Charities Update
The Office of the Scottish Charity Regulator (OSCR) has made a number of recommendations in its 2008 Annual Report for changes to the Charities and Trustee Investment (Scotland) Act 2005 and the Charity Accounts (Scotland) Regulations 2006.
The proposed changes which are sought both to clarify existing legislation and reduce the regulatory burden facing charities are being considered as part of a public consultation. OSCR has made recommendations to enhance its powers to assist charities in circumstances which were not included within the primary legislation.
These include:-
• Appointing additional charity trustees where a charity is unable to operate due to lack of sufficient quorum or lacks the required power in its constitution to appoint new Trustees thereby allowing the charity to continue or resume its activities.
• Allowing a charity with insufficient power in its constitution to add new provisions which relate to improving governance and administration arrangements. The Act only allows constitutions to be amended in relation to the charitable purposes or other provisions where the existing ones can no longer be given effect to or are no longer desirable.
It is important to note that the foregoing powers would be exercised by OSCR only at the request of the relevant charity.
The other key recommendation within the proposed changes relates to the rolling review and the regulatory burden facing charities. As we have featured in previous newsletters, the rolling review is the process by which OSCR is reviewing charities which were automatically entered in the Scottish Charities Register (as part of the transitional implementation of the 2005 Act) to assess whether they meet the requirements of the charity test. Part of the test is that an organisation must only have charitable purpose(s) as set out in the 2005 Act.
Many charities established before the Act may find that their constitutions include charitable purposes defined only in terms of the tax legislation and consequently fail to meet the charity test. Five of the thirty charities reviewed under phase 1a of the Rolling Review were in this position. Where there is no substantive difference, charities are facing having to amend their constitutions to prevent failing the charity test on what in many cases will be a minor technicality. OSCR has suggested that the pre 2005 constitutions should be read as including “charitable purposes” under the 2005 Act.
As this proposal would certainly reduce the likelihood of charities failing to meet the charity test as a result of a minor technicality, it is welcomed. The amendment of legislation can prove to be a lengthy process even if the Government decides to take the proposed change forward at the earliest opportunity. Even though the risk of failing to meet the charity test may be minimised by this proposal, it is still important for charities to review their constitutions regularly to ensure they contain sufficient flexibility and necessary powers. This should include provision for the transfer of assets in the event of either an amalgamation or wind up.
Angela McMahon
angela.mcmahon@murraybeith.co.uk