof for the purpose of determining whether the advance is beyond the power of the society by reason—

  • (a) of the amount of the advance being excessive, or

  • (b) of the amount of any excess advance included in the advance being greater than that which is authorized by this Act.

(3) Where a society has made an advance to a member upon the security of land, and the advance is an advance to which the provisions of subsection (6) of section 24 of this Act apply, then, if the society subsequently adds to the advance a further advance under the power conferred by this section, the said provisions shall also apply in relation to that further advance; and, for the purpose of the application thereto of those provisions, the further advance shall be deemed to have been made at the time when the original advance was made.

Notice to be given where security for advance to member is taken from third party.

27. (1) Where a building society makes to a member an advance for the purpose of its being used in defraying the purchase price of land and takes any security for the advance from another person, then, unless before any contract requiring the member to repay the advance is entered into the society gives to the member a notice in writing, in the prescribed form—

  • (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 the said maximum amount; and

  • (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, either by the society or by any other person, in respect of the advance or of any security given therefor (whether by the member or otherwise), nor shall any rights be exercisable by virtue of any such security, except by leave of the court.

(2) Where a society makes such an advance and takes such security as aforesaid without giving notice to the member in accordance with the foregoing provisions of this section, the court may, either upon an application for such leave as aforesaid, 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.

Power to carry on business abroad.

28. A building society shall have power, provided that its rules so allow, to carry on business in any place outside Kenya and to invest any portion of its funds not immediately required for its purposes in advances upon the security of land in any such place:

Provided that—

  • (i) no building society, other than an existing society, shall make any such investment within five years of its registration under this Act;

  • (ii) the amount which a building society may invest outside Kenya shall not, without the consent of the Minister, exceed one-fifth of its capital assets for the time being in Kenya.

Additional powers of building societies.

29. Subject to the provisions of this Act, and to its rules, a building society shall have the following powers in addition to the powers hereinbefore conferred—

  • (a) 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;

  • (b) to act as the agent of insurance companies in effecting insurances in respect of property mortgaged or to be mortgaged to the society and any other insurances designed to secure a debt to the society, and to collect on behalf of such companies the premiums in respect of any insurance so effected and of the insurances pledged to the society;

  • (c) to pay pensions or gratuities to its employees, or to establish a pension fund or to adopt a pension scheme for providing pensions or gratuities for its employees, or to join with other societies in establishing or adopting any such fund or pension scheme.

Dividends payable only out of profits.

30. 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.

Part V—Meetings and Periodical Returns

Annual general meeting.

31. Every 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.

Other meetings.

32. 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 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 lesser.

Annual accounts and statement.

  • 33. (1) (a) Every 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 such financial year and a general statement of its funds and effects, liabilities and assets.

  • (b) Every such account and statement shall be attested by the auditors of the society and shall be countersigned by at least two directors thereof.

(2) Every such account and statement shall be in such form and shall contain such particulars as may be prescribed, and, without prejudice to the generality of the foregoing, shall show—

  • (a) the amounts due to the holders of the various classes of shares respectively;

  • (b) the amounts due to depositors and creditors for loans;

  • (c) the balance due or outstanding on the security of mortgages (not including prospective interest); and

  • (d) the amount invested by the society in other securities, showing separately investments in and investments outside Kenya.

(3) Every auditor in attesting any such 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 the law, and shall also certify that he has at that audit actually inspected the securities belonging to the society, and shall state the number of properties with respect to which evidence of title has been produced to and actually inspected by him.

(4) Every member of a building society shall be entitled to receive on demand a copy of such account and statement, and copies thereof shall also be available at the offices of the building society not less than fourteen days before the meeting at which they are to be presented.

(5) A copy of every such annual account and statement, certified in such manner as may be prescribed, shall be sent to the Registrar within fourteen days after the annual or other general meeting at which it is presented or within five months after the expiration of the financial year to which it relates, whichever period expires first.

(6) If any building society fails to comply with the provisions of this section, the society and every director, secretary or other officer of the society shall be guilty of an offence and liable to a fine not exceeding five thousand shillings.

Returns of sales and transfers.

34. Every building society shall, in respect of each financial year, cause to be prepared and sent to the Registrar at the same time as its annual account and statement is sent a return in such form as may be prescribed containing such particulars as may be prescribed with respect to—

  • (a) 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;

  • (b) every mortgage which, during the said period, has been transferred by the society.

Part VI—Miscellaneous Provisions

Books and records to be kept by building societies.

35. (1) Every building society shall keep the following books, that is to say—

  • (a) a minute book recording all proceedings of general meetings;

  • (b) a minute book recording all proceedings of the board of directors;

  • (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

  • (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.

(2) Every building society shall cause to be kept records showing with respect to every advance made by the society on the security of any land—

  • (a) the amount at which the land was assessed and the name of the person by whom the assessment was made; and

  • (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.

(3) Every building society registered under section 6 of this Act shall keep all registers, minute books, books of account and other records, which it is required by this Act to keep, in English.

(4) If any building society fails to comply with the provisions of this section, the society and every director, secretary or other officer of the society shall be guilty of an offence and liable to a fine not exceeding one thousand shillings.

Rules to be binding on members and others.

36. 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.

Duty to supply copies of rules.

37. Every building society shall supply to any person requiring the same a complete printed copy of its rules, with a copy of the certificate of registration appended thereto, and shall be entitled to charge for the same a sum not exceeding five shillings.

Evidence of rules.

38. 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.

Persons under twenty-one.

39. (1) Any person who is under the age of twenty-one years may be admitted as a member of any building society the rules of which do not prohibit such admission.

(2) A member of a building society while under the age of twenty-one years may—

  • (a) give all necessary acquittances;

  • (b) consent to the dissolution of the society; and

  • (c) by his next friend, present a petition for winding-up;

but may not—

  • (i) vote at any meeting of the society;

  • (ii) hold any office in the society;

  • (iii) transfer any share standing in his name; or

  • (iv) execute a mortgage to secure advances made to him by the society.

Shares may be held jointly.

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

Provided that the right to vote at any meeting of the society shall be limited to one of such shareholders.

Prohibition of balloting.

41. No building society shall cause or permit applicants for advances to ballot for precedence or in any way make the granting of an advance depend on any chance or lot.

Implied warranty.

42. Where a building society makes to a member an advance for the purpose of its being used in defraying the purchase price of land, the society shall be deemed to warrant to the member that the purchase price is reasonable unless, before any contract requiring the member to repay the advance is entered into, the society gives to the member a notice in writing in such form as may be prescribed stating that the making of the advance implies no such warranty.

Exercise of power of sale.

43. (1) A building society exercising its power of sale of any land mortgaged to it shall take reasonable care to ensure that in the exercise of the power the price at which the land is sold is the best price which can reasonably be obtained; and any agreement if and so far as it relieves or may have the effect of relieving a society from the obligations imposed by this section shall be void.

(2) Where a building society has exercised its power of sale of any land mortgaged to it, it shall, within twenty-eight days from the completion of the sale, send by registered post to the person who immediately before the sale was the owner of the land at his last known address a notice containing such particulars relating to the sale as may be prescribed.

(3) Nothing in subsection (2) of this section shall affect the operation of any rule of law relating to the duty of a mortgagee to account to a mortgagor.

(4) If a building society contravenes the provisions of subsection (2) of this section, the society and every director, secretary or other officer of the society shall be guilty of an offence and liable to a fine not exceeding one thousand shillings.

Lost or destroyed share certificates, etc.

44. (1) If any share certificate, savings deposit pass book, subscription share pass book, deposit receipt or fixed deposit receipt, or any statement or other record of payment, issued by a society is lost or destroyed, the society, upon such evidence and subject to such terms and conditions as the directors think fit, and after the loss or destruction thereof has been duly advertised once in the Gazette and once in a newspaper circulating in the town or district in which the member or depositor, as the case may be, resides, may issue a certified copy of such certificate, pass book, receipt, statement or record:

Provided that the directors may in their discretion authorize the issue of such a certified copy without requiring the loss to be advertised.

(2) Such certified copy shall thereafter for all purposes take the place of the certificate, pass book, receipt, statement or record so lost or destroyed and be the sole evidence thereof.

Inspection of documents by public.

45. On payment of the prescribed fees, any person may inspect at the office of the Registrar the documents relating to any society and required to be lodged with the Registrar in terms of this Act or obtain from the Registrar a certificate of the registration of any society or a copy or extract of any such document or part of any such document kept by the Registrar.

Part VII—Change of Name, Address, Officers and Constitution

Change of name.

46. (1) A building society may, by special resolution, change its name.

(2) A society which changes its name in accordance with the provisions of subsection (1) of this section shall, within fourteen days from the date of the meeting at which the resolution was adopted, send to the Registrar two copies of the resolution certified in such manner as may be prescribed.

(3) Subject to the provisions of section 9 of this Act, the Registrar shall register one copy of the resolution and return the other to the society endorsed with a certificate of registration.

(4) A change of name by a building society in accordance with the provisions of this section shall not affect any right or obligation of the society or any member thereof, or other person concerned, or render defective any legal proceedings by or against the society, and any legal proceedings that may have been continued or commenced against it by its former name may be continued or commenced against it by its new name.

Change of address.

47. Every building society which changes the situation of its registered office or its postal address shall, within fourteen days after such change, send to the Registrar notice thereof in the prescribed form, and the Registrar shall register the same.

Change of directors.

48. Whenever any person is appointed a director of a building society or ceases for any reason to be a director of a building society, the society shall within fourteen days after such happening send to the Registrar notice thereof in the prescribed form.

Alteration of rules.

49. (1) A building society may, by special resolution, alter or rescind any of its rules or make any additional rule:

Provided that no such special resolution shall have any validity until registered under subsection (3) of this section.

(2) Where a building society has altered or rescinded any of its rules or made any additional rule, it shall, within fourteen days from the date of the meeting at which the resolution was adopted, send to the Registrar two copies of the resolution, certified in such manner as may be prescribed.

(3) If the Registrar is satisfied that the alteration, addition or rescission is in conformity with this Act, he shall register one copy of the resolution and return the other to the society endorsed with a certificate of registration.

Penalties.

50. If any building society fails to comply with the provisions of subsection (2) of section 46, section 47, section 48 or subsection (2) of section 49 of this Act, the society and every director, secretary and other officers of the society shall be guilty of an offence and liable to a fine not exceeding five thousand shillings.

Part VIII—Amalgamation of Societies and Transfer of Engagements

Amalgamation of building societies.

51. (1) Subject to the provisions of section 53 of this Act, two or more building societies may unite and become one society, with or without any dissolution or division of the funds of such societies or either of them, upon such terms as are agreed by special resolution of each of such societies.

(2) Notice of any such union shall be sent to the Registrar in the prescribed form.

(3) Upon completion of the union in terms of this section, the building societies so united shall be deemed to be dissolved and, their registrations having been cancelled, the Registrar shall register the new society in terms of this Act.

Transfer of engagements.

52. (1) Subject to the provisions of section 53 of this Act, a building society may by a special resolution transfer its engagements to any other building society which may undertake to fulfil those engagements, and a building society may undertake to fulfil the engagements of any other building society by a special resolution.

(2) Notice of any such transfer shall be sent to the Registrar in the prescribed form and shall be registered by him.

Special provisions relating to amalgamations and transfers of engagements.

35. (1) Save as is hereinafter provided, no union of building societies and no transfer of engagements shall take effect unless or until the consent thereto in writing of holders of not less than two-thirds of the whole number of shares of each society party thereto has been obtained.

(2) A building society desiring to unite with one or more other building societies, or to transfer its engagements to another building society, or to undertake to fulfil the engagements of another building society, may make an application in that behalf to the Registrar in the prescribed manner, and shall publish notice of the application in the Gazette and, if the Registrar so requires, in one or more newspapers, and the Registrar, after hearing the society and any other person whom he considers entitled to be heard, may confirm the union, transfer or undertaking notwithstanding that the consent of the holders of two-thirds of the whole number of shares of the society has not been obtained in the manner required by this section.

Registration of amalgamation or transfer of engagements to operate as conveyance.

54. Upon the registration by the Registrar of the notice of union of any building societies under section 51, or of the transfer of the engagements of any building society to another building society under section 52, or upon the confirmation by the Registrar of any such union or transfer under section 53, of this Act, there shall vest in the united society or in the society to which another society has transferred its engagements, as the case may be, by virtue of this section and without further or other assurance, all the funds, assets and movable or immovable property vested or held in the name of the societies so uniting or of the society so transferring its engagements.

Amalgamation or transfer of engagements not to prejudice creditors.

55. No union of building societies and no transfer of engagements from one building society to another shall affect the rights of any creditor of either or any of the societies concerned.

Part IX—Determination of Disputes

Determination of disputes by arbitrators or the Registrar.

56. (1) Where the rules of a building society direct that any disputes 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 said arbitrators being beneficially interested, directly or indirectly, in the funds of the society.

(2) Not less than three such 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.

(3) In the case of the death or refusal or neglect of any of the said 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.

(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.

(5) Any award made by arbitrators or the major part of them shall determine the dispute.

(6) Where the parties to any dispute arising in a building society agree to refer the dispute to the Registrar, or where the rules of the society direct disputes to be referred to the Registrar, the award of the Registrar shall have the same effect as that of arbitrators.

(7) The arbitrators or the Registrar shall, at the request of any party to the arbitration or any person claiming under him, and upon payment of the costs and charges of filing the award, cause the award, or a signed copy of it, to be filed in the High Court; and notice of the filing shall be given to the parties by the arbitrators or the Registrar.

(8) An award in an arbitration under this section, on being filed in the High Court in accordance with subsection (7) of this section, shall be enforceable as if it were a decree of the Court.

Determination of disputes by the Supreme Court.

57. The High Court may hear and determine any dispute—

  • (a) 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 such 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

  • (b) where the rules of the society direct that any dispute shall be referred to the High Court.

Determination of disputes by arbitrators or the Registrar to be final.

58. Every 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:

Provided always that 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 any question of law (but shall not be compelled to do so), and shall have power to grant to either party in the dispute such discovery as to documents and otherwise as might be granted by the High Court, such discovery to be made on behalf of the society by such officer of the society as the arbitrators or the Registrar may determine.

Part X—Powers of the Registrar

Power to require production of books, etc.

59. (1) The Registrar may at any time, by notice in writing served on a building society or on any person who is or has been an officer of such a society, require the society or person to produce to the Registrar such books, accounts, deeds and other documents relating to the business of the society and to furnish to him such other information relating to that business as he considers necessary for the exercise of the powers given him by this Act, and any such notice may contain a requirement that any information to be furnished in accordance with the notice shall be verified by a statutory declaration.

(2) If any building society or other person fails to comply with the requirements of a notice under this section, the society, and every director, secretary or other officer of the society or such other person, as the case may be, shall be guilty of an offence and liable to a fine not exceeding five thousand shillings.

Power to cause inspection of books.

60. (1) The Registrar may, if he thinks fit, on the application of one-tenth of the whole number of members of a building society or of fifty members, whichever is the lesser, each such applicant having been a member of the society for not less than twelve months immediately preceding the date of the application, appoint an accountant or actuary to inspect the books of the society and to report thereon.

(2) Any person applying under subsection (1) of this section for inspection shall deposit with the Registrar such sum as a security for the costs of the proposed inspection as the Registrar may require.

(3) All expenses of or incidental to any such inspection shall be defrayed by the applicants, or out of the funds of the society, or by the members or officers, or former members or officers, of the society in such proportions as the Registrar may direct.

(4) A person appointed under this section shall have power to make copies of any books of the society and to take extracts therefrom at all reasonable hours at the registered office of the society or at any place where the books are kept.

(5) The Registrar shall communicate the results of any such inspection to the applicants and to the society.

Power to appoint inspector.

61. (1) The Registrar may, with the consent of the Minister, on the application of one-tenth of the whole number of members of a building society or of fifty members, whichever is the lesser, either—

  • (a) appoint an inspector to examine into and report on the affairs of the society; or

  • (b) call a special meeting of the society.

(2) Any application under this section shall be supported by such evidence as the Registrar may direct for the purpose of showing that the applicants have good reason for requiring the inspection to be made or the meeting to be called and that they are not actuated by malicious motives in their application.

(3) Such notice of the application shall be given to the society as the Registrar may direct.

(4) The Registrar shall require the applicants to give security for the costs of the proposed inspection or meeting before the inspector is appointed or the meeting is called.

(5) All expenses of and incidental to such inspection or meeting shall be defrayed by the applicants or out of the funds of the society, or by the members or officers, or former members or officers, of the society in such proportions as the Registrar may direct.

(6) An inspector appointed under this section may require the production of all or any of the books, accounts, securities and documents of the society, and may examine on oath its officers, members, agents and servants in relation to its business, and may administer an oath accordingly.

(7) The Registrar may direct at what time and place a special meeting under this section is to be held, and what matters are to be discussed and determined at the meeting, and the meeting shall have all the powers of a meeting called according to the rules of the society, and shall in all cases have power to appoint its own chairman, any rule of the society to the contrary notwithstanding.

(8) The Registrar may, without any application by members, but with the consent of the Minister given on each occasion, exercise the powers given by this section—

  • (a) where a building society has, for two months, after notice, failed to make any return required by this Act;

  • (b) where a building society has, for two months, after notice, failed to correct or complete any such return;

  • (c) where evidence is furnished by statutory declaration of not less than three members of a building society of facts which, in the opinion of the Registrar, calls for investigation:

    Provided that the Registrar shall forthwith, on receipt of such declaration, send a copy thereof to the society, and such society shall, within fourteen days from the sending of such copy, be entitled to give the Registrar an explanatory statement in writing by way of reply thereto.

Power to forbid invitations for subscriptions, etc.

62. (1) If, with respect to any building society, the Registrar considers it expedient to do so in the interest of persons who have invested or deposited or may invest or deposit money with the society, he may by order direct that, unless and until the order is revoked, no invitation to subscribe for, or to acquire or offer to acquire, securities or to lend or deposit money shall be made by or on behalf of the society:

Provided that, before making any order under this section, the Registrar shall serve on the society a written notice stating his intention to make the order, and shall consider any representations with respect to the proposed order made to him by the society within the period of thirty days from the date of the service of the notice and, if the society so requests, afford it an opportunity of being heard by him within that period.

(2) Any order made under subsection (1) of this section may be revoked by a subsequent order of the Registrar.

(3) If any invitation is made in contravention of an order made under subsection (1) of this section, the person by whom the invitation is so made shall be guilty of an offence and liable to imprisonment for a term not exceeding two years or to a fine not exceeding ten thousand shillings, or to both such imprisonment and such fine.

Power to suspend or cancel registration.

63. (1) Where the Registrar is satisfied that a certificate of registration has been obtained for a building society by fraud or mistake, or that any such society exists for an illegal purpose, or has wilfully and after notice from the Registrar violated any of the provisions of this Act, or has ceased to exist, the Registrar may by notice in writing cancel the registration of the society or suspend the registration thereof for any term not exceeding three months, and may renew such suspension from time to time for the like period.

(2) The Registrar shall, before cancelling or suspending the registration of a building society under powers conferred by subsection (1) of this section, give to the society not less than two months’ previous notice in writing, specifying briefly the ground of the proposed cancellation or suspension, and shall, as soon as practicable after the cancellation or suspension takes place, cause notice thereof to be published in the Gazette and in such one or more newspapers (if any) as he may determine.

(3) A building society may appeal to the High Court against the cancellation or suspension of its registration, and thereupon the Court may, if it thinks it just so to do, set aside the cancellation or suspension.

(4) The Registrar may also, if he thinks fit, at the request of any building society, evidenced in such manner as he may direct, cancel the registration of the society.

(5) A building society whose registration has been cancelled or suspended shall from the time of such cancellation or suspension (but in the case of suspension only while the suspension lasts, and in any case subject to the right of appeal given by this section) cease absolutely to enjoy the privileges conferred by this Act, but without prejudice to any liability incurred by the society, and any such liability may be enforced against the society as if the cancellation or suspension had not taken place.

Part XI—Dissolution and Winding Up

Dissolution.

64. (1) A building society may be dissolved—

  • (a) by dissolution in the manner prescribed by its rules;

  • (b) by dissolution with the consent of three-fourths of the whole number of members, holding not less than two-thirds of the whole number of shares of the society, testified by their signatures to an instrument of dissolution; or

  • (c) by winding up either voluntarily, under the supervision of the High Court, or by the High Court.

  • (2) Notice of the commencement and completion of any dissolution or winding up shall be sent to the Registrar and registered by him.

Instruments of dissolution.

65. (1) Every instrument of dissolution of a building society shall set forth—

  • (a) the liabilities and assets of the society in detail;

  • (b) the number of members, and the amount standing to the credit in the books of the society;

  • (c) the claims of depositors and other creditors, and the provision to be made for their payment;

  • (d) the intended appropriation or division of the funds and property of the society; and

  • (e) the names of one or more persons to be appointed trustees for the purpose of the dissolution, and their remuneration.

(2) The provisions of an instrument of dissolution may be varied with the like consent, testified in the same manner, as is required for an instrument of dissolution.

(3) Every instrument of dissolution, and every instrument varying the provisions of an instrument of dissolution, shall be made and signed in duplicate and sent to the Registrar within fourteen days of signature, whereupon the Registrar shall register one copy of the instrument and return the other to the society endorsed with a certificate of registration.

(4) An instrument of dissolution, and any instrument varying the provisions of an instrument of dissolution, shall, when registered, be binding upon all the members of the society.

Winding up.

66. (1) The High Court may, on the petition of—

(a) any member authorized to present the same on behalf of the society by three-fourths of the members present at a general meeting of the society specially called for the purpose; or

(b) any judgment-creditor for not less than one thousand shillings,

but not otherwise, order that a building society be wound up, either voluntarily under the supervision of the Court or by the Court.

(2) The provisions of the Companies Act relating to the winding up of companies voluntarily, under the supervision of the Court, or by the Court, shall apply, mutatismutandis, to the winding up of a building society.

Obligations of liquidators and trustees in case of dissolution.

67. When a building society is being dissolved in accordance with paragraph (a) or paragraph (b) of subsection (1) of section 64 of this Act, the provisions of this Act shall continue to apply as if the liquidators or other persons conducting the dissolution of the society, or the trustees appointed under the instrument of dissolution, were the board of directors of the society.

Liability of members in the event of dissolution.

68. (1) When a building society is being dissolved or wound up, the liability of any member of such society in respect of any share upon which no advance has been made shall be limited to the amount actually paid, or in arrear on such share, and in respect of any share upon which an advance has been made shall be limited to the amount payable thereon under any mortgage or other security or under the rules of the society.

(2) When a building society is being dissolved or wound up, a member to whom an advance has been made under any mortgage or other security, or under the rules of the society, shall not be liable to pay the amount payable under the mortgage or other security, or under the rules, except at the time or times and subject to the conditions therein expressed.

Account and balance sheet on dissolution.

69. If a building society is dissolved in accordance with paragraph (a) or paragraph (b) of subsection (1) of section 64 of this Act, the liquidators, trustees and other persons having the conduct of the dissolution shall, within twenty-eight days from the termination of the dissolution, send to the Registrar an account and balance sheet, signed and certified by them as correct and showing the assets and liabilities of the society at the commencement of the dissolution and the way in which those assets and liabilities have been applied and discharged.

Dissolution by order of Registrar.

70. (1) On the application in writing of one-tenth of the whole number of members of any building society or of fifty members, whichever is the lesser, setting forth that the society is unable to meet the claims of its members, and that it would be for their benefit that it should be dissolved, and requesting an investigation into the affairs of the society with a view to the dissolution thereof, the Registrar may investigate the affairs of the society, but shall before doing so give not less than two months’ previous notice in writing to the society at its registered office.

(2) If on such investigation it appears that the society is unable to meet the claims of its members, and that it would be for their benefit that it should be dissolved, the Registrar may, if he considers it expedient so to do, order that the society be dissolved, and shall direct in what manner the affairs of the society are to be wound up:

Provided that the Registrar may suspend his order for such period as he may deem necessary to enable the society to make such alterations of its rules as will, in his judgment, prevent the necessity of the order being made.

(3) The Registrar shall, within twenty-one days after the making of any order for dissolution under this section, cause notice thereof to be advertised in the Gazette and in such one or more newspapers (if any) as he may determine.

(4) The Registrar of his own motion, if he has reason to believe that the society is unable to meet the claims of its members, and that it would be for their benefit that it should be dissolved, may investigate the affairs of the society.

Part XII—Offences

Prohibition of unregistered building societies.

71. (1) No society, association, partnership or company shall commence or carry on business in Kenya as a building society unless it is registered in terms of this Act.

(2) No society, association, partnership or company shall commence or carry on business in Kenya under or by any name which includes the words “Building Society” unless it is registered in terms of this Act.

(3) The Registrar may at any time make an inspection or cause an inspection to be made of the books, accounts and records of any society, association, partnership or company for the purpose of determining whether the same is carrying on the business of a building society or not.

(4) Any society, association, partnership or company which contravenes the provisions of subsection (1) or subsection (2) of this section shall be guilty of an offence and liable to a fine not exceeding ten thousand shillings.

Withholding or misapplying property of a building society an offence.

72. (1) If any person by false representation or imposition obtains possession of any moneys, securities, books, papers or other effects of a building society, or having the same in possession withholds or misapplies the same or wilfully applies any part thereof to purposes other than those expressed or directed in the rules of the society and authorized by this Act, he shall be guilty of an offence and liable to a fine not exceeding five thousand shillings and to be ordered to deliver up to the society all such moneys, securities, books, papers or other effects and to repay the amount of money applied improperly, and in default of such delivery of effects or repayment of such amount of money shall be liable to imprisonment for a term not exceeding six months.

(2) Proceedings under subsection (1) of this section may be taken at the instance of—

  • (a) the society; or

  • (b) any member authorized by the society or by the board of directors or by the Registrar; or

  • (c) the Registrar.

False statements.

73. If any person makes any false statement or orders or allows any false statement to be made in any document which is required by this Act or any regulations thereunder to be sent to the Registrar, or which such person expects will be published, knowing such statement to be false, or by addition, alteration, erasure or omission falsifies any such document, knowing that the addition, alteration, erasure or omission will cause a falsification of the document, he shall be guilty of an offence and liable to imprisonment for a term not exceeding six months.

Offences.

74. If any building society neglects or refuses—

  • (a) to give any notice, send any return or document or do or allow to be done anything which the society is by this Act or any regulations thereunder required to give, send, do or allow to be done; or

  • (b) to do any act or furnish any information required for the purposes of this Act by the Registrar or by an inspector,

the society, and every officer thereof bound by the rules of the society to fulfil the duty whereof a breach has been so committed, and, if there is no such officer, then every director, unless it appears that he was ignorant of or attempted to prevent the breach, shall be guilty of an offence and, unless a special penalty is provided by this Act, liable to a fine not exceeding two thousand shillings.

Part XIII—Foreign Building Societies

Registration of foreign building societies.

75. (1) A building society registered or incorporated outside Kenya, the rules of which—

  • (a) contain substantially the like matters which in the case of building societies to be registered in Kenya are required by section 10 of this Act to be set forth; and

  • (b) contain no provision which is incompatible with any provision of this Act; and

  • (c) expressly authorize the society to carry on business outside the country in which it is registered or incorporated,

may apply for registration under this Act.

(2) Every such application shall be in the prescribed form and shall be accompanied by—

  • (a) a copy of its rules and a copy of the certificate of registration or incorporation, each certified in such manner as may be prescribed, and, if the same are not written in the English language, certified translations of the same; and

  • (b) a statement of the situation and the postal address of its registered or chief office in the country of its registration or incorporation; and

  • (c) a statement of the situation and of the postal address of its head office in Kenya; and

  • (d) a copy of its latest annual statement and account; and

  • (e) a statement of the names and addresses of the directors.

(3) The Registrar may in his discretion, and subject to the provisions of section 9 of this Act, allow or refuse an application for registration made under subsection (1) of this section:

Provided that any person aggrieved by the refusal of the Registrar to register a building society under this section may within one month, or such extended period as the Minister may allow, from the date of such refusal appeal against such refusal to the Minister, whose decision shall be final.

(4) Where the Registrar allows an application, he shall enter the prescribed particulars relating to the society in the register, and thereupon the society shall, subject to the provisions of section 23 of this Act, become entitled to hold land and to take mortgages of land in Kenya.

(5) The Registrar shall issue a certificate of registration to every building society registered under this section.

(6) No building society registered or incorporated outside Kenya shall commence business in Kenya as a building society unless it is registered under this Act.

Provisions of Act generally to apply to foreign building societies.

76. The provisions of this Act relating to building societies registered under section 6 of this Act shall apply to building societies registered under section 75 of this Act, and in addition thereto the following special provisions shall apply to every building society registered under the said section 75—

  • (a) the society shall maintain an office and a postal address in Kenya; and

  • (b) the society shall keep in English separate records and books of account in respect of its business in Kenya, which records and books shall be kept at the society’s principal place of business in Kenya; and

  • (c) the society shall prepare in English a separate account and statements in respect of its business in Kenya, which shall be in the form required in the case of a building society registered in Kenya with such modifications as the Registrar may allow, as well as a consolidated account and statement; and

  • (d) the society shall not, save with the prior approval of the Minister, invest outside Kenya any moneys raised in Kenya in excess of one-fifth of the capital assets for the time being of the society in Kenya; and

  • (e) the society shall show in all advertisements and announcements and on all documents issued by it the place where it was originally registered or incorporated:

Provided that the Minister may, by order, either generally or in any particular case, exempt any society registered under the said section 75 from all or any of the provisions of this Act, or direct that such provisions of this Act as are specified in such order shall, in their application to any such society, be modified in such manner as may be provided therein.

Part XIV—Orders, Rules and Regulations

Orders, rules and regulations.

77. (1) The Minister may by order—

  • (a) fix the maximum rate of interest which may be paid or charged by building societies in respect of the borrowing or advancing of money;

  • (b) require building societies to hold such amount in cash or on deposit or in investments in accordance with section 25 of this Act as may be specified in such order as security for the prompt repayment of shares, deposits, loans and overdrafts and for the payment of interest accrued thereon.

(2) The Chief Justice may make rules of court for regulating proceedings before the High Court, and applications and appeals thereto, under the provisions of this Act, and for the fees to be paid in respect thereof.

(3) Subject to the provisions of subsections (1) and (2) of this section, the Minister may make regulations prescribing anything required to be prescribed under this Act, and, for the better carrying into effect of the provisions of this Act, and without prejudice to the generality of the foregoing, such regulations may provide for the procedure in the registry of building societies, the hours in which the registry is to be open for business, the forms to be used and the fees to be paid in respect of any matter under this Act required, permitted or entitled to be done.

Schedule

(s. 24)

classes of additional security which may be taken into account in determining the amount of advances to members

1. A charge upon a policy of life assurance.

2. A guarantee given, whether in pursuance of a continuing arrangement or not, by the Government, a local authority or an insurance company, or any other person approved by the Minister.

3. A charge given by the member upon money deposited with the society or upon any stocks, shares or securities for the time being authorized by law for the investment of trust moneys.

4. A guarantee, not being a guarantee given in pursuance of a continuing arrangement, accepted by the society with the written consent of the member and supported by a charge upon money deposited with the society or upon any such stocks, shares or securities as aforesaid.

5. A charge upon money deposited with the society, being a charge which is given in accordance with arrangements which are approved by the Registrar and which provide that the society shall also take, as further security for each advance in respect of which such a charge is given to the society, a guarantee given by an insurance company.

The Industrial and Commercial Development Act1

Commencement: 15th February, 1955

An Act to establish a corporation to be known as the Industrial and Commercial Development Corporation for facilitating the industrial and economic development of Kenya

Short title

1. This Act may be cited as the Industrial and Commercial Development Act.

Interpretation.

2. In this Act, except where the context otherwise requires—

“Corporation” means the Industrial and Commercial Development Corporation established by section 3 of this Act;

“director” means a person appointed as a director under section 4 of this Act;

“Minister” means the Minister for the time being responsible for commerce and industry;

“Minister for Finance” means the Minister for the time being responsible for finance.

Establishment and functions of Corporation.

3. (1) There is hereby established a corporation to be known as the Industrial and Commercial Development Corporation, for the purposes of facilitating the industrial and economic development of Kenya by the initiation, assistance or expansion or by aiding in the initiation, assistance or expansion of industrial, commercial or other undertakings or enterprises in Kenya or elsewhere.

(2) In the exercise of its functions under this Act, the Corporation shall have regard generally to the desirability of—

  • (a) acting principally as an auxiliary finance organization and not as the sole source of the provision of finance in respect of any particular undertaking or enterprise as aforesaid;

  • (b) exercising its powers of affording financial assistance, so far as possible and except where the Minister for Finance otherwise directs, by way of guarantee, loan or investment and not by way of grant or subsidy;

  • (c) requiring early liquidation or repayment of any guarantee, loan or investment made by the Corporation, in order to ensure so far as possible that the liquid resources of the Corporation may be available for other purposes within the scope of the functions of the Corporation under this Act,

and, in particular, to the desirability of ensuring that any such undertaking or enterprise as aforesaid will be of long-term value in relation to the development of Kenya, whether or not it is likely to prove self-supporting or to furnish direct profits either immediately or in the future.

(3) The Corporation shall be a body corporate with perpetual succession and a common seal, with power to hold land and to sue and be sued in its corporate name.

(4) The application of the seal of the Corporation shall be authenticated by the signatures of the chairman of the Corporation (or some other director authorized by the Corporation to authenticate the application of the seal thereof) and of another director.

(5) Every document purporting to be an instrument issued by the Corporation and to be sealed as aforesaid or to be signed on behalf of the Corporation shall be received in evidence and be deemed to be such an instrument without further proof unless the contrary is shown.

Constitution of Corporation.

4. (1) The Corporation shall consist of a chairman and not less than five nor more than nine other directors, all of whom shall be appointed by the Minister from among persons appearing to him to have had experience and shown capacity in industry, trade or administration.

(2) Every director of the Corporation shall hold and vacate his office in accordance with the terms of his appointment and shall, on ceasing to be a director, be eligible for reappointment:

Provided that any director may at any time by notice in writing to the Minister resign his office.

(3) All appointments under this section shall be made by the Minister after consultation with the Corporation.

(4) The validity of any proceedings of the Corporation shall not be affected by any vacancy amongst the directors or by any defect in the appointment of a director.

(5) If the chairman of the Corporation ceases to be a director he shall also cease to be chairman.

(6) If the Minister is satisfied that any director—

  • (a) has become bankrupt or has made an arrangement with his creditors; or

  • (b) is incapacitated by physical or mental illness; or

  • (c) has been absent from meetings of the Corporation for a period longer than three consecutive months without the permission of the Corporation; or

  • (d) is otherwise unable or unfit to discharge the functions of a director, or is unsuitable to continue as a director,

the Minister may remove him from his office as a director.

Alternate directors.

5. (1) Subject to the approval of the Minister, each director shall have power to appoint either another director or any person approved by the other directors, or by a majority of them, to act as an alternate director in his place during his absence or his inability to attend any meeting, and may at his discretion remove such alternate director:

Provided that no director or person shall at one and the same time act as alternate director in place of more than one director.

(2) An alternate director shall, whilst so acting (except as regards remuneration and the power to appoint an alternate director), be subject in all respects to the provisions of this Act relating to directors, and each alternate director shall, whilst so acting, exercise and discharge all the functions, powers and duties of his appointor in his appointor’s absence.

(3) A director acting as alternate director shall have an additional vote for the director for whom he so acts.

(4) An alternate director shall cease to be an alternate director whenever his appointor ceases for any reason to be a director.

Remuneration.

6. (1) The Corporation shall pay to the chairman and each director such remuneration and allowances as may from time to time be determined by the Corporation with the approval of the Minister.

(2) If any director or person is employed about the affairs of the Corporation otherwise than as a director, the Corporation may pay him such remuneration and allowances (in addition to the remuneration or allowances, if any, to which he may be entitled as a director), as the Corporation, with the approval of the Minister, may determine.

Management.

7. The Corporation may appoint a general manager, and such managers, accountants, secretaries, managing agents and such other servants or agents as the Corporation may consider necessary for the proper discharge of its functions, on such terms and conditions as the Corporation may determine.

Powers of Corporation.

8. Without prejudice to the generality of the provisions of section 3 of this Act the Corporation shall, subject to the approval, generally or specially, of the Minister and subject to such terms and conditions as he may impose in giving any such approval, have power—

  • (a) to provide credit and finance by means of loans or the subscription of loan or share capital or otherwise for industrial, commercial or other undertakings or enterprises in Kenya or elsewhere;

  • (b) to subscribe for, conditionally or unconditionally, to underwrite, issue on commission or otherwise, take, hold, deal in and convert shares, stocks, obligations and securities of all kinds, and to enter into partnership, or into any arrangement for participating in undertakings, sharing profits, union of interest, reciprocal concession or co-operation with any person, partnership or company, and to take or otherwise acquire and hold shares or stocks in or obligations or securities of, and to subsidize, any person, partnership or company, and to sell, hold, reissue, with or without guarantee, or otherwise deal with any such shares, stocks, obligations or securities, and to promote and aid in promoting, constitute, form or organize companies, syndicates, or partnerships of all kinds and to exercise and enforce all rights and powers conferred by or incident to its ownership of any shares, stocks, obligations or securities for the time being held or owned by the Corporation;

  • (c) to advance, deposit or lend money, securities and property to or with such persons, partnerships or companies and on such terms as may seem expedient; to create, make, draw, accept, endorse, execute, issue, discount, buy, sell, negotiate and deal in bills, notes, bills of lading, warrants, coupons, debentures and other negotiable or transferable instruments;

  • (d) subject to the provisions of section 10 of this Act, to guarantee or become liable by way of suretyship or indemnity for the payment of money, or for the performance of any contracts or obligations, and generally to transact all kinds of guarantee, trust or agency business;

  • (e) to purchase, take on lease, hire or otherwise acquire, and to sell, exchange, surrender, lease, mortgage, charge, convert, turn to account, dispose of and deal with, any movable or immovable property and rights of all kinds;

  • (f) to purchase or otherwise acquire and carry on the whole or any part of the business, property, goodwill and assets of any person, partnership or company carrying on, or proposing to carry on, any business which the Corporation is authorized to carry on, or which can be conveniently carried on in connexion with such business or may seem calculated, directly or indirectly, to benefit the Corporation, or possessed of property suitable for the purposes of the Corporation, and, as part of the consideration for any of the acts or things aforesaid or property acquired, to undertake all or any of the liabilities of such person, partnership or company, or to acquire an interest in, amalgamate with or enter into any arrangement for sharing profits or for co-operation or for limiting competition or for mutual assistance with any such person, partnership or company, and to give, issue or accept cash or any shares, stocks, obligations or securities that may be agreed upon, and to hold and retain or sell, mortgage and deal with any shares, stocks, obligations or securities so received;

  • (g) to sell, exchange, mortgage (with or without power of sale), assign, lease, sublet, improve, manage, develop, dispose of, turn to account, grant rights and privileges in respect of and generally otherwise deal with the whole or any part of the business, estates, property, rights or undertakings of the Corporation, upon any terms, either together or in portions, and as a going concern or otherwise, for such consideration, whether of cash, shares, stocks, obligations or securities, as the Corporation may think fit;

  • (h) to invest and deal with money upon such securities and in such manner as may from time to time be determined, and to place money on deposit or current account with any bank or building society;

  • (i) subject to the provisions of section 9 of this Act, to raise or borrow money, with or without security, and also to secure the payment of money by the issue of or upon debentures or debenture stock, perpetual, terminable or otherwise, or bonds, or other obligations charged or not charged upon, or by mortgage, charge, hypothecation, lien or pledge of the whole or any part of the undertaking, property, assets and rights of the Corporation, both present and future, and generally in such other manner and on such terms as may seem expedient, and to issue any of the Corporation’s obligations or securities for such consideration and on such terms as may be thought fit; and also, by a similar mortgage, charge, hypothecation, lien or pledge, to secure and guarantee the performance by the Corporation of any obligation or liability it may undertake, and to redeem or pay off any such securities;

  • (j) to act as the manager, agent or secretary of any undertaking and to nominate or appoint any person to act as director of, or in any other capacity in relation to, any undertaking, and to act as the agent or representative of any undertaking, whether carrying on business in Kenya or elsewhere;

  • (k) to do all or any of the above things as principals, managers, agents, contractors, trustees or otherwise, and either by or through trustees, agents, subcontractors or otherwise, and either alone or in partnership or in conjunction with any other person, partnership or company, and to contract for the carrying on of any operation connected with the Corporation’s business by any other person, partnership or company;

  • (l) to do all such other things whether of an industrial, commercial or other nature as may be deemed to be incidental or conducive to the attainment of the above objects or any of them and to the exercise of the rights, powers and authorities given by this Act.

Power of Minister to give directions.

8A. The Industrial and Commercial Development Corporation shall, in the exercise of its powers and in the performance of its duties under this Act or any other written law, act in accordance with any general or special directions that may be given to it by the Minister.

Borrowing powers.

9. (1) The borrowing powers of the Corporation shall be exercisable only with the approval of the Minister for Finance as to amount, the sources of the borrowing and the terms and conditions on which the borrowing may be effected.

(2) Any approval given for the purposes of this section may be either general or limited to a particular borrowing or otherwise, and may be either conditional or unconditional.

(3) A person lending money to the Corporation shall not be bound to inquire whether the borrowing of money is within the power of the Corporation or be concerned to see to the application thereof or be answerable for any loss or misapplication thereof.

Powers of guarantee, etc.

10. The power of the Corporation to guarantee, or become liable by way of suretyship or indemnity for, the payment of money, or the performance of any contracts or obligations, shall be limited to the extent that the aggregate amount remaining undischarged under all liabilities by way of guarantee, suretyship or indemnity assumed by the Corporation shall not at any time exceed the value, as determined by the Minister for Finance from time to time, of the assets of the Corporation available for meeting such aggregate amount as aforesaid.

Advances or grants by Government.

11. To enable the Corporation to exercise its powers or to fulfil any of its obligations, the Minister for Finance may, with the consent of the National Assembly, make advances or grants to the Corporation.

Surplus funds.

12. The Minister for Finance may, from time to time, after consultation with the Minister, direct the Corporation to pay into the consolidated fund any money held by the Corporation and deemed by the Minister for Finance to be surplus to its existing or anticipated requirements.

Meetings and proceedings.

13. (1) The quorum necessary for the transaction of business of the Corporation shall, except where regulations made under this Act otherwise provide, be four.

(2) The chairman of a meeting shall in the case of equality of votes have a second or casting vote.

(3) The directors shall cause minutes of all proceedings at their meetings, and of all proceedings at meetings of every committee that may be appointed by them, to be entered in books kept for that purpose.

(4) The books containing the minutes of such proceedings shall remain the property of the Corporation and shall be kept at such place as the directors think fit, and shall at all times be made available to the Minister and to all persons authorized by him in that behalf.

(5) Subject to the provisions of this Act and of any regulations made thereunder, the Corporation shall regulate its own procedure.

Accounts and report.

14. (1) The directors shall cause to be kept proper books of account and such other records as are necessary to give a true and fair view of the state of the Corporation’s affairs and to explain its transactions, and such books of account and other records shall be kept at such place as the directors think fit, and shall at all times be made available to the Minister and to all persons authorized by him in that behalf.

(2) The directors shall as soon as practicable after the end of each financial year of the Corporation cause to be prepared a statement of accounts in such form as the Minister may, with the approval of the Minister for Finance, direct.

(3) The accounts of the Corporation shall be audited annually by an auditor or auditors appointed by the Minister.

(4) The directors shall as soon as practicable after the end of each financial year of the Corporation make an annual report to the Minister dealing generally with the operations of the Corporation during that year.

(5) The accounts and annual report shall within six months after completion of each financial year of the Corporation be laid before the National Assembly by the Minister.

Winding up.

15. The Corporation shall not be wound up except by or under the authority of an Act.

Application of the Companies Act.

16. The Minister may from time to time, by order published in the Gazette, apply to the Corporation any provision of the Companies Act not being inconsistent with the provisions of this Act, and where any such order is made such provision shall apply to the Corporation as it applies to a company within the meaning of the Companies Act.

Directors not to be personally liable.

17. No director or officer of the Corporation shall be personally liable for any act or thing done or omitted to be done by him as such in good faith and without negligence in the course of the operations of the Corporation.

Regulations.

18. The Minister may, after consultation with the directors, make such regulations as he may consider necessary or desirable for the proper conduct of the business of the Corporation including, without prejudice to the generality of the foregoing, regulations with regard to any of the following matters—

  • (a) the convening of the meetings of the Corporation, directors and committees, and the procedure to be followed thereat;

  • (b) the appointment or establishment of committees of the directors, and the co-opting of persons other than directors to such committees; and

  • (c) the provision of a common seal and the custody and use thereof.

The Agricultural Development Corporation Act1

Commencement: 29th October, 1965

An Act of Parliament to provide for the establishment of the Agricultural Development Corporation and for purposes incidental thereto and connected therewith

Short title.

1. This Act may be cited as the Agricultural Development Corporation Act.

Interpretation.

2. In this Act, except where the context otherwise requires—

“Act” means this Act and any rules made thereunder;

“Corporation” means the Agricultural Development Corporation established by section 3 of this Act;

“General Manager” means the General Manager to the Corporation appointed under section 14 of this Act;

“Minister” means the Minister for the time being responsible for agriculture.

Establishment of Agricultural Development Corporation.

3. There is hereby established a Corporation, to be known as the Agricultural Development Corporation, which shall be a body corporate having perpetual succession and a common seal, with power to sue and be sued, purchase, hold, manage and dispose of land and any other property and to enter into such contracts as it may consider necessary or expedient for the purposes of performing its functions under this Act.

Directions of Minister.

4. In the exercise of its powers and in the performance of its functions under this Act, the Corporation shall comply with such general or special directions as the Minister may from time to time issue.

Membership of Corporation.

5. (1) The Corporation shall consist of—

  • (a) a chairman, appointed by the Minister;

  • (b) not more than ten members appointed by the Minister who, in his opinion, possess qualities likely to be of benefit to the Corporation, of whom—

    • (i) not less than one shall be a member of one of the professional bodies specified in the Schedule to the Accountants (Designations) Act;

    • (ii) not less than one shall be appointed by reason of his knowledge of international finance;

    • (iii) not less than one shall be appointed by reason of his knowledge of the processing and marketing of agricultural produce;

    • (iv) not less than one shall be appointed to represent the interests of lenders of funds to the Corporation;

  • (c) two members appointed by the Minister from a panel of not less than five names submitted by the Central Agricultural Board established under the Agriculture Act;

  • (d) the Permanent Secretary to the Ministry, or a person deputed by him in writing for the purposes of this Act;

  • (e) the Permanent Secretary to the Ministry for the time being responsible for finance, or a person deputed by him in writing for the purposes of this Act;

  • (f) the Permanent Secretary to the Ministry for the time being responsible for economic planning and development, or a person deputed by him in writing for the purposes of this Act.

(2) The Corporation may co-opt to serve on it for such length of time as it thinks fit any person or persons whose assistance or advice it may require, but a person so co-opted shall not be entitled to vote at any meeting of the Corporation or be counted as a member for the purpose of forming a quorum.

(3) The Corporation shall elect a vice-chairman annually from among its members.

Duration of office of members of Corporation.

6. (1) The chairman shall hold office for three years and shall then retire but shall be eligible for reappointment.

(2) Two of the members appointed under paragraph (b) and one of the members appointed under paragraph (c) of section 5(1) of this Act shall retire annually but shall be eligible for reappointment; the members to retire shall be those who have been continuously longest in office, and, as between members who have been continuously longest in office, the order of retirement shall, in default of agreement between them, be determined by lot.

(3) A member of the Corporation shall cease to hold office—

  • (a) if he delivers to the Minister a written resignation of his office; or

  • (b) if the Corporation declares by resolution that he has been absent from three consecutive meetings of the Corporation without the leave of the Corporation; or

  • (c) if, on the advice of the Corporation, the Minister removes him from office on the grounds that he is incapacitated by mental or physical illness or is otherwise unable or unfit to discharge the functions of a member or is unable to continue as a member; or

  • (d) if he is adjudged bankrupt or enters into a composition or scheme of arrangement with his creditors; or

  • Remuneration and expenses of members of Corporation.

    Meetings of Corporation.

  • (e) if he is sentenced by a court to imprisonment for a term of six months or more.

Remuneration an expenses of members of Corporation

7. (1) The members of the Corporation (other than public officers in receipt of a salary) shall be paid out of the funds of the Corporation such remuneration as the Minister, after consultation with the Corporation, may from time to time determine.

(2) The Corporation may, at its discretion, pay such travelling and other expenses as may reasonably have been incurred by its members by reason of their office.

Meetings of Corporation.

8. (1) A general meeting of the Corporation shall be convened by the chairman at least four times every year.

(2) The chairman may at any time convene a special meeting of the Corporation and shall do so within one month of the receipt by him of a written request signed by at least two members.

(3) In the absence of the chairman from any Corporation meeting, the vice-chairman shall preside, and in the absence of both chairman and vice-chairman, the members present shall elect one of their number to preside, and such member shall, as concerns that meeting, have all the powers and attributes of the chairman under this Act.

(4) At every meeting of the Corporation the member presiding shall have a casting as well as a deliberative vote.

(5) The quorum of the Corporation shall be five.

Declaration of interest.

9. Every member of the Corporation who is or is likely to be concerned in, or who participates in the profits of, any contract with or work done for the Corporation, otherwise than in his capacity as a member of the Corporation, shall, on the matter coming before the Corporation for consideration, immediately declare his interest therein, and shall, unless the Corporation otherwise agrees, retire from the meeting, and shall in any case abstain from voting on the matter:

Provided that this section shall not apply to a member who has been appointed under section 5(1) (b) (iv) of this Act, in respect of the interests he was appointed to represent.

Authentication of documents.

10. (1) The common seal of the Corporation shall be authenticated by the signature of the chairman or such other member of the Corporation as may be authorized by the Corporation to act in that behalf, together with the signature of some other member or officer authorized by the Corporation to act in that behalf.

(2) All documents made by the Corporation, other than those required by law to be under seal, shall be executed, and all decisions of the Corporation shall be signified, under the hand of the chairman or of any member, officer or servant of the Corporation authorized in that behalf.

Committees of Corporation.

11. The Corporation may appoint committees, whether of its own members or otherwise, to carry out such general or special functions as may be specified by the Corporation, and may delegate to any such committee such of its powers as the Corporation may deem fit.

Functions of Corporation.

12. (1) The functions of the Corporation shall be to promote and execute schemes for agricultural development and reconstruction in Kenya by the initiation, assistance or expansion of agricultural undertakings or enterprises.

(2) In the performance of its functions under this Act the Corporation shall have proper regard to the economic and commercial merits of any undertaking it plans to initiate, assist or expand.

(3) If the Minister, after consultation with the Minister for the time being responsible for finance, instructs the Corporation to initiate, assist or expand any undertaking which it considers economically or otherwise unsound, the Corporation shall not be required to proceed with such initiation, assistance or expansion until the Government has undertaken to reimburse the Corporation with any losses incurred thereby.

Powers of Corporation.

13. (1) The Corporation shall, subject to the provisions of this Act, have power to do all such things and to enter into all such transactions as to the Corporation appear to be necessary for, or conducive or incidental to, the performance of its functions under this Act.

(2) Without prejudice to the generality of subsection (1) of this section, the Corporation shall have power—

  • (a) to provide credit and finance by means of loans or the subscription of loan or share capital or otherwise for agricultural undertakings in Kenya;

  • (b) to advance, deposit or lend money, securities and property to or with such persons and on such terms as may seem expedient; to create, make, draw, accept, endorse, execute, issue, discount, buy, sell, negotiate and deal in bills, notes, bills of lading, warrants, coupons, debentures and other negotiable or transferable instruments;

  • (c) to borrow money in support of the Corporation on such terms and for such purposes as may be approved by the Minister after consultation with the Minister for the time being responsible for finance;

  • (d) to purchase, take on lease or otherwise acquire, and to sell, exchange, surrender, lease, mortgage, charge, convert, turn to account, dispose of and deal with, any movable or immovable property and rights of all kinds;

  • (e) to appoint such agents as the Corporation may consider necessary for the proper discharge of its functions as the Corporation may determine;

  • (f) to do all such other things, whether of an agricultural or other nature, as may be deemed to be incidental or conducive to the proper discharge of the functions of the Corporation.

General Manager.

14. (1) The Minister shall, with the agreement of the Corporation, appoint a General Manager of the Corporation, who shall be the chief executive officer of the Corporation, and shall be present at all meetings of the Corporation unless he has obtained leave of absence from the Corporation or is incapacitated by sickness or other cause.

(2) The Corporation shall delegate to the General Manager such of its functions under this Act as are necessary to enable him to transact effectively the day-to-day business of the Corporation of every kind whatsoever.

(3) In the event of the General Manager being absent on leave or on account of incapacitation, the Corporation, with the approval of the Minister, may appoint a person to act as General Manager during such period of absence or incapacitation, and the person so acting may exercise all the powers and discharge all the duties by this Act exercisable or to be performed by the General Manager.

Staff of Corporation.

15. (1) The Corporation may employ such officers and servants as may be necessary for the efficient conduct and operation of the Corporation.

(2) The Corporation may with the consent of the Minister provide for its General Manager, officers and servants by means of insurance, pension, superannuation or provident funds or otherwise, pecuniary benefits upon leave, retirement, death or termination of service, or in the event of sickness or injury, and may require the General Manager or any such officer or servant to contribute thereto.

Protection of Corporation, etc., from liability.

16. No act or thing done by any member of the Corporation, the General Manager or any officer or servant of the Corporation shall, if the act or thing be done in good faith and without negligence for the purposes of this Act, render that member, the General Manager, officer or employee, or any person acting by his directions, personally liable to any action, proceeding, claim or demand whatsoever.

Accounts and audit.

17. (1) The Corporation shall cause to be kept proper books of account and other books in relation thereto and to all its undertakings, funds, activities and property, and shall prepare such other accounts as the Minister may require and, in addition, yearly balance sheets made up to the end of its financial year, showing in detail the assets and liabilities of the Corporation.

(2) The Corporation shall appoint one or more members of the professional bodies specified in the Schedule to the Accountants (Designations) Act (hereinafter referred to in this Act as the auditors) who shall annually examine, audit and report on the accounts of the Corporation.

(3) The Corporation shall produce and lay before the auditors all books and accounts of the Corporation, with all vouchers in support thereof, and all books, papers and writings in its possession or control relating thereto, and the auditors shall be entitled to require from all members, officers, agents and employees of the Corporation such information and explanation as may be necessary for the performance of their duties as auditors.

(4) The expenses of and incidental to the audit shall be paid by the Corporation.

Annual report.

18. (1) The Corporation shall, within a period of six months after the end of its financial year or within such longer period as the Minister may approve, submit to the Minister a report of its operations during such year, and the auditor’s report, together with the yearly balance sheets and such other statements of account as the Minister shall require; and the Corporation shall, if the Minister so requires, publish them in such manner as the Minister may specify.

(2) The Minister shall lay the Corporation’s report and the auditor’s report, together with the balance sheet and such other statements of account as he may have required, before the National Assembly as soon as practicable.

Reserve Fund and surplus moneys.

19. (1) The Corporation may establish and maintain a Reserve Fund and shall pay into such fund such part of the surplus moneys earned by the Corporation in the course of its operations in any one year as the Board may determine.

(2) The Reserve Fund shall be applied by the Corporation in making good any loss or deficiency which may occur in the course of the business of the Corporation.

(3) Any surplus moneys after deducting therefrom such sums as are required for the purpose specified in subsection (2) of this section shall be disposed of in such manner as the Corporation, subject to the approval of the Minister and the Minister for the time being responsible for finance, may direct, but a prudent balance shall remain in the Reserve Fund.

Rules.

20. The Minister may, after consultation with the Corporation, make rules generally for better carrying out the purposes and provisions of this Act and, in particular and without prejudice to the foregoing generality, may make rules for—

  • (a) raising such loans and making investments, on such terms as the Minister may, after consultation with the Minister for the time being responsible for finance, approve;

  • (b) regulating and controlling the Corporation or any of its agencies;

  • (c) prescribing the procedure to be followed in the appointment of members to the Corporation and its agencies;

  • (d) controlling and regulating the purchase and sale of land for agricultural development;

  • (e) regulating and prescribing the powers, duties, functions, responsibilities and remunerations of officers, employees and agents of the Corporation;

  • (f) prescribing, controlling and regulating schemes for agricultural development.

Exemption from stamp duty.

21. No duty shall be chargeable under the Stamp Duty Act in respect of any instrument executed by or on behalf of or in favour of the Agricultural Development Corporation in cases where, but for this exemption, the Corporation would be liable to pay such duty.

The Agricultural Finance Corporation Act1

Commencement: 21st March, 1969

An Act of Parliament to establish an Agricultural Finance Corporation and to prescribe its powers and duties

Part I—Preliminary

Short title.

1. This Act may be cited as the Agricultural Finance Corporation Act.

Interpretation.

2. In this Act, except where the context otherwise requires—

“this Act” includes any rules or regulations made under this Act; “

agricultural industry” means any industry connected with agriculture or with the processing of agricultural produce;

“agricultural produce” includes anything (whether live or dead) produced in the course of agriculture;

“agriculture” means agriculture as defined in section 2(1) of the Agriculture Act, and also forestry and the establishment, maintenance and exploitation of fisheries in private ownership;

“appraiser” means a person appointed as an appraiser under section 38 of this Act;

“the Board” means the Board of Directors of the Corporation established by section 4 of this Act;

“the Central Agricultural Board” means the Central Agricultural Board established by section 35 of the Agriculture Act;

“co-operative society” means a co-operative society registered under the Co-operative Societies Act;

“the Corporation” means the Agricultural Finance Corporation established by section 3 of this Act;

“Director” means a person who is a member of the Board by virtue of section 4 of this Act or of an appointment made thereunder;

“farmer” means a person who engages in agriculture in Kenya;

“fishery” means a privately-conducted establishment directed to fish culture in farm ponds and fish farming;

“the General Manager” means the General Manager of the Corporation appointed under section 9 of this Act;

“land” includes anything attached to the land;

“the land registrar” means the person charged with the registration of documents of title to land under the written law under which the land is registered;

“loan” means a loan made under this Act;

“mortgage” includes a charge, lien or other security or encumbrance;

“mortgagor” means a person who has mortgaged any land to the Corporation or to whom a loan has been made under this Act, or his personal representative;

“net profit” means the excess of income over expenditure after making adequate provision for depreciation, amortization, and bad and doubtful debts;

“staff” means the officers and servants of the Corporation appointed under section 10 of this Act.

Part II—The Agricultural Finance Corporation

Establishment of Corporation.

3. (1) There is hereby established a Corporation, to be known as the Agricultural Finance Corporation.

(2) The functions of the Corporation shall be to assist in the development of agriculture and agricultural industries by making loans to farmers, co-operative societies, incorporated group representatives, private companies, public bodies, local authorities and other persons engaging in agriculture or agricultural industries.

(3) The Corporation shall be a body corporate with perpetual succession and a common seal, and shall have power to acquire, own, possess and dispose of property, and to contract, and to sue and be sued in its own name.

(4) The Corporation is not subject to the Companies Act or the Banking Act.

Board of Directors

4. (1) There shall be a Board of Directors of the Corporation, which shall, subject to this Act, be responsible for determining the policy of the Corporation and for controlling its operations.

(2) The Board shall consist of—

  • (a) not less than four and not more than six persons appointed by the Minister of whom at least two shall be appointed by reason of their knowledge of banking or financial matters;

  • (b) the Permanent Secretary of the Ministry, or a person deputed by him in writing to take his place as a Director of the Board; and

  • (c) the Permanent Secretary of the Ministry for the time being responsible for finance, or a person deputed by him in writing to take his place as a Director of the Board.

(3) A chairman and a deputy chairman shall be appointed by the Minister, after consultation with the Minister for the time being responsible for finance, from among the Directors, and the deputy chairman may, in the absence of the chairman, exercise all the powers and discharge all the duties which are conferred and imposed by this Act upon the chairman.

(4) A Director appointed under paragraph (a) of subsection (2) of this section shall hold office for such period not exceeding three years from the date of his appointment as may be specified in the instrument appointing him and shall then retire but shall be eligible for reappointment, and in default of any other person having been appointed by the Minister to succeed him within one month of the date of his retirement shall be deemed to have been reappointed.

(5) In the exercise of its powers and in the performance of its functions under this Act, the Board shall act in accordance with any general or special directions that the Minister may give it:

Provided that, if the Minister gives the Board directions which in the Board’s opinion will involve the Corporation in financial loss, the Board is not required to act in accordance with those directions unless the Government has undertaken to reimburse the Corporation the amount of any losses incurred in so acting.

Disqualification of Director.

5. (1) No person shall be appointed a Director if—

  • (a) he is insolvent or has conveyed or assigned his property for the benefit of his creditors generally or has made a composition or arrangement with his creditors; or

  • (b) he is of unsound mind or has been convicted within the preceding five years of an offence and sentenced to imprisonment without the option of a fine.

(2) If the Minister is satisfied that the chairman, the deputy chairman or any other Director appointed under paragraph (a) of subsection (2) of section 4 of this Act—

  • (a) is incapacitated by physical or mental illness; or

  • (b) has become subject to any of the disqualifications specified in subsection (1) of this section; or

  • (c) has been absent from two consecutive meetings of the Board without the leave of the Board; or

  • (d) is otherwise unable or unfitted to discharge the functions of his office,

the Minister may declare his office as chairman, deputy chairman or Director, as the case may be, to be vacant, and shall notify the fact in such manner as the Minister thinks fit; and thereupon the office shall become vacant.

(3) If the chairman, the deputy chairman and any other Director to whom subsection (2) of this section applies—

  • (a) at any time, by notice in writing under his hand addressed to the Minister, resigns his office as such;

  • (b) dies; or

  • (c) is declared under that subsection to have vacated his office,

the Minister shall appoint a new Director to discharge the functions of that office:

Provided that where the vacancy to be filled is in the office of chairman or deputy chairman the Minister shall consult the Minister for the time being responsible for finance before exercising such power of appointment.

Meetings of Board.

6. (1) Meetings of the Board shall be convened by the chairman, or in his absence by the deputy chairman, at such times and places as he determines but not less than four times a year.

(2) The chairman, or in his absence the deputy chairman, may at any time, and shall at the request in writing of at least three Directors, convene a special meeting of the Board.

(3) A notice convening a special meeting of the Board shall state the purposes for which the special meeting is convened.

Procedure of Board.

7. (1) If the chairman is absent from a meeting of the Board, the deputy chairman shall act as chairman at that meeting.

(2) Three Directors who include the chairman or the deputy chairman shall constitute a quorum at any meeting of the Board, and all acts, matters or things authorized or required to be done by the Board shall be effected by resolution passed by a majority of the Directors present and voting at a meeting at which a quorum is present.

(3) At every meeting of the Board, the chairman, or in his absence the deputy chairman, shall have a casting vote in addition to his deliberative vote as a Director.

(4) All orders, directions and decisions of the Board shall be made, given and notified under the hand of the chairman or deputy chairman, or of the General Manager if he is so authorized by the Board.

(5) Minutes of the proceedings of every meeting of the Board shall be regularly entered in a minute book, and the book shall be kept so as to show proper tabulated details of the business conducted or transacted at each meeting.

(6) The minutes of the proceedings of each meeting shall be placed before the next ensuing meeting and, if then passed as correct, shall be confirmed by the signature of the person who presided at that meeting, and when so confirmed shall be prima facie evidence in all proceedings of the matter recorded in the minutes.

(7) Subject to this Act and to any general or specific directions of the Minister, the Board shall regulate the procedure at its meetings as it considers proper.

Matters on which Director may not vote.

8. (1) A Director shall not at a meeting of the Board take part in the discussion of nor vote upon an application for a loan made by a person who is—

  • (a) related to that Director within the third degree of affinity or consanguinity; or

  • (b) a debtor, creditor, partner or employee of that Director; or

  • (c) a debtor under a mortgage of a body of persons, whether incorporated or not, of which that Director is a director or under which he holds any office or position other than that of auditor.

(2) A Director who is in any way whether directly or indirectly, interested in a proposed loan or in a loan then subsisting shall declare the nature of his interest at the first meeting at which he is present when the question of that loan is taken into consideration, if his interest then exists, or, in any other case, at the first meeting at which he is present after he becomes so interested, and shall take all reasonable steps to ensure that such declaration shall be recorded in the minutes of the meeting:

Provided that a general notice given by a Director to the effect that he is a member of a specified body of persons, company or firm and is to be regarded as interested in all transactions connected therewith shall be a sufficient declaration under this subsection.

(3) Subject to subsection (1) of this section a Director who shall have declared his interest in accordance with subsection (2) of this section may attend and be counted in the quorum of, but shall not vote in relation to that matter, at any meeting which may consider or pass any application or other resolution in respect of such a loan.

(4) Any person who contravenes subsection (1) or subsection (2) of this section shall be guilty of an offence and liable to imprisonment for a term not exceeding three years or to a fine not exceeding five thousand shillings, or to both such imprisonment and such fine.

Appointment and duties of General Manager.

9. (1) The Board, with the approval of the Minister given after consultation with the Minister for the time being responsible for finance, shall appoint a General Manager of the Corporation, who shall as far as possible be present at all meetings of the Board and shall at such meetings be entitled to speak but not to vote.

(2) It shall be the duty of the General Manager to undertake executive responsibility for the functions of the Corporation and to perform the other functions conferred upon him by this Act.

(3) The General Manager shall act in accordance with any special or general directions which the Board may give him.

(4) The General Manager is hereby empowered to administer oaths and take statutory declarations in matters where statements upon oath and statutory declarations are required by this Act.

(5) In the event of the General Manager being unable to exercise his functions as such through illness, leave, absence from Kenya or other cause, a person shall be appointed in the manner specified in subsection (1) of this section to act as General Manager, and the person so appointed may exercise all the power and discharge all the duties which are conferred and imposed by this Act upon the General Manager until such time as the Board considers that the General Manager is again able to exercise his functions as such.

Appointment of staff.

10. (1) The Board may appoint, upon such terms and conditions as it thinks proper, such other officers and servants as it considers necessary or desirable for the efficient conduct and operation of the Corporation.

(2) Every member of the staff shall, subject to this Act, exercise the powers and functions and perform the duties assigned to him from time to time by the General Manager.

Remuneration.

11. The Directors (other than public officers in receipt of salary), the General Manager and the staff shall be paid out of the funds of the Corporation such salaries and allowances as the Corporation, with the approval of the Treasury, may from time to time determine, and such travelling and other expenses as they may incur in the performance of their duties as such.

Pension and provident funds.

12. (1) The Board may, subject to the approval of the Minister and the Treasury, establish, control, manage, maintain and contribute to pension or provident funds for the benefit of the General Manager and the staff, and may grant pensions and gratuities from any such fund to them on their retirement from the service of the Corporation and to their dependants on their death.

(2) If neither a pension nor a provident fund is established under subsection (1) of this section, or if a fund is established but in the opinion of the Board it provides insufficient benefits, the Board may, with the approval of the Minister and the Treasury, grant from the funds of the Corporation pensions and gratuities, or additional pensions and gratuities, as the case may be, to the General Manager and the staff on their retirement from the service of the Corporation and to their dependants on their death.

Execution of documents.

13. (1) The common seal of the Corporation shall be authenticated by the signature of the chairman or deputy chairman of the Board and by the signature of the General Manager or some other person so authorized by the Board.

(2) All documents, other than those required by law to be under seal, made by, and all decisions of, the Corporation may be signified under the hand of the chairman or deputy chairman of the Board, or of the General Manager if he is so authorized by the Board.

Powers of Corporation.

14. (1) The Corporation shall, subject to this Act, have power to do all such things and to enter into all such transactions as it considers necessary for, or conducive or incidental to, the proper discharge of the functions described in section 3(2) of this Act, including, without prejudice to the generality of the foregoing, power—

  • (a) to make loans of money in accordance with Part III of this Act;

  • (b) with the concurrence of, and subject to such limitations as may be imposed by, the Treasury, to borrow money or obtain credit either in Kenya or abroad;

  • (c) to furnish managerial, technical and administrative advice, or to assist in obtaining such advice, for agricultural industries;

  • (d) after consultation with the Treasury, to invest money which is not for the time being needed for discharging the functions of the Corporation in investments for the time being authorized by law for the investment of trust moneys, or to place any such money on deposit at interest with any public body;

  • (e) to create, make, draw, accept, endorse, execute, issue, discount, buy, sell, negotiate and deal in bills, notes, warrants, coupons, stock, debentures and other negotiable or transferable instruments;

  • (f) subject to this Act, to mortgage the property of the Corporation to secure the repayment of money borrowed by the Corporation.

(2) Notwithstanding subsection (1) of this section, the Corporation shall not borrow any money where the result would be that the total indebtedness (whether present or contingent) of the Corporation would exceed the sum of fifteen million pounds, or such larger amount as the Treasury may, by notice in the Gazette, determine.2

(3) The Corporation may delegate to the General Manager its power to grant loans under this Act.

(4) No loan shall be made out of the funds of the Corporation to any Director or to any member of the staff unless—

  • (a) it is for the purchase of housing accommodation or a motor vehicle; or

  • (b) it is for agricultural purposes,

and the interest of the applicant has been disclosed and recorded in the minutes of the meeting recommending approval of the application and the consent of the Minister to the proposal has been obtained.

Funds of Corporation.

15. (1) The funds of the Corporation shall consist of—

  • (a) all moneys, funds and securities vested in the Corporation by section 48 of this Act;

  • (b) any money provided by Parliament;

  • (c) any money borrowed under section 14(1) (b) of this Act;

  • (d) any money received by way of interest on, or in repayment of, or otherwise in connexion with, loans made by or vested in the Corporation;

  • (e) such moneys as the Minister may from time to time approve as funds of the Corporation.

(2) The Corporation shall pay to the Government interest, at such rate as the Treasury, after consultation with the Minister and with the Board, may from time to time determine upon any money provided by Parliament and upon any money which, by virtue of subsection (1)(a) of this section, forms part of its funds and was provided by Parliament; and any interest payable under this subsection shall be paid upon such dates as the Permanent Secretary to the Treasury may direct.

Reserve fund.

16. (1) The Board shall create a reserve fund which shall be credited from time to time with any net profit earned by the Corporation.

(2) The reserve fund shall be applied by the Board in making good any loss or deficiency which may occur in any of the transactions of the Corporation.

(3) Whenever any balance remains in the reserve fund after providing for any loss or deficiency as aforesaid, it may be devoted to any of the purposes to which any other fund of the Corporation may by this Act be devoted.

(4) The reserve fund created in accordance with subsection (1) of this section shall be credited with any net profit earned by the Corporation until such time as the balance remaining after providing for any loss or deficiency as aforesaid shall exceed ten per centum of the funds of the Corporation as defined in section 15 of this Act, and shall thereafter not be reduced below that level.

(5) Subject to subsection (4) of this section, as soon as the reserve fund and other funds of the Corporation total such amount as in the Board’s opinion is adequate to enable the Corporation fully to carry out its objects, there shall as soon as possible after the accounts have been duly audited and certified in accordance with section 40(1) of this Act be paid to the Permanent Secretary to the Treasury such amount as the Board shall direct out of—

  • (a) the profits of the Corporation; and

  • (b) the reserve funds of the Corporation.

(6) All amounts paid to the Permanent Secretary to the Treasury under subsection (5) of this section shall be applied towards the redemption of any loans made by the Government to the Corporation, and interest upon the amount repaid shall cease to be payable as from the date of repayment.

Moneys borrowed by Corporation charged on assets.

17. Any moneys borrowed by the Corporation under section 14(1) (b) of this Act are by this section charged upon the assets of the Corporation, and shall be repayable primarily out of the revenues of the Corporation.

Part III—Loans

Interpretation of Part.

18. In this Part, “farmer” includes the duly authorized attorney of a farmer, the personal representative of a deceased farmer, a trustee of a farmer appointed by deed or will and a receiver appointed by an order of the court or by a mortgagee, even though that person may not have been specifically authorized to mortgage land.

Loans to farmers.

19. (1) The Corporation may, in accordance with rules made under this Act and subject to the provisions of subsection (3) of section 14 of this Act but otherwise upon such terms and conditions as to interest, repayment, security or otherwise and in such manner as the Board may think fit, make a loan to a farmer to enable him to engage more effectively in agriculture—

  • (a) upon his applying for a loan in writing in such form as the Board from time to time approves; and

  • (b) upon the authority of a resolution of a meeting of the Board at which the application is properly considered and approved.

(2) A loan under this section may be made for the purpose of reducing or discharging an existing first mortgage if in the opinion of the Board the terms of the mortgage are onerous:

Provided that a loan shall not be made for the purpose of reducing an existing mortgage unless the mortgagee executes a waiver of priority in favour of the Corporation under section 28 of this Act.

(3) A loan under this section shall be made for such period, not exceeding thirty years, and on such terms, as the Board may determine.

Charge on the land.

20. (1) Where the Board so directs a farmer who is the registered owner of land which is not encumbered with any mortgage (other than one in respect of which the mortgagee has executed a waiver of priority in favour of the Corporation under section 28 of this Act) shall execute a first mortgage of the land in favour of the Corporation.

(2) Where the conditions of the loan are such that the Board is satisfied that the execution of a formal first mortgage is not necessary, or where the Board otherwise directs, the borrower shall not be required to execute such a document, and instead the General Manager shall—

  • (a) deliver a written notification of the loan in the prescribed form to the land registrar, who shall register it against the title to the borrower’s land and, where appropriate, endorse a memorandum of the loan on the grant or certificate of title, and thereupon the land shall stand charged with the repayment of the loan and the interest thereon subject to any prior registered charge; and

  • (b) upon repayment of the loan and all interest due on it, give written notice of the repayment to the land registrar, who shall register it against the title to the borrower’s land and cancel any memorandum of the loan which is endorsed on the grant or certificate of title, and thereupon the charge created in respect of the loan shall be extinguished,

and a written notification delivered under this subsection shall for all the purposes of this Act be deemed to be a mortgage of the land comprised therein executed by the borrower to secure the loan.

(3) In addition to the action prescribed by subsection (2) of this section, the General Manager shall—

  • (a) deliver a written notification of the loan in the prescribed form to the Registrar-General, who shall register it as an instrument under the Chattels Transfer Act, and it shall be deemed to be an instrument within the meaning of that Act assigning and transferring to the Corporation, by way of mortgage to secure the loan and the interest on it, all the movable property for the time being of the borrower (other than his household and personal effects); and

  • (b) upon repayment of the loan and all interest due on it, give written notice of the repayment to the Registrar-General, who shall register it as a memorandum of satisfaction under the Chattels Transfer Act, and it shall be deemed to be a memorandum of satisfaction within the meaning of that Act in respect of the whole of the loan.

Extension of time.

21. The Board may in its discretion postpone the repayment or extend the time for the repayment of a loan or for the payment of any interest payable thereon, but so that the maximum period for repayment in respect of any loan shall not exceed thirty years.

Consent by trustee to short-term loan.

22. If a trustee consents to his security being postponed to enable a loan to be made, his consent shall not itself be deemed improper or a breach of trust so as to render the trustee liable in respect of any loss resulting from the loan having been made.

Loan to co-operative society.

23. (1) The Corporation may make a loan to any co-operative society primarily engaged in agriculture to enable the society to erect buildings, install equipment or buy land or otherwise to promote any one or more of the objects of the society—

  • (a) upon the society applying for a loan in writing in such form as the Board from time to time approves signed by the chairman and the secretary of the society; and

  • (b) upon the Board being satisfied that the chairman and secretary of the society have been authorized, by a resolution of a meeting of the society passed by a majority of two-thirds of the members of the society and which does not offend any by-laws of the society, to apply for a loan; and

  • (c) upon the society lodging with its application a list of the persons who were members of the society at the time of the resolution; and

  • (d) upon the Board being satisfied that the accounts, books, papers and documents of the society are in order; and

  • (e) upon such security (if any) as the Board may require; and

  • (f) upon the authority of a resolution of a meeting of the Board at which the application is properly considered and approved.

(2) The Commissioner for Co-operative Development shall, at the request of the Board, furnish such lists and other information as the Board may require regarding any co-operative society.

Examination of books of co-operative society.

24. The Board shall at all times have full access to all accounts, books, papers and documents of any co-operative society to which a loan has been made or from which an application for a loan has been received, and may cause all such accounts, documents, papers or books to be examined by a member of the staff or by such other person as the Board may appoint.

Liability of members of co-operative society.

25. (1) Where a loan is made to a co-operative society, all persons who were members of the society at the time of the application for the loan and are named in the list referred to in section 23(1) (c) of this Act shall be jointly and severally liable to repay the loan and to pay the interest payable on the loan.

(2) If a person who was a member of a co-operative society at the time of the application for a loan and is named in the list referred to in section 23(1)(c) of this Act ceases to be a member of that society, he shall nevertheless remain liable under subsection (1) of this section in respect of any part of a loan and any interest which was outstanding at the time he ceased to be a member, and on ceasing to be a member he shall provide security to the satisfaction of the Board for the due discharge of that liability.

(3) Where a co-operative society is a company registered under the Companies Act, the liability of the shareholders of the company is limited to the amount (if any) of the share capital not called up, and subsection (2) of this section shall not apply to a person who has ceased to be a shareholder in the company.

Part IV—General Provisions as to Loans

Rate of interest, and form of security.

26. (1) A loan shall bear such rate of interest as the Board, with the approval of the Minister for the time being responsible for finance given after consultation with the Minister, may prescribe, either generally or for any particular class of loan.

(2) A mortgage given under this Act shall be in such form as is prescribed under any written law relating to that mortgage or, where no such form is prescribed, in such form as the Board may determine.

Appraisal of land offered as security.

27. The Board, if it considers it desirable, shall cause land offered as security for a loan to be appraised by an appraiser, and in such case the appraiser shall render to the Corporation an appraisal of the land in a form approved by the Board.

Waiver of priority.

28. Any mortgagee may, by waiver endorsed upon or incorporated in the mortgage, agree that a mortgage in favour of the Corporation shall have priority, either for the purposes of this Part or for any of the other purposes of this Act, over his mortgage, and such agreement when registered in the same manner as the mortgage held by him shall for all purposes be binding upon him and as from the date of registration upon his successors in title.

Loan to be taken up within three months.

29. If a loan has been authorized by the Board and the applicant does not, within a period to be fixed by the Corporation (but not exceeding three months after the applicant has been notified of the authorization), execute such documents as the Board may consider necessary to complete the security and lodge them with the Corporation together with the title deeds of and other documents relative to the applicant’s title to the property (if it is to be mortgaged), the Board may withdraw its authorization of the loan, and in that event the loan shall not be made and no part of the fees paid in connexion with the application shall be refunded.

Covenants and conditions to be implied in mortgages.

30. (1) In every mortgage or other security document executed to secure a loan, there shall be implied on the part of the farmer and in favour of the Corporation the covenants and conditions set out in the Schedule to this Act.

(2) All such covenants and conditions shall extend to and bind the successor in title of the mortgagor.

Corporation may withhold loan where debtor in default.

31. If a loan is made, and—

  • (a) at any time any sum of money, whether principal or interest, due in respect of the loan is unpaid; or

  • (b) the Board considers that the loan has not been applied to the purposes for which it was made or has not been carefully and economically expended; or

  • (c) the debtor becomes insolvent, or is sentenced to imprisonment without the option of a fine, or conveys or assigns his property for the benefit of his creditors generally, or makes a composition or arrangement with his creditors, or (the debtor having died) his estate is or is about to be administered in bankruptcy; or

  • (d) there has been a breach of any other condition of the loan; or

  • (e) the loan is not applied within such time as the Corporation may consider reasonable to the purpose for which it was made,

the Corporation may in addition to any other remedies refuse to pay any portion of the loan which has been approved but not yet paid.

Application of money repaid prematurely.

32. (1) If a person to whom a loan has been made under this Act (in this section referred to as a borrower) at any time pays to the Corporation an amount in excess of the instalment then due under the mortgage, the Corporation may, if it thinks fit, on the date when the next instalment falls due, apply such amount in payment of the capital portion of one or more of the instalments which would otherwise thereafter fall due, and the instalments may then be recalculated on the basis of balance of capital owing by the borrower over the remainder of the period for which the loan was originally made.

(2) Such an excess payment, and its application by the Corporation as provided in subsection (1) of this section, shall not exempt the borrower from paying his next instalment when it is due, reduced or recalculated where appropriate.

(3) The Corporation may allow a borrower a rebate of interest, in respect of money paid prematurely, and the rebate shall be in the form of a reduction of the rate of interest charged on that money by one per cent per annum from the date of the payment up to the date when the next instalment falls due.

(4) If the total amount owing to the Corporation is paid off before the due date for payment, the Corporation may claim interest only up to the date of payment:

Provided that, in the case of repayment on a date before the due date for repayment, three months’ notice of intention to repay shall be given to the Corporation, and if no such notice is given the Corporation may claim interest in respect of such amount for the period by which the notice actually given falls short of three months.

Procedure for recovery on default by occupation or sale of property.

33. (1) In any of the circumstances or events mentioned in section 31 of this Act, the Corporation may, by notice served on the person to whom the loan has been made or his personal representative (in this section referred to as the debtor) personally or by post, demand repayment of the loan and, after due notice of such demand has been served in similar manner on all subsequent mortgagees of the land on the security of which the loan was made, the Corporation may, without recourse to any court, enter upon the land and either take possession of or sell by public auction the whole or (where subdivision is not prohibited under section 34 of the Government Lands Act) any part of the land upon such terms and conditions as the Board may in all the circumstances consider proper.

(2) At a public auction held in pursuance of subsection (1) of this section, the Corporation, by its agent duly authorized in writing, may bid for and purchase the whole or any part of the land offered for sale.

(3) The Corporation, as agent of the debtor, may transfer the land to itself or any other purchaser and give a good and unencumbered title to it, and may execute all such documents and do all such other acts as may be necessary to complete the transfer.

(4) A sale under subsection (1) of this section shall not be held until—

  • (a) a notice of the sale has been published in the Gazette, or in a newspaper circulating in the area in which the land is situated, stating the date, time and place of the sale, and the terms and conditions of the sale; and

  • (b) twenty-one days have elapsed since the date of publication of the notice; and

  • (c) all reasonable steps have been taken by the Corporation to notify in writing the persons having a registered interest (or any unregistered interest of which the Corporation knows) in the land of the intended sale.

Inspection of land.

34. For the purpose of ascertaining whether a loan has been or is being properly applied, any member of the staff, or any person deputed by the Corporation to inspect land under this Act, may enter upon any land in respect of which the loan was made and make such inspections thereon as he considers proper.

Protection against liability.

35. Where a loan is made in good faith, and it is afterwards discovered that—

  • (a) the land comprised in any mortgage or other security document in respect of the development of which a loan was granted was not used, or was not to be used, as the case may be, for agricultural purposes; or

  • (b) the loan was not applied for the purpose for which it was made within the time specified by the Board, or the loan was applied for purposes other than that for which it was made,

no Director and no member of the staff shall be personally liable therefor, but—

  • (i) the Board or the General Manager may refuse to pay any part of the loan which has not already been paid; and

  • (ii) the Board may at once proceed to call in and recover the money already lent.

Part V—Powers of Corporation

Power of Corporation to inspect valuation rolls.

36. The Corporation may inspect without fee or charge the valuation roll of any local authority which now exists or hereafter exists, and it shall be the duty of officers of a local authority, upon application, to supply to the Corporation without fee or charge, particulars as to any valuation of rateable property in respect of which the local authority has the power to levy rates.

Power of Corporation to hold land.

37. (1) The Corporation may hold land which is—

  • (a) required for its business premises; or

  • (b) required for the provision of housing accommodation for the staff; or

  • (c) acquired as the result of foreclosure or otherwise on account of indebtedness to the Corporation,

but not otherwise.

(2) All developed land acquired in accordance with subsection (1) (c) of this section shall be sold at the earliest favourable opportunity upon such special terms and conditions as the Corporation may determine, but the Directors, the General Manager and members of the staff shall not buy directly or indirectly any land sold in pursuance of this subsection.

Power of Corporation to appoint appraisers.

38. (1) The Corporation may appoint appraisers to inspect and appraise land for the purposes of this Act.

(2) Fees and travelling expenses of appraisers shall be paid in accordance with rates specified by the Corporation with the approval of the Treasury, and shall be payable by the applicants.

(3) Every administrative officer, Government surveyor, police officer or other public officer shall, without additional emolument, when required by the Corporation to do so, report on any cases submitted to him and generally act as agent or inspector of the Corporation.

Power of Corporation to act as agent.

39. The Corporation may be appointed and may act as agent of the Government in the making, administration and recovery on behalf of the Government of any loans to farmers or others:

Provided that no expenses of such agency shall fall to be paid from the funds of the Corporation, and the Corporation shall be indemnified by the Government against any losses, costs and expenses which may be sustained or incurred by the Corporation in the performance of such agency.

Part VI—Accounts of Corporation

Publication of accounts.

40. (1) The General Manager shall, within four months after the 31st March in each year, deliver to the Minister a statement of accounts duly audited and certified showing—

  • (a) the assets and liabilities of the Corporation on that date; and

  • (b) a profit and loss account of the Corporation for the year.

(2) Every such statement shall be signed as correct by the General Manager and at least two Directors.

(3) The Minister shall cause every statement delivered to him under subsection (1) of this section to be laid before the National Assembly.

(4) In addition, the General Manager shall render to the Minister promptly such other accounts, reports and statements as the Minister may from time to time require.

Inspection and audit of accounts.

41. (1) The Treasury shall have full access to all accounts, documents, papers and books of the Corporation, and the General Manager shall at all times furnish to the Treasury all such information as it may require.

(2) The accounts of the Corporation shall be examined, audited and reported on annually by the Controller and Auditor-General or by such other person as the Minister may appoint, being a person who is a member of one or more of the bodies specified in the Schedule to the Accountants (Designations) Act.

Part VII—Miscellaneous

False statements.

42. Any applicant for a loan who wilfully fails to disclose any material information within his knowledge, or who wilfully makes any statement which he knows to be false or does not believe to be true, shall be guilty of an offence and liable to imprisonment for a term not exceeding three years or to a fine not exceeding five thousand shillings, or to both such imprisonment and such fine, and shall further be liable to have any loan made to him cancelled forthwith and to repay to the Corporation forthwith all sums lent to him together with interest thereon.

Corrupt acts.

43. (1) If a Director, the General Manager or a member of the staff, or any appraiser, inspector or agent appointed by the Corporation, directly or indirectly receives any fee or reward (other than as authorized by or under this Act) from any person in respect of or in connexion with a loan or an application for a loan, he shall be guilty of an offence and liable to imprisonment for a term not exceeding five years or to a fine not exceeding ten thousand shillings, or to both such imprisonment and such fine.

(2) If any person in respect of or in connexion with a loan or an application for a loan, bribes or corruptly influences a Director, the General Manager or a member of the staff, or any appraiser, inspector or agent appointed by the Corporation, he shall be guilty of an offence and liable to imprisonment for a term not exceeding five years or to a fine not exceeding ten thousand shillings, or to both such imprisonment and such fine.

(3) Any person who—

  • (a) having a pecuniary interest in any land offered as security for a loan; or

  • (b) being a debtor, creditor, partner or employee of an applicant for a loan or being related to such an applicant within the third degree of affinity or consanguinity,

acts as appraiser in connexion with the land offered as security for such loan shall be guilty of an offence and liable to imprisonment for a term not exceeding three years or to a fine not exceeding five thousand shillings, or to both such imprisonment and such fine.

Secrecy.

44. (1) Any person who is on official duty under, or is employed in the administration of, this Act shall treat all documents, information, returns and forms relating to an application for a loan or the making of a loan as secret.

(2) Any person who has possession of or control over any document, information, return or form relating to an application for a loan or the making of a loan, and who communicates any such information or anything contained in any such document, return or form to any person—

  • (a) other than a person to whom he is authorized by proper authority to communicate it; or

  • (b) otherwise than for the purposes of this Act,

shall be guilty of an offence and liable to imprisonment for a term not exceeding twelve months or to a fine not exceeding three thousand shillings, or to both such imprisonment and such fine.

Rules.

45. The Minister, on the advice of the Board, may make rules as to all or any of the following matters, namely—

  • (a) the meeting and proceedings of the Board;

  • (b) the procedure for applying for loans, and the conditions which may be imposed on the making of a loan;

  • (c) the recovery of any costs resulting from examination of application for advances;

  • (d) the appointment of agents and the establishment of agencies, and their respective powers;

  • (e) the management of the Board and its agencies;

  • (f) the cases in which property given as security shall be insured;

  • (g) the forms to be used, and the books, accounts and records to be kept;

  • (h) the rights and privileges and the duties of the staff and the manner of the performance of their duties;

  • (i) generally for fully and effectually carrying out and giving effect to the provisions and purposes of this Act, and for guarding against violations of this Act.

Regulations.

46. The Board, with the consent of the Minister, may make regulations prescribing the fees, costs and expenses to be charged and payable in respect of loans and applications for loans, and any such regulations may provide for—

  • (a) scales of application fees and appraisal fees based on the amount of the loan for which application is made;

  • (b) reduced scales of application fees and appraisal fees where the application is for a short-term loan;

  • (c) the basis upon which travelling expenses incurred by appraisers on appraisals are to be calculated;

  • (d) the refund or partial refund of the application fee where an application for a loan is refused;

  • (e) the reduction of the application fee where an amount less than that applied for is lent;

  • (f) a scale of conveyancing costs and fees for the preparation and completion of mortgages and other securities and discharges thereof;

  • (g) charging the borrower with any expenses, including copying charges, actually incurred by the Corporation at any time during the continuance of the loan in connexion with such loan;

  • (h) the time and mode of payment of fees, costs and expenses;

  • (i) the remission of fees, costs and expenses by the Board.

47. Subject to section 48 of this Act, the Agricultural Credit Act is repealed.

48. (1) On the commencement of this Act—

Transfer of property and liabilities of former Corporation and Land and Agricultural Bank.

  • (a) all the property of every kind of the former Corporation, and all the property of every kind of the Land Bank, shall be transferred to and vest in the Corporation by virtue of this section and without further assurance;

  • (b) all the liabilities and contractual obligations of the former Corporation, and all the liabilities and contractual obligations of the Land Bank, shall become those of the Corporation;

  • (c) all directions, orders, rules, appointments, requirements, authorizations, registrations and other things given, made or done by the former Corporation or the Land Bank under the former Act or any subsidiary legislation thereunder, and subsisting immediately before such commencement, shall be deemed to have been given, made or done by the Corporation;

  • (d) every appointment of the former Corporation or of the Land Bank to do anything, and every reference to the former Corporation or to the Land Bank in any written law or instrument, shall be deemed to be an appointment of or reference to the Corporation;

  • (e) any reference to the former Corporation or to the Land Bank in any contract shall be deemed to be a reference to the Corporation; and

  • (f) every person who, immediately before such commencement, was an officer or servant of the former Corporation or of the Land Bank (not being then under notice of dismissal or resignation) shall become a servant of the Corporation:

    Provided that such a person who gives to the Corporation within two weeks after such commencement notice in writing that he does not wish to become an officer or servant of the Corporation shall be deemed not to have become an officer or servant of the Corporation on such commencement but to have retired from the service of the Corporation or the Land Bank, as the case may be, on the day but one preceding such commencement.

(2) In subsection (1) of this section—

“the former Corporation” means the Agricultural Finance Corporation established by section 3 of the former Act;

“the former Act” means the Agricultural Credit Act (hereby repealed);

“the Land Bank” means the Land and Agricultural Bank established by section 19 of the former Act.

Schedule

(S. 30)

covenants and conditions implied in every mortgage

1. That the mortgagor will from time to time, so long as money remains owing on this security, pay the rent after it becomes due under any agreement, lease or licence under which he holds the land, and will well and substantially repair and keep in good and substantial repair and condition all buildings and other improvements erected and made upon the land; and that the Corporation shall at all times be at liberty by itself, its agents or its servants to enter upon the land to view and inspect the said buildings and improvements.

2. That the mortgagor will not at any time alienate his interest in the said security, or any part thereof, by way of sale or gift or in any other manner whatsoever, without the prior consent in writing of the Corporation, which consent shall not be unreasonably withheld.

3. That if the mortgagor fails or neglects to pay the rent as aforesaid, to repair the said buildings and improvements or keep them in good and substantial repair and condition as aforesaid, it shall be lawful for, but not obligatory upon, the Corporation, at the cost and expense in all things of the mortgagor, to pay the rent, to repair the buildings and improvements or to keep them in good and substantial repair and condition, as the case may be.

4. That all moneys expended by the Corporation in paying rent as aforesaid, or in repairing or keeping in repair any of the buildings and improvements as aforesaid, or in the insurance thereof or in attempting to exercise any power, right or remedy herein contained or implied in favour of the Corporation, shall be a charge on the land, together with interest at the rate of not more than the rate per centum charged in the mortgage computed from the date or dates of such moneys being expended.

5. That insurance shall be effected as may be prescribed or directed by the Board in the joint names of the applicant and the Corporation; and that every policy of insurance so effected and every renewal receipt shall be deposited with the Corporation.

6. That if the mortgagor makes default in the full and punctual payment of any instalment of interest or principal, or if the mortgagor makes default in the faithful observance and performance of any covenant or condition contained in or implied by the mortgage, the Corporation shall be at liberty to call up and compel payment of all principal, interest and other moneys for the time being owing under this security, notwithstanding that the time or times appointed for their payment thereof respectively may not have arrived.

7. That the mortgagor will at all times cultivate and manage the land in a skilful and proper manner, either personally or by proxy, according to the rules of good husbandry, and particularly will fulfil all conditions of development and occupation to which in any grant from the Government such lands are subject (failure in the performance of this condition entailing the immediate recovery of the loan should the Corporation so desire), and that the conditions of any grant from the Government in respect of land used exclusively for stock farming shall in all respects be punctually fulfilled.

The Kenya Post Office Savings Bank Act, 19771

Date of Assent: 30th December, 1977

Date of Commencement: By Notice

An Act of Parliament to establish the Kenya Post Office Savings Bank and to encourage and facilitate personal saving

enacted by the Parliament of Kenya as follows—

Short title and commencement.

1. This Act may be cited as the Kenya Post Office Savings Bank Act, 1977, and shall come into operation on such date as the Minister may, by notice in the Gazette, appoint.

Interpretation.

2. In this Act—

“Bank” means the Kenya Post Office Savings Bank established under section 3;

“Board” means the Board of Directors appointed under section 5;

“Corporation” means the Kenya Posts and Telecommunications Corporation established under the Kenya Posts and Telecommunications Corporation Act, 1977;

“expenses” has the meaning assigned to it in section 10;

“former Bank” means the Post Office Savings Bank established under the Post Office Savings Bank Act (now repealed);

“revenue” means income of the Bank but does not include moneys received on deposit.

Establishment of the Bank and vesting of assets and liabilities.

3. (1) There is hereby established a savings bank to be known as the Kenya Post Office Savings Bank which shall replace the former Bank and which shall be a body corporate with perpetual succession and a common seal and shall have power to sue and be sued in its corporate name and to acquire, hold and dispose of movable and immovable property for the purposes of the Bank.

(2) The assets and liabilities of the former Bank subsisting at the commencement of this Act shall on that day be vested in the Bank.

(3) Savings accounts vested in the Bank under subsection (2) shall be maintained by the Bank subject to any rules made under section 15.

Functions of the Bank.

4. It shall be the responsibility of the Bank—

  • (a) to encourage thrift and provide the means and opportunities for the people of Kenya to save;

  • (b) to open, maintain or close branches at such places, including at any office of the Corporation, as the Board deems appropriate;

  • (c) to provide facilities for savings accounts including the accounts vested in the Bank on the commencement of this Act;

  • (d) to issue such other instruments or facilities for personal saving in such form as it may from time to time deem to be appropriate and desirable in furtherance of the objects of this Act;

  • (e) to invest any surplus funds in accordance with section 11;

  • (f) to cover the expenses of its operation with revenue earned from its investments taking one year with another.

Appointment of Board of Directors.

5. (1) The Bank shall be under the control of a Board of Directors which shall, subject to the direction of the Minister, take such steps as may be necessary and desirable for the proper management of the Bank and for the promotion of the objects and purposes of this Act.

(2) The Board shall consist of—

  • (a) the Permanent Secretary to the Treasury who shall be the chairman;

  • (b) the Managing Director of the Corporation;

  • (c) a public officer employed by the Treasury appointed by the Minister;

  • (d) three other members appointed by the Minister who shall not be employees of the Government.

(3) A quorum for any meeting of the Board shall be three: Provided that no meeting of the Board shall be held or continued notwithstanding that there is a quorum unless either the Permanent Secretary to the Treasury or the public officer appointed under paragraph (c) of subsection (2) is present.

Appointment of General Manager.

6. (1) The Board shall appoint a General Manager who shall be responsible for the implementation of the policy and savings programmes of the Bank as laid down by the Board from time to time.

(2) The General Manager shall attend meetings of the Board.

(3) The General Manager may with the consent of the Board employ such persons as may be necessary for the execution of this Act.

(4) Employees of the Bank shall be engaged on such terms of service as the Board and the Treasury may approve:

Provided that the Bank may arrange with the Corporation that employees of the Corporation shall undertake duties on behalf of the Bank and that the Corporation shall be reimbursed in accordance with section 10.

Deposits and repayments.

7. Deposits of money to be paid into the Bank whether paid into a savings account or in respect of any other savings facility issued by the Bank from time to time shall be received and repaid under such conditions as may be prescribed in accordance with rules made by the Board under section 15.

Security of moneys deposited.

8. (1) The repayment of all moneys deposited in the Bank together with interest thereon is hereby guaranteed by the Government and accordingly if at any time the assets of the Bank are insufficient to pay the outstanding lawful claim of any depositor, the deficiency shall be charged upon and paid out of the Consolidated Fund.

(2) The deficit in the reserve account of the former Bank as at the 31st December, 1975, shall be charged upon and paid out of the Consolidated Fund within six months of the commencement of this Act.

Interest payable.

9. Interest shall be payable on savings deposits and on such other savings instruments as may be issued by the Bank from time to time in accordance with rules made by the Board under section 15.

Exemption from lottery licences.

9A. Nothing in the Betting, Lotteries and Gaming Act shall be taken to apply to any instrument issued under this Act by reason of any use or proposed use of chance to select particular instruments for special benefits, if the terms of the issue provide that the amount subscribed is to be repayable in full in the case of all the instruments.

Expenses.

10. (1) All expenses incurred in the execution of this Act shall be met from the revenue of the Bank.

(2) For the purposes of this Act, “expenses” means the cost of any work or service done by or in connection with the Bank, including such sum on account of administrative and other overhead expenses incurred by the Corporation as may, with the approval of the Permanent Secretary to the Treasury, be reasonably assigned to that work or service.

Investment of funds.

11. (1) Except in so far as any sums may be prescribed by the Board to be kept in hand for the general purposes of the Bank, the Board shall ensure that any surplus of cash in the Bank shall be invested in interest-bearing securities or be employed at interest as the Board may direct.

(2) Any sums of money that may from time to time be required for the repayment of any deposits or for the payment of interest thereon or expenses incurred in the execution of this Act may be raised by the sale of the whole or a part of such securities:

Provided that any sums of money which may be required for such purposes may, with the approval of the Minister, be advanced to the Bank by the Treasury until they can be raised by the sale of such securities and such advances shall bear interest at the rate of interest from time to time payable to depositors.

(3) Any advances made in pursuance of the proviso to subsection (2) shall be charged upon and paid out of the Consolidated Fund and every sum repaid on account of such advance shall be forthwith paid into the exchequer account.

Accounts.

12. (1) Annual accounts of the revenue and expenditure of the Bank for each year ending on the 31st December, together with a statement of the assets and liabilities of the Bank, shall, after being audited and certified by the Controller and Auditor-General, be laid by the Minister before the National Assembly as soon as possible after the close of each year and shall thereafter without delay be published in the Gazette.

(2) The annual accounts shall include a statement of moneys received and repaid by the Bank separately for each savings facility, including a statement of the amount of interest credited to each facility.

Surplus and deficits.

13. (1) Without prejudice to paragraph (f) of section 4, if in any year the revenue of the Bank is insufficient to defray the interest due to depositors and all expenses under this Act, such deficiency shall be charged upon and paid out of the Consolidated Fund.

(2) If in any year the revenue of the Bank shall be more than sufficient to defray the interest due to depositors and all expenses under this Act, then the Minister may direct the transfer of the surplus or any portion thereof to the Consolidated Fund:

Provided that no such transfer shall be made unless the assets of the Bank will thereafter exceed the liabilities by not less than fifteen per centum of the liabilities to depositors.

Settlement of disputes.

14. If any dispute shall arise between the Bank and any individual depositor therein, or any executor, administrator or next-of-kin of a depositor, or any creditor or assignee of a depositor who may become bankrupt or insolvent, or any person claiming to be such an executor, administrator, next-of-kin, creditor or assignee, or to be entitled to any money deposited in the Bank, then the matter in dispute shall be referred to an arbitrator to be appointed by the Minister, and any award, order or determination of or by such arbitrator shall be final and binding on all parties to the arbitration.

Rules.

15. (1) The Board may make rules for the management and regulation of the Bank.

(2) In particular and without prejudice to the generality of the foregoing, such rules may—

  • (a) prescribe the terms under which deposits will be accepted;

  • (b) prescribe the limits of deposits acceptable under various terms;

  • (c) prescribe the rates of interest payable on deposits accepted under various terms and how such interest will be payable;

  • (d) prescribe procedures for making and withdrawing deposits together with any interest thereon;

  • (e) prescribe the times at which deposit books shall be returned to the Bank by depositors;

  • (f) regulate deposits and withdrawals by minors, guardians, trustees, friendly societies, charitable bodies or any other bodies of persons of whatsoever description;

  • (g) prescribe procedures for dealing with deposits of deceased, insane or otherwise incapacitated persons.

Secrecy.

16. (1) No person appointed to carry this Act into effect shall disclose the name of any depositor or the amount which may have been deposited or withdrawn by any depositor except in due course of law or to such person or persons as may be appointed to assist in carrying this Act into operation.

(2) Any person who contravenes the provisions of this section shall be guilty of an offence and liable to a fine not exceeding five thousand shillings.

Repeal of Cap. 501.

17. The Post Office Savings Bank Act is hereby repealed.

Mr. Arowolo, who prepared the original manuscript, was a Division Chief in the African Department of the International Monetary Fund at the time of his death. He was a graduate of London University, had done postgraduate work at the University of Saskatchewan and McGill University (Canada), and had been an Inspector of Taxes in Western Nigeria’s Treasury.

Acknowledgments are made to Ms. Naheed Kirmani and Messrs. J. D. Simpson and R. T. Stillson, who also contributed to the introduction to Kenya.

See Money and Banking in Kenya, published by the Central Bank of Kenya (Nairobi) [1972].

Laws of Kenya, The Central Bank of Kenya Act, cap. 491 (rev. 1967), sec. 4.

Kenya, Development Plan, 1979–83, p. 53.

The Kenya Tea Development Authority also extends credit to farmers but is not licensed as a financial institution.

Kenya, Ministry of Economic Planning and Development, Statistical Abstract, 1980, p. 173; hereinafter referred to as Statistical Abstract, 1980.

For details see Edward A. Arowolo, “The Development of Capital Markets in Africa, with Particular Reference to Kenya and Nigeria,” International Monetary Fund, Staff Papers, Vol. 18 (July 1971), pp. 420–72.

A private company is one with fewer than 50 shareholders and one whose shares are not available for purchase by the public at large. A public company, on the other hand, is widely owned, can offer its shares for sale to the public, and, among other things, must publish its accounts as required by law.

Statistical Abstract, 1980, p. 96.

East African Currency Board, Annual Report for the Year Ended 30th June, 1966.

Central Bank of Kenya, Annual Report, June 1981, p. 67.

Ibid., p. 42

Statistical Abstract, 1980, p. 178.

Ibid., pp. 173 and 174.

Laws of Kenya, The Banking Act, cap. 488 (rev. 1970), sec. 18.

Ibid., sec. 19.

Ibid., secs, 11 and 12.

Ibid., sec. 24.

The original Act, No. 15 of 1966, was revised in 1967 and published as cap. 491 in Laws of Kenya (Government Printer, Nairobi), rev. ed. 1967 and amended by The Finance Act, 1980, No. 10 of 1980, assented to August 12, 1980 and commenced August 15, 1980. The Subsidiary Legislation to this Act has not been reproduced in this volume.

Following the Second Amendment to the Articles of Agreement of the International Monetary Fund, effective April 1, 1978, a member has been free to choose the exchange arrangements that it wishes to apply in accordance with Article IV, Section 2(b). It may therefore maintain the value of its currency in terms of the special drawing right or some other denominator excluding gold. Alternatively, it may allow its currency to float. Kenya maintains its exchange rate within relatively narrow margins in terms of the special drawing right.

The Second Amendment to the Articles of Agreement of the International Monetary Fund, effective April 1, 1978, abrogated par values under the Articles. Provision is made for a new par value system if the Fund decides in its favor by 85 per cent of the total voting power. Should such a decision be taken, each member would be able to decide whether to propose a par value for its currency. Under such a regime the margins around parity within which exchange transactions involving currencies with par values would have to be confined would be wider than those consistent with the original Articles of Agreement.

Sec. 33 of The Banking Act, 1968 provides as follows:

“Section 42 of The Central Bank of Kenya Act is repealed.”

See footnote 3 on page 565.

Editor notes that, although this is designated as paragraph 1 of Article 58, there appears to be no succeeding paragraph.

Act No. 56 of 1968—The Banking Act 1968—published in a Special Issue of the Kenya Gazette Supplement, No. 96 (Acts No. 17) (Government Printer Nairobi), November 25, 1968. Amended by The Banking Act, cap 488 Laws of Kenya, rev. ed., 1981, with June 3, 1969 commencement in Legal Notice 115/1969; Nos. 13 of 1979; 10 of 1980; and 12 of 1980. The Schedule and Subsidiary Legislation are omitted from this volume.

Following the Second Amendment to the Articles of Agreement of the International Monetary Fund, effective April 1, 1978, a member has been free to choose the exchange arrangements that it wishes to apply in accordance with Article IV, Section 2(b). It may therefore maintain the value of its currency in terms of the special drawing right or some other denominator excluding gold. Alternatively, it may allow its currency to float. Kenya maintains its exchange rate within relatively narrow margins in terms of the special drawing right.

The Schedule is omitted from this volume.

Laws of Kenya, Cap. 528 (1962). Originally Cap. 307 (1948). Relevant citations: Nos. 36 of 1959; 21 of 1966; L.N. 462/1963; L.N. 2/1964; and No. 10 of 1980.

The Schedule is omitted from this volume.

Laws of Kenya, Cap. 529 (1962). Relevant citations: No. 28 of 1961; L.N. 462 of 1963; and No. 21 of 1966.

The First Schedule is omitted from this volume.

The Second Schedule is omitted from this volume.

The Third Schedule is omitted from this volume.

Laws of Kenya, Cap. 489 (1962). Originally No. 29 of 1956. Relevant citations: Nos. 28 of 1959; 27 of 1961; 9 of 1967; 29 of 1967; 34 of 1967; L.N. 589/1960; L.N. 142/1961; L.N. 147/1961; L.N. 457/1963; L.N. 462/1963; L.N. 2/1964; L.N. 374/1964; Nos. 21 of 1966; and 9 of 1967.

Laws of Kenya, Cap. 517 (1972). Originally No. 63 of 1954. Relevant citations: L.N. 2/1964; L.N. 374/1964; and No. 7 of 1967.

Laws of Kenya, Cap. 346 (1967). Originally No. 7 of 1965.

Laws of Kenya, Cap. 323 (1970). Originally No. 1 of 1969. Relevant citation: L.N. 163 of October 28, 1975.

By Legal Notice No. 163 of October 28, 1975, published as Legislative Supplement No. 45 in Kenya Gazette Supplement No. 62 of November 7, 1975, the Minister for Finance and Planning made the following determination:

“In pursuance of subsection (2) of section 14 of the Agricultural Finance Corporation Act, the Treasury hereby determines that the sum of fifty million pounds shall be the amount of the total indebtedness (whether present or contingent) of the Corporation which shall not be exceeded as the result of the borrowing of any money.”

Laws of Kenya, Cap. 493B (1980). Originally No. 23 of 1977. Relevant citation: No. 8 of 1978.

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