Court freezes government's push to replace direct voting with delegates in large SACCOs

Tower Sacco has won temporary relief after the High Court barred the government from enforcing a directive that would have required large savings and credit cooperatives to replace direct member voting with a delegate-based governance model. The conservatory orders allow the society to retain its existing governance structure while the court considers whether the Commissioner’s directive is constitutional.

The decision temporarily suspends enforcement of the delegate system for Tower Sacco and sets up what could become an important legal test of how far regulators can go in requiring governance changes at Kenya’s largest cooperative societies. The case also unfolds as the government advances wider reforms intended to strengthen oversight across the cooperative sector, while the Sacco argues those changes cannot override members’ decisions or the autonomy guaranteed under its registered by-laws.

The court granted interim orders after finding that Tower Sacco had presented an arguable constitutional case against a 2025 circular issued by the Commissioner for Cooperative Development and a subsequent compliance reminder issued in April this year.

Tower Sacco argued that implementing the directive before the case is heard would fundamentally alter its governance structure and force amendments to by-laws that members had already rejected. According to court documents, the Commissioner had also indicated that administrative action, including interference with the Sacco’s registered by-laws, could follow if it failed to comply before the June deadline.

In granting the orders, the court said preserving the status quo was necessary until the constitutional questions are fully determined. The judge observed that compelling the society to adopt a new governance model before hearing the case could cause irreparable harm and affect the rights of thousands of members.

Notably, neither the Commissioner for Cooperative Development nor the Cabinet Secretary responsible for cooperatives opposed the application for interim relief.

The disputed circular targets cooperative societies with more than 5,000 members.

Instead of allowing every member to attend and vote during annual general meetings, affected Saccos would be required to elect between 150 and 500 delegates who would represent the wider membership during key governance decisions. The societies would also have to amend their by-laws to accommodate the new structure.

Delegate systems are common in many large cooperative organisations because they make governance more manageable as membership expands. From a regulatory perspective, standardising governance can also improve oversight and decision-making across institutions serving tens or hundreds of thousands of members.

The legal question before the court, however, is not whether delegate systems are inherently appropriate. It is whether the Commissioner can compel societies to adopt that model through an administrative circular.

Tower Sacco says its members considered the proposal twice before the government attempted to enforce it.

The society placed the matter before members during a special general meeting in September 2025 and again at its annual general meeting in January 2026. According to the petition, members rejected the proposal on both occasions and resolved to retain the existing general membership model, where every member has the right to attend and vote.

The Sacco argues that the directive violates constitutional protections by interfering with cooperative autonomy, overriding registered by-laws and limiting members’ ability to participate directly in decisions affecting their society.

Those arguments now form the core of a constitutional challenge that seeks to have both the circular and the Commissioner’s enforcement letter declared unlawful.

Although the case focuses on one circular, it unfolds against a much broader conversation about the future of Kenya’s cooperative sector.

The government has been pursuing reforms designed to improve governance, accountability and regulatory oversight following several high-profile governance failures within the movement. Those efforts also feature prominently in the proposed Kenya Cooperatives Bill, which seeks to modernise the legal framework governing cooperative societies while supporting stronger supervision and wider adoption of digital financial services.

The cooperative sector manages more than KSh1 trillion in member assets and remains one of Kenya’s largest sources of household savings and credit. Decisions about governance therefore carry consequences that extend well beyond boardrooms, affecting millions of members who rely on Saccos for loans, savings and other financial services.

This explains why the current dispute deserves attention. The case is not simply about whether delegates should represent members at annual meetings. It also tests how governance reforms should be introduced, particularly where members have already voted against proposed changes and believe existing by-laws should continue to apply.

The outcome could help define the balance between regulatory oversight intended to strengthen the sector and the long-standing cooperative principle that societies should be governed democratically by their members.

The matter is scheduled for mention on September 16, when the court is expected to issue further directions on the constitutional petition.

Until then, Tower Sacco will continue operating under its existing governance structure, with the Commissioner barred from compelling adoption of the delegate system or taking administrative action against the society’s registered by-laws.

While the conservatory orders apply specifically to Tower Sacco, the final judgment may carry wider implications for other large Saccos that received the same directive. A ruling in favour of the society could limit the Commissioner’s ability to impose governance changes through administrative circulars, while a decision upholding the directive would reinforce the government’s authority to standardise governance across large cooperative societies.

Whatever the outcome, the case is likely to become an important reference point for the relationship between state regulation and member democracy in one of Kenya’s most significant financial sectors.

Go to TECHTRENDSKE.co.ke for more tech and business news from the African continent and across the world.

Follow us on WhatsApp, Telegram, Twitter, and Facebook, or subscribe to our weekly newsletter to ensure you don’t miss out on any future updates. Send tips to editorial@techtrendsmedia.co.ke