Date updated: Tuesday 26th September 2023
The Charities (Regulation and Administration) (Scotland) Bill received Royal Assent on 9 August 2023 (the “2023 Act”).
The 2023 Act makes changes to the Charities and Trustee Investment (Scotland) Act 2005 and aims to increase transparency and accountability, improve the Office of the Scottish Charity Regulator’s (OSCR) powers in order to increase confidence in the sector, and make Scottish charity law more consistent with the law and regulation in England and Wales (and Northern Ireland).
The implementation timetable for introducing these changes is expected in the next few months.
In practice, the changes will be much more significant for charities only registered in Scotland, as cross-border charities (i.e. those registered in England and Wales as well as Scotland) are already subject under English charity law to the majority of the new obligations coming in under the 2023 Act.
However, a change that cross-border charities should be aware of is that all charities registered with OSCR will need to have and retain a more than “negligible” connection to Scotland.
Connection to Scotland
OSCR will be given a new power to direct charities to take such steps as OSCR considers necessary to establish a more than negligible connection to Scotland.
OSCR must take into account the following non-exhaustive list of factors when considering what connection (if any) the charity has to Scotland:
• Whether the charity has a principal office in Scotland;
• Whether the charity occupies any land or premises in Scotland;
• Whether the charity carries out activities in any office, shop or similar premises in Scotland;
• Whether the charity is established under the law of Scotland;
• Whether any of the trustees of the charity are resident in Scotland.
If the charity fails to adhere to OSCR’s direction to establish a more than negligible connection to Scotland, OSCR must remove the charity from the Scottish Charity Register.
This is an interesting evolution from the current position, which starts from the premise that all organisations that represent themselves as charities in Scotland must register with OSCR. In practice, we do not expect this amendment to have a huge impact on most cross-border charities, as it is probable that any cross-border charity that has registered with OSCR in the past will have done so for a specific reason, making it likely to continue to meet the requirements for being registered in Scotland.
However, for those cross-border charities without a clear connection to Scotland, thought will need to be given to whether or not it is important for them to remain registered in Scotland and, if it is, how they can establish a more than negligible connection, taking into account the factors set out above. Trustees will need to consider whether establishing a connection (e.g. occupying any land or premises in Scotland) would be in the best interests of the charity’s objects and its beneficiaries.
The 2023 Act makes a number of other changes to Scottish charity law. As set out above, a number of the changes will result in a closer alignment between Scottish charity law and regulation and the law and regulation in England and Wales. These changes are discussed in brief below.
To improve transparency and accountability, the names of trustees will be published on each charity’s entry on the Scottish Charity Register and charities will be required to notify OSCR of any changes to its trustee board.
Trustees of charities registered in England and Wales will be used to their names being publicly available, as they are already published on the Charity Commission register. Furthermore, the names of current and former directors of charitable companies are also available on Companies House.
As is the case in England and Wales, trustees will be able to request that their names are not published on the Scottish Charity Register if, for example, it would be a risk to their safety.
OSCR will also maintain an internal “schedule” of trustee contact details and can retain information on former trustees, provided retention of such information facilitates OSCR’s functions.
Disqualification of trustees
The range of criminal offences and situations that would result in a charity trustee being disqualified have been extended. A disqualified charity trustee will also be barred from holding a position with a senior management function, such as a Chief Executive Officer or Finance Director role.
The change aligns with the position in England and Wales, with both regulators recognising that disqualification should be extended to senior management positions, as the individuals holding these roles have a fundamental impact and influence on the operation of a charity.
OSCR will also keep a searchable record of trustees who have been removed by the Court of Session from the management or control of any body.
Statement of Accounts and Annual Return
The annual accounts of charities registered in England and Wales are already publicly available on the Charity Commission register. Moving forwards, OSCR will publish charities’ annual accounts on the Scottish Charity Register. It will also be a statutory requirement for charities to prepare an annual return and to send it to OSCR.
If a charity has failed to send a copy of its accounts on time to OSCR (and has not responded to OSCR about the failing), OSCR may give the charity notice of its intention to remove the charity from the Scottish Charity Register. Unless the charity makes contact with OSCR within 3 months of the date of the notice or confirms that accounts are being prepared, OSCR may remove the charity from the Scottish Charity Register.
An increase in OSCR’s powers
The 2023 Act provides OSCR with greater powers. Similar to the Charity Commission, OSCR’s role as regulator involves investigating and undertaking inquiries into charities. However, until now, OSCR has only been able to tell charities not to do certain things. After the implementation of the 2023 Act, OSCR will have a new power to enable it to make positive directions where there has been misconduct or where it is necessary or desirable to do so for the purpose of protecting charity assets.
OSCR’s power to carry out inquiries has also been extended to enable it to investigate former charities and former charity trustees.
OSCR will have a new power to appoint interim trustees. The request to appoint an interim trustee can be made by the charity itself. OSCR can also make the appointment of its own accord or on the representation of another person in the following circumstances: the charity has no existing trustees; all of the existing trustees cannot be found or are not acting and are not expected to resume acting; the number of existing trustees is such that a charity is unable to make a request for the appointment of interim trustees.
Register of mergers
As charities in England and Wales will be aware, the Charity Commission keeps a register of merged charities. The purpose of the register is to help ensure that any gift provided to benefit the “original” charity can find and benefit the “newly merged” charity.
OSCR will now also keep a register of merged charities. Legacies will transfer to the “new” charity, unless it is clear from the Will that the testator intended otherwise. However, only gifts under a Will are covered, not other gifts such as lifetime gifts or gifts under a settlement. Therefore, the position will be more restrictive than in England and Wales.