Application of society’s property and funds
The property and funds of a co-operative society shall only be applied for the benefit of the society and, its members, in accordance with the provisions of this Act, the rules made hereunder and the by-laws of the society.
Restriction on giving loans
A co-operative society shall not give a loan nor allow any credit, to person other than a member, unless the by-laws of the society provide for giving a loan subject to a resolution passed at the general meeting of the society to that effect.

Restriction on borrowing
A co-operative society may receive loans from persons who are not members only to such extent and under such conditions as may be prescribed by its by-laws or by rules under this Act, and for the purposes of this section a deposit of money under a hire-purchase agreement shall be deemed to be a loan.

Investment of society’s funds
A co-operative society may invest or deposit its funds only—
(a) in the Post Office Savings Bank;

(b) in and upon such investments and securities as are for the time being authorized for the investment of trust funds;
(c) in the shares of any other co-operative society;
(d) with any bank licensed under the Banking Act (Cap. 488);
(e) in the stock of any statutory body established in Kenya or in any limited liability company incorporated in Kenya or in any other manner approved by a resolution at a general meeting of the said society.

Declaration and payment of bonus
Subject to this section, every co-operative society shall declare each year all bonuses due to members; but, where the bonuses are required for re-investment by the society for capital development, or for the redemption of bonus certificates, the society shall issue bonus certificates to its members in lieu of cash payments, redeemable from a revolving fund established by the society for that purpose.
No co-operative society shall pay a dividend, bonus; or distribute any part of its accumulated funds without a balance sheet and audited account and report disclosing the surplus funds out of which the dividend, bonus or distribution is to be made.
A co-operative society shall pay a dividend at such rate as may be recommended by the management committee and approved by the annual general meeting of the society.
 Maintenance of reserve fund
Every co-operative society which does or can derive surplus from its transactions shall maintain a reserve fund.
A co-operative society may carry to the reserve fund such portion of the net surplus in each year as may be prescribed by rules made under this Act or by the by-laws of the society.
The reserve fund shall be invested in the manner provided for under section 45 of this Act.
The reserve fund set up under this section shall be indivisible and no member shall be entitled to claim a specific share of it.
Upon the dissolution of a co-operative society, the assets under the reserve fund shall be applied in the discharge of the liabilities of the society.

 Distribution of net balance
Subject to sections 46 and 47, the net balance of each year with, any sum available for distribution from previous years, may be distributed in the manner prescribed by rules made under this Act or by the by-laws of the society.


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