The new Charities (Regulation and Administration) (Scotland) Bill (“Charities Bill”) was introduced to the Scottish Parliament in November 2022. It proposes a number of changes to the current statutory regime, with a view to improving accountability and transparency of charities, and increasing the powers of the Scottish Charity Regulator (OSCR).
The provisions of the Bill include:
- giving OSCR wider powers to investigate charities and charity trustees;
- amending the rules on who can be a charity trustee or a senior office-holder in a charity;
- increasing the information that OSCR holds about charity trustees;
- updating the information which needs to be included on the Scottish Charity Register; and
- creating a record of charities that have merged.
There are some key points in the Bill that are worth highlighting:
Trustee Names
The current law provides that the Scottish Charity Register must contain details of the principal office of a charity; if they do not have an office, the name and address of one trustee. The Bill proposes that the Scottish Charity Register contain much more detailed information, including the names of all trustees and be publicly searchable. It is envisaged that the Register will be similar to that currently provided by Companies House.
The proposed changes aim to increase accountability and transparency. However, some charities have expressed concern that the need to publish details will impact privacy and increase the admin burden on charities. We will have to wait and see how the Register operates in practice.
Disqualification of Trustees
The new Bill provides more detail as to when an individual will be disqualified from becoming, or continuing, as a charity trustee. It expands the range of criminal offences which will result in disqualification to include serious crimes such as terrorism, money laundering, bribery, perverting the course of justice and a public official being derelict in their duty. A search function on OSCR’s website will allow the public to check whether a trustee has been disqualified.
The disqualification provisions are extended to cover both senior management roles and trustees. This reflects the important role that senior management has in the day-to-day operation of a charity.
These amendments have been broadly welcomed as bringing greater transparency and protection for charities and bringing Scottish charity law in line with that in England and Wales.
Connection to Scotland
At present, there is no requirement for a charity registering with OSCR to have a particular link with Scotland (unless they are a SCIO). Under the new Bill, before a charity can appear on the Scottish Charity Register, it must have a confirmed link to Scotland. OSCR must reject an application for a charity with no connection to Scotland.
This provision aims to ensure that any charity wanting to join the Scottish Charity Register has a real interest in doing so. It also ensures that OSCR has jurisdiction to take action against the charity if required. The charity could be registered in Scotland, operational in Scotland, or have trustees, beneficiaries or assets or fundraise in Scotland. It will not prevent the registration of cross-border charities or those doing work outwith Scotland
Register of Mergers
When a Scottish charity merges with another charity, or is wound up, it no longer exists as a separate legal entity. Instead, the newly merged charity is a new legal entity. This can cause problems, for example, when a poorly drafted Will does not provide what should happen to a legacy when the charity no longer exists. It can result in charities losing out.
The Bill provides for a record of charity mergers. This means that, when a merger is recorded with OSCR, it should be much easier for the new charity to claim any legacy left to an old charity. This provision will be welcomed by charities.
Current Position
On 28 June 2023, the Scottish Parliament voted unanimously to pass the Bill. The Bill will now be sent for Royal Assent, after which it becomes an Act of the Scottish Parliament.
We await details of when the new Act will take affect and any phased implementation.
Comments
The Bill is welcome and provides some long overdue clarification and modernisation to charity law in Scotland. However, many we have spoken to in the sector are of the view that it does not go far enough.
For example, there is scope to introduce a new regime for Scottish charitable incorporated organisations (SCIOs), particularly in relation to conversion of unincorporated charities.
The Social Justice and Social Security Committee has highlighted that it is aware of other areas of charity law that require attention. The Scottish Government has committed to a second phase of review after this Bill has been enacted.
MacRoberts will continue to provide updates on the progress of the Bill and any phased implementation plans as well as future reform.
How can we help?
If you have any queries in relation to the Bill, please get in touch with a member of our Charities & Social Enterprise team.
