Charity

Earlier in the year we blogged on the Scottish Government’s ‘Consultation on Scottish Charity law’ and the proposed changes in order to ensure public trust and confidence in the work and operation of charities. The results of that consultation are now in with the publication of the ‘Analysis of Consultation on Scottish Charity Law’ (the Analysis). Without further delay, let’s consider the main message coming through in the Analysis!

What did people make of the proposals?

In short, the Analysis reports broad support for most of the changes to charity law that are being proposed by OSCR. As a brief overview, the topics being consulted on where:-

1. publishing annual reports and accounts in full for all charities on the Scottish Charity Register
2. an internal database and external register of charity trustees
3. criteria for automatic disqualification of charity trustees and individuals employed in senior management positions in charities
4. a power to issue positive directions to charities
5. removal of charities from the Scottish Charity Register that are persistently failing to submit annual reports and accounts and may no longer exist
6. all charities in the Scottish Charity Register to have and retain a connection in Scotland
7. inquiries into the former charity trustees of bodies which have ceased to exist and bodies which are no longer charities
8. de-registered charities’ assets and public benefit
9. the speed and efficiency of OSCR’s powers to gather information when making inquiries
10. the reorganisation of charities established under royal charter, warrant or enactment

There were some caveats on topics. These included ensuring appropriate data protection for registers of trustees, ensuring parliament is not usurped for certain charities established under statute and making sure any new powers for OSCR are used in a proportionate manner.

However, it was perhaps in the section of the Analysis summarising other comments beyond the consultation questions where the most interesting material can be found. Let’s have a look at some of those.

Is there more work to be done? The other comments and thoughts

Most prominent among the other issues raised was that the scope of the initial consultation was too narrow and fell short of a wider review of Scottish charity law to ensure it was fit for purpose. Here are some of the main ‘wider issues’ raised by respondents:-

1. The Scottish charity test: Concerned with legislation falling behind the times it was suggested that the statutory definition be reviewed in order to take account of wider changes in the charities sector and to ensure that the sixteen charitable purposes reflect current practice and reflects the aspirations of charities.

2. Public benefit: this would be a seriously existential moment in any review of charity law. A re-working or re-definition of public benefit could have a significant effect on the charity sector landscape.

3. Social enterprise: Social enterprise is a growing part of society and the charities, third and impact sectors. But where does it fit? Should it appear in legislation and what is the relationship between social enterprise and charity? Not all social enterprises would meet the charity test. It would seem right for consideration to be given to the status of social enterprise. Of course, social enterprise is a fluid concept… that is one its benefits and over-definition of it might restrict the dynamism in that sector.

4. One of the wider issues raised was the position and charitable status of Arm’s Length External Organisation (ALEOs) and Non-Departmental Public Bodies (NDPBs). In particular to address points following on from OSCR’s report on ALEOs (here’s our summary of that) and the “Who’s in Charge?” guidance. That is perhaps a wider issue that ALEOs and NDPBs as the recent Charity Commission guidance indicates.

5. Owing to the growing popularity of using SCIOs as the legal form for charities, clarification on the nature of SCIO members’ duties and responsibilities and the rules governing the wind-up, insolvency and dissolution of SCIOs was mentioned.

6. In light of the increasing number of charities that operate throughout the UK, the Analysis records an appetite for increasing the consistency of compliance both north and south of the border. The Analysis cites a reduced cost of compliance and lightening the administrative burden for cross-border charities in support of this aspect of charity regulation being investigated.

7. It was reported in the Analysis that the duties of trustees should be reviewed and thought given to the rules regarding trustee remuneration. This is a really interesting topic and worthy of wider examination. No doubt it will generate much debate.

8. Notifiable Events – with no statutory framework but OSCR stating that failure to meet expectations surrounding notifiable events may be classed as trustee misconduct, clarification in this area is required. It is perhaps the case that as there has been time since the notifiable events framework came in, there will be the evidence and experience of the actual issues that it has raised. OSCR has recently blogged on this.

What next?

First, we will keep you posted on developments.

We might conclude and look to the next steps with the words of OSCR:-

‘‘We would like to acknowledge everyone who responded to the Scottish Government’s consultation. Hundreds of individuals and organisations expressed their views, and we thank everyone who took the time to do so. The high volume of engagement and the overwhelming support for almost all of the proposals shows us that there is an appetite for change.”

“We are disappointed that there is no indication that the consultation will result in a reform bill for charity law in this session of Parliament. However, we welcome the Scottish Government’s announcement of a working group on changes to the Scottish Charitable Incorporated Organisations (Removal from the Register and Dissolution) Regulations 2011, with a view to bringing forward amendment regulations before the session ends.

“OSCR will continue to press for required changes and charity law reform. As a non-ministerial office, we will work closely with the Scottish Government and our stakeholders on this matter.”

This blog was written by Kevin Winters with Alan Eccles.

Kevin Winters

Solicitor at Brodies LLP
Kevin joined Brodies in January 2019 as a solicitor in the Personal & Family department.Prior to joining the firm, he worked as a solicitor at an international law firm as part of a corporate tax practice. Kevin now focuses on all aspects of private client related work and also assists with charity law matters.
Kevin Winters