UPDATE: Scottish Charitable Incorporated Organisations
Posted: Tuesday 26 April 2011
What is a SCIO?
The Scottish Charitable Incorporated Organisation (SCIO) is a new form of legal entity for charities registered in Scotland. A SCIO is a corporate body, regulated only by OSCR and not Companies House. A SCIO is able to enter in to contracts, employ staff and own property in its own name rather than through the charity’s trustees acting in a personal capacity. A SCIO also has the ability to sue and be sued.
Charities must make an application to OSCR in order to become a SCIO. Once accepted the SCIO is entered on the OSCR register and enjoys the benefits of incorporation. Unlike other unincorporated bodies, the SCIO is a separate legal entity which offers a degree of protection to its trustees and in the event of winding up, members will have no liability for the debts of the SCIO.
What legislation governs SCIOs?
The foundations for a SCIO are set down in the Charities and Trustee Investment (Scotland) Act 2005 (the “Act”). The Act sets out the principals behind a SCIO but it is the Scottish Charitable Incorporated Organisations Regulations 2011 (the “Regulations”) which set out in more detail the operational framework.
The Act states that a SCIO must have only charitable purposes and must provide a public benefit in Scotland or elsewhere. A SCIO must have a constitution. The Regulations expand on the detail which must be contained in the constitution.
The Regulations state that a SCIO must have 2 or more members and 3 or more trustees and the SCIO has a duty to maintain a register of each. A SCIO must hold an annual general meeting for its members.
The Scottish Charitable Incorporated Organisations (Removal from Register and Dissolution) Regulations 2011 govern the procedure for solvent and insolvent dissolution of a SCIO.
When is the launch date for SCIOs?
The Scottish Government has made provision for the Regulations to come into force on 1 April 2011 i.e. new SCIOs can be formed from this date.
It is intended that amalgamations and conversions of existing charities to become SCIOs can occur from January 2012.
Are there any issues?
There are certainly benefits to the introduction of a new charitable legal form which has limited liability but which is not subject to dual regulation by both OSCR and Companies House. However, as with any new legal form, there is some uncertainty.
It is not clear how the winding up of a SCIO will work in practice. OSCR’s view appears to be that once a SCIO is removed from the SCIO register, it ceases to exist at all. An alternative view is that the organisation as an entity will continue to exist (albeit that it will not be classed as a SCIO).
The requirement for members to act in the best interests of the SCIO has also caused some concern – in what situations a member is expected to discharge this duty remains unclear.
OSCR is due to publish further guidance on SCIOs sometime in March, and it is hoped that these and other issues will be addressed in more detail in that guidance.
Morton Fraser’s Charities Team has considerable experience in the formation of, and provision of ongoing advice to charities in Scotland including advising on incorporation, mergers and regulatory matters. The team adopts a cross-departmental approach drawing on both corporate/commercial experience and private client trust experience.
For more information please contact Lauren Scott
