On 15 November 2022, the eagerly awaited Charities (Regulation and Administration) (Scotland) Bill (the “2022 Bill”) was presented by the Scottish Government following periods of consultation in 2019 and 2021.
The current legislation, the Charities and Trustee Investment (Scotland) Act (the “2005 Act”) has governed charity law in Scotland for over 15 years, and the sector has developed significantly in this time.
This Bill does not intend to rewrite the 2005 Act, which created the Office of the Scottish Charity Regulator ("OSCR"), but rather to enhance OSCR’s powers with the aim of increasing accountability and making the charity sector more transparent. The overarching principles from the 2005 Act that OSCR regulate in a consistent, accountable, transparent and proportional manner, and only direct regulatory activities at cases where action is necessary, remain.
The 2022 Bill has a heavy focus on improving public trust in the charity sector via increased reporting obligations on charities and stronger powers for OSCR to investigate and take action against the small minority of charities who fall foul of the rules. However, OSCR remains clear that is seeks to keep its role as a supportive body who aims to help and encourage charities to meet their obligations.
Here, we outline several key provisions that charity trustees should familiarise themselves with ahead of the Bill becoming law:
The Scottish connection
Charities will now need to demonstrate a significant tie to Scotland in order to claim Scottish charitable status. A “tenuous link” such as a mere PO box will not be sufficient, aiming to crackdown on the increasing sophistication of those looking to take advantage of claiming Scottish charitable status. OSCR can have regard to a number of factors, such as the location of the charity's office or location of charitable activities.
Consistency on trustee disqualification across the border
The list of offences and situations that disqualify a person from holding office as a charitable trustee has been extended, now covering, among others, terrorism offences, bribery, being held in contempt of court in England and Wales and bankruptcy. This also extends the criteria to people in senior management roles, who often make the day-to-day decisions for a charity.
Publication of annual accounts for all charities
All charities already have the legal duty to prepare and submit their annual accounts for OSCR, as well as the duty to provide their accounts should anyone ask. This is now being extended to OSCR publishing all accounts for public record. Of particular note is that this removes the exemption in place for charities with under £25,000 annual income.
Powers of removal for persistent refusal to submit accounts
Under the current regime, failure to submit accounts can be considered misconduct in charity administration. Now, if following contact from OSCR a charity refuses to send its accounts and fails to provide a statement regarding this failure, they may be removed from the Register. There is, however, a three-month grace period following the notice to submit the accounts.
Creation of a new Register of Mergers
In Scotland, more than £90 million of charitable income is raised from gifts left in Wills. If the Will is properly drafted, it will clearly identify the charity and make provision for what happens if the charity in question no longer exists in such form upon the person’s death. However, a problem can arise if this legacy fails and as a result, passes to either a non-charitable beneficiary or else falls into intestacy. Creating a Register of Mergers will give charities confidence that the intent of the testator to provide valuable charitable income in their Will is followed and will give evidence of who is best placed to accept the funds.
New Trustee Database
For the approximately 160,000 trustees across 25,000 charities registered with OSCR, it will now be compulsory to provide their details to OSCR for the database. While this would not spell a huge transformation from the existing obligation to provide three charity contacts, it would make it easier for the public or third parties to understand who is in control of a charity. If a trustee has concerns, for example about the public safety element of listing their name, they can apply to OSCR for an exemption.
This would also include a register of charity trustees who have been removed by the courts, to help charities conduct due diligence of new trustees.
Powers to investigate ex-trustees and ex-charities
Under the existing legislation, OSCR has often struggled with formally investigating trustees who have resigned, or charities no longer in existence. Trustees should now be aware that resigning does not mean an end to potential contact from OSCR.
Also of note are new powers to re-direct ex charities to use their assets for public benefit and widening of OSCR's powers to appoint interim trustees.
When considering these changes, it is important to note that the Bill is still at the early stages of the legislative process, and may well be amended before it reaches its final form.
If you would like some further information about your obligations as a charity trustee, or about charity administration more broadly, then please get in touch with a member of our Third Sector Team.
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