Chama Constitution (Kenya)

A Chama Constitution in Kenya sets out the chama constitution and the obligations it places on the parties.

The concept of a chama is deeply rooted in Kenyan social and economic culture. Estimates by the Kenya National Bureau of Statistics (KNBS) and the Central Bank of Kenya (CBK) suggest that millions of Kenyans belong to at least one chama, and chamas collectively manage billions of Kenya Shillings in assets. Chamas are particularly influential in the real estate sector in Nairobi, Kisumu, and Mombasa, where groups of working professionals, traders, and civil servants pool resources to purchase commercial and residential land — often acquiring parcels on the outskirts of major cities and building income-generating properties.

In terms of legal registration, a chama can be structured under several different legal frameworks depending on its size, purpose, and the members' aspirations. At the simplest level, a self-help group can be registered with the Ministry of Social Protection, Gender and Affirmative Action under the NGO Co-ordination Act. A more formal option is registration as a society under the Societies Act (Cap. 108) administered by the Registrar of Societies — the primary framework for investment chamas with a written constitution. Larger, financially active chamas may elect to incorporate as a private limited company under the Companies Act No. 17 of 2015 via the eCitizen portal of the Business Registration Service (BRS), or as a cooperative society under the Co-operative Societies Act (Cap. 490). Chamas whose primary activity is savings and credit may register as SACCO Societies under the Sacco Societies Act No. 14 of 2008 and obtain a licence from the SACCO Societies Regulatory Authority (SASRA) if they wish to take deposits from the public.

A Chama Constitution submitted for registration under the Societies Act (Cap. 108) must comply with the Registrar of Societies' requirements: the group must have a minimum number of members (typically at least 10); the constitution must specify the group's objectives, governance structure, and financial management procedures; and the constitution must demonstrate that the group is not formed for an unlawful purpose under Section 5 of the Societies Act. The Registrar may refuse or cancel registration if the society's activities are contrary to public policy or national security.

The Capital Markets Authority (CMA) of Kenya has noted that some chamas engaging in collective investment activity may fall within the definition of a Collective Investment Scheme (CIS) under the Capital Markets Act (Cap. 485A), requiring CMA authorisation. Chamas that pool contributions and invest in securities, land, or other assets on a professional basis should seek legal advice from an Advocate of the High Court of Kenya on whether CMA licensing is required to avoid operating an unlicensed investment scheme.

A Kenya Chama Constitution is required at the formation of any savings, investment, or welfare group, and is specifically necessary in several situations.

A Chama Constitution is required when a group of individuals — colleagues, neighbours, family members, or business associates in Nairobi, Mombasa, Kisumu, or elsewhere in Kenya — decides to pool financial resources for collective investment and wishes to establish clear, binding rules for managing contributions, investments, and distributions. Without a written constitution, internal disputes about contribution amounts, investment decisions, profit sharing, and member exit are resolved only by oral agreement — an unreliable basis once real money is at stake.

A Chama Constitution is needed when the group intends to apply for registration under the Societies Act (Cap. 108) through the Registrar of Societies. The Societies Act requires a written constitution as part of the registration application. Registration gives the chama legal personality, enables the group to open a bank account in the chama's name, enter contracts, and own property as a registered society.

A Chama Constitution is required when the chama intends to purchase land, buildings, or other fixed assets. Without a constitution and proper registration, property must be held in the names of individual trustees — a governance arrangement that creates serious succession and dispute risks. A registered chama with a clear constitution can hold property in its own name or through a clearly structured trustee arrangement governed by the Trusts Act No. 11 of 2020.

A Chama Constitution is needed when the group wishes to approach a commercial bank — such as Kenya Commercial Bank (KCB), Equity Bank, or Co-operative Bank of Kenya — for a group investment loan. Banks require a written constitution, meeting minutes, a registered bank account, and evidence of financial discipline (regular contributions and loan repayments) before extending credit to chama groups.

A Chama Constitution is required when the group is growing in membership, asset value, or investment scope, and the founding members wish to formalise governance before internal management challenges arise. Well-drafted constitutions prevent the most common causes of chama failure: unequal contributions, disputed valuations, unilateral investment decisions, and disagreements about member exit terms.

Under the Companies Act No. 17 of 2015, the Registrar of Companies at the Office of the Attorney General maintains the register of Kenyan companies. Section 3 of the Law of Contract Act (Cap. 23) governs contractual obligations. The Competition Authority of Kenya (CAK) enforces the Competition Act No. 12 of 2010. The Kenya Revenue Authority (KRA) administers corporate tax under the Income Tax Act (Cap. 470). The High Court of Kenya has unlimited original jurisdiction under Article 165 of the Constitution of Kenya 2010.

A Kenya Chama Constitution governing a savings and investment group under the Societies Act Cap. 108 must include the following essential provisions.

Name and Registered Address: The full official name of the chama and its principal registered address in Kenya (ward, sub-county, and county). The name should be distinctive and should not be identical or confusingly similar to an existing registered society.

Objectives: A clear statement of the chama's purposes — for example, collective savings, investment in real estate, agriculture, or securities, and member welfare. The Registrar of Societies requires the objectives to be lawful and consistent with Section 5 of the Societies Act Cap. 108.

Membership Rules: Eligibility criteria for membership (age, occupation, geographic area, referral requirement), the admission procedure, the membership fee, and the rights and obligations of members. Rules for suspension, expulsion, and voluntary resignation should be specified, including any consequences for a member's share of the chama's assets upon exit.

Contributions and Levies: The amount, frequency (weekly, monthly), and payment deadline for regular contributions. The mechanism for imposing and collecting special levies for specific investments. The consequences of default — late payment penalties and the threshold at which a member's shares may be forfeited.

Governance Structure: The chama's elected officers — typically Chairperson, Secretary, and Treasurer — their roles, election procedure, term of office, and grounds for removal. Quorum requirements for general meetings and committee meetings. Voting rights (one member, one vote is the cooperative principle; weighted voting by contribution is also used).

Financial Management: Bank account signatories (typically two of three officials must co-sign), financial year, requirement for annual accounts prepared by a qualified accountant, and the procedure for approving investment decisions. Reference to the Central Bank of Kenya (CBK) requirements for mobile money accounts (M-Pesa, Airtel Money) used by many chamas.

Investment Policy: The types of investments the chama may make (land, listed securities, unlisted shares, business loans to members), any investment limits, and the decision-making process for each investment category — whether it requires unanimous consent, a two-thirds majority, or a simple majority of members present.

Profit Distribution and Dividends: The policy for distributing returns — percentage reinvested versus distributed, calculation of each member's share based on their cumulative contributions, and the timing of annual distributions.

Dispute Resolution: A tiered internal dispute resolution procedure (first: meeting of the officials; second: extraordinary general meeting of all members; third: mediation or arbitration) before resorting to the courts. Many chama constitutions designate the Nairobi Centre for International Arbitration (NCIA) or a named mediator as the external dispute forum.

Amendment and Dissolution: The procedure for amending the constitution (typically requiring a two-thirds majority at a general meeting with advance written notice) and the procedure for voluntary dissolution — distribution of net assets among members in proportion to their contributions after all debts are paid. Forms-legal.com provides this Chama Constitution as a starting document for Kenya savings and investment groups.

Additional compliance elements for a Chama Constitution (Kenya) used in Kenya include: Under the Companies Act No. 17 of 2015, the Registrar of Companies at the Office of the Attorney General maintains the register of Kenyan companies. Section 3 of the Law of Contract Act (Cap. 23) governs contractual obligations. The Competition Authority of Kenya (CAK) enforces the Competition Act No. 12 of 2010. The Kenya Revenue Authority (KRA) administers corporate tax under the Income Tax Act (Cap. 470). The High Court of Kenya has unlimited original jurisdiction under Article 165 of the Constitution of Kenya 2010. Forms-legal.com provides this template as a starting point for Kenya-compliant documentation.