By Mary Anne Zita

Running a Chama is no easy task. However, to make things easier, every Chama needs rules that all members of the Chama have agreed upon. This allows everyone to know the other members’ expectations, and provides a forum for disagreements. For example, if every member is supposed to attend the monthly meeting, and one member continuously does not attend, other members can point to the agreement and remind the forgetful member that attending meetings was an agreed upon task. It allows disagreements to be handled like adults, and avoids many issues by deciding first how to handle the running of the club.

This should include the club’s policies on:

• How much the monthly contributions are: most chamas have monthly contributions between Kshs.2,000/- and Kshs.10,000/- seems to be the most common. Whatever your amount is, everyone in the chama should agree to it.
• When the meetings are and how often. If the meetings are not held in members’ homes, where are they held?
• What positions there are within the Chama. Most Chamas have a Chairman, Vice-Chairman, secretary, and treasurer. You may also have someone who is responsible for coordinating extraactivities, such as organizing Chama events. You should describe what each role entails, and what tasks every member has to do. Also, how often are roles reassigned or re-elected.
• A basic outline of the budget, or guidelines for how the budget will be set and agreed upon.
• Guidelines for liquidating assets – while members should understand that investing is a long term process, sometimes events occur and a member needs to withdraw. However, there may be a penalty for early withdrawal (except under extraordinary circumstances), as the first couple of years can be very fragile for a chama’s portfolio.
• Guidelines for adding new members – will new members buy in, which can be prohibitive if the club has been running for several years already, or will new members contributions be pro-rated, which might be difficult to figure out, but a new member might simply own less shares than everybody else?
• If the club dissolves, how will it dissolve? Who will do what, or will someone else be hired to divide up the assets?

Your operating agreement may include more details, depending on what
circumstances your members think are likely to occur. Here is a sample agreement to help you.

Maisha Bora Chama Operating Agreement

1, Maureen Kemboi, herewith form a Chama to be known as the Maisha Bora Chama.

The Chama shall commence on 10th February 2012 and shall continue for a period of five years, and then thereafter year for year, unless earlier terminated by this agreement.

Each partner shall on or before 10th of March 2012 make an initial capital contribution of Kshs.3,000/- . Members shall be entitled to make additional capital contributions of at least Kshs.2,000/- at any regular meeting of the Chama.

Books of account shall be created and maintained of all transactions of the Chama. A yearly report shall be presented to members of the results of the operation of the Chama. The books shall be open to examination by members at all reasonable times. Upon a vote of the members, an accounting firm may be appointed to perform bookkeeping or other services. It shall not be necessary for the affairs of the Chama to be audited; however, upon the vote of the majority of the members an audit may be commissioned.

The members shall by vote designate an official depository for funds. Withdrawals shall be made by the signature of the 3 Chama office bearers namely; Chairman, Secretary and Treasurer.

The Chama shall hold regular meetings at least once monthly. The time and place for the holding of meetings shall be determined by vote of the partners. No quorum shall be required for regular business; however, the following business shall require a quorum of the members, determined by percentage of capital at the beginning of the meeting:

(a) dissolution or other termination of the Chama;
(b) changes in the Chama agreement

All business of the Chama shall be determined by a simple majority of the members present, except for dissolution or changes in the Chama, which shall require an 80 percent majority.

Each member shall have the right to participate in the management of the Chama including the selection of investments. No member shall have the right or authority to bind or to obligate the Chama except in accordance with a vote of the members.

No business shall be conducted with any brokerage, bank or other institution in which any member has a financial interest, or is employed, except an interest as a shareholder in a publicly traded company which does not exceed 5% of the outstanding shares of the company, unless after a disclosure, the members by majority vote assent thereto. All members shall disclose such conflicts to the other members.

The Chama interests herein may not be assigned or transferred without the approval of a majority of the members. This approval shall not be unreasonably withheld.

New members may be admitted upon a majority consent of the existing members. The minimum initial capital contribution of a new member shall be Kshs.3,000. The amount
necessary for such admission may be changed no more often than yearly upon motion and vote by the members.

The total number of members shall not exceed 15.

The Chama shall not purchase securities on margin.

The Chama may not purchase investments of the following types:
Matatu business, precious stones

The members may designate a broker or brokers for trading of securities; however, the Chama may not grant discretionary trading authority to any brokerage.

A member may withdraw by notice to the Chama. The Chama shall not be dissolved by such withdrawal unless the remaining members determine not to continue the business of the Chama.

Upon withdrawal, a member shall receive the value of their capital account as of the date of their withdrawal within 30 days, except that if the repayment of the capital account of any withdrawing partner shall require the liquidation of securities the repayment of the capital account may be postponed for no more than 14 additional days to allow a vote of the members to determine which securities to liquidate. Upon this withdrawal, the member shall render a hold harmless agreement naming the Chama and the individual members for everyone’s protection.

Upon the death, incapacity or legal disability of a member, the same shall be deemed to be a withdrawal, and the disability of any member, the capital account of the member shall be repaid as is provided above.

1. Notices.

Any notice required by this Agreement or given in connection with it, shall be in writing and shall be given to the appropriate party by personal delivery or a recognized over night delivery service such as G4S, DHL, etc.

2. No Waiver.

The waiver or failure of either party to exercise in any respect any right provided in this agreement shall not be deemed a waiver of any other right or remedy to which the party may be entitled.

3. Entirety of Agreement.

The terms and conditions set forth herein constitute the entire agreement between the parties and supersede any communications or previous agreements with respect to the subject matter of this Agreement. There are no written or oral understandings directly or indirectly related to this Agreement that are not set forth herein. No change can be made to this Agreement other than in writing and signed by both parties.

4. Governing Law.

This Agreement shall be construed and enforced according to the laws of Kenya and any dispute under this Agreement must be brought in this venue and no other.

5. Headings in this Agreement

The headings in this Agreement are for convenience only, confirm no rights or obligations in either party, and do not alter any terms of this Agreement.

6. Severability.

If any term of this Agreement is held by a court of competent jurisdiction to be invalid or unenforceable, then this Agreement, including all of the remaining terms, will remain in full force and effect as if such invalid or unenforceable term had never been included.

In Witness whereof, the parties have executed this Agreement as of the
date first written above.

_________________________ _______________________
Each Member Each Member

_________________________ _______________________
Each Member Each Member

_________________________ _______________________
Each Member Each Member

Please note that the words in Bold can be custom-made to suit your Chama needs. Also, you may modify this agreement to suit the needs of your investment group.

It is important to ensure that after each member of the Chama has signed the document, that it is commissioned by an advocate and also keep a copy in a file for future reference.

Categorised in: chama constitution, chama management, Chamas, Operating Agreement

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