The purposes and provisions governing a trust fund can usually be changed. However, the type and terms of each trust will determine the proper legal course to make the change. Changes to a trust can also be platform to new, modern, better governance including leaving the trust law regime. Escaping being a trust would oftenmean becoming a Scottish Charitable Incorporated Organisation (SCIO).

As well as a narrative on the issues, we have a diagram below to help navigate the processes to change and reorganise a charitable or public trust.

The major type distinction is between charitable and non-charitable trust funds.

  • Changes to non-charitable trust funds are regulated by the trust deed itself, the courts and in very small trusts a specific statutory regime.
  • Changes to charitable trust funds are mainly regulated by the trust deed itself and the Office of the Scottish Charity Regulator (OSCR).

It should be mentioned that this note only addresses charitable and public non-charitable trust funds. Private and family trusts are dealt with differently.

Do you really have a "trust" (in the strict legal sense)?

It is important to check whether or not the fund is indeed a "trust". It may not be and that could alter the methods required to change the purposes and terms of the "trust" fund. For charities that will still mean OSCR regulation is relevant. This issue is perhaps most apparent where an existing charity has acquired assets from a trust- the funds may be held subject to the terms and conditions contained in the original trust, but the legal vehicle involved will be that of the recipient body. This situation can be quite common in the education sector where educational institutions (often established under a statutory regime) receive funds from trusts or wills to be managed, held and applied by the university or college under its legal framework.

Statutory "trust funds": take extra care

Charities and other organisations which have been established under a statutory regime should confirm what statutory or parliamentary processes they might need to go through to make a change. We have Scotland's widest experience of helping organisations navigate parliamentary processes in order to change the purposes or terms of their "trust fund".

The terms of the trust: do you have the power to change?

A fundamental port of call for any proposed change is the trust deed itself. Does it allow the particular change? Is there a clause permitting amendments and alterations? If so, that will be helpful. For non-charitable trusts, that may provide the single mechanism required to make the desired change(s). For charitable trusts, it will be necessary to apply to OSCR for consent in advance if the aim is to change the purposes or the name of the trust. Any other changes would need to be notified to OSCR after the change has been made.

If the trust deed does not allow the proposed change, then charitable trusts will need to engage the OSCR "reorganisation provisions" to seek consent to do something they could not otherwise do and non-charitable trusts will need to seek the authority of the court.

OSCR and the courts: the decision makers

OSCR regulates all Scottish charities irrespective of legal form. For charitable trusts that are changing their purposes, one of two processes will be engaged:-

  • Consent: as noted above, where a charitable trust has the power within the trust deed to change and amend, the change will still need OSCR consent before making the change.
  • Reorganisation: where the trust does not include a power to change within the trust deed.OSCR assesses conditions and tests for a successful use of the reorganisation provisions. The provisions deal with addressing "weaknesss" etc in trust deeds as well as allowing proposals for "improvements" to a trust's terms- all with a view to making the running of the charity better. The reorganisation provisions do not provide trustees with carte blanche to change the trust and a respect for the spirit of the original purposes (having regard to changes in society etc) will often be a key factor. Reorganisation will require the proposed change to be publicised and where the funds were gifted charity subject specific conditions (a "restricted fund"), steps may require to be taken to ascertain the views of the donor.

Historically, the courts have set a relatively high threshold for allowing non-charitable trusts to change purposes and terms. It is in general a less flexible process than that administered by OSCR. "An inability to further the trusts proposes without recourse to a change of purposes or terms" is a general enscapulation of the rules to change non-charitable trusts through a court process.

Early, considered passage planning and navigation

Fundamental to a change of purposes or the terms of a trust fund is to pause and plot the right and best course and passage at the outset and thereafter navigate along that chosen course. This note and the accompanying chart provide a flavour of the issues and rules, which must be considered specifically on a case-by-case (trust-by-trust) basis. We can help you identify the right and smoothest course and navigate the process to help you and your organisation's objectives arrive at a trusts and charities law safe harbour. It might also be that changes, particularly through the "reorganisation provisions", are the springboard to governance modernisation including becoming a Scottish Charitable Incorporated Organisation.