At our times of greatest need - whether personally or in our communities - it’s very often charities who are there for us. We place our faith in them. In doing so, it’s so important that we trust those to whom we turn.
Trust in our charities is, of course, already high. We can see that by the ways in which people support third sector organisations of all shapes and size across the country.
The new Charities (Regulation and Administration) (Scotland) Bill working its way through the Scottish Parliament offers the potential for that trust to deepen - hopefully while not placing a greater administrative burden on the sector. It’s important that charities are aware of what’s likely to be coming over the hill and to make arrangements for them, taking expert advice where necessary.
The Scottish Government tells us that Scotland’s charities raised in excess of £13bn of income each year. It’s hard to disagree with ministers when they say it’s important that the means by which they are regulated are fit-for-purpose, coming 17 years after our current charity laws came into force.
MSPs on Holyrood’s Social Justice and Social Security Committee are currently examining the bill and gathering views on legislative amendments which would:
- Give the Office of the Scottish Charity Regulator (OSCR) wider powers to investigate charities and charity trustees
- Amend rules on who can be a charity trustee or a senior office-holder in a charity
- Increase the information that OSCR holds about charity trustees
- Update the information which needs to be included on the Scottish Charity Register
- Create a record of charities that have merged
There are some in the sector who argue that the changes proposed do not go far enough; that the new Bill mainly represents administrative change. And while the changes proposed may not necessarily be generating banner headlines in the mainstream media, for some the changes proposed are significant.
Smaller charities may be daunted by the implementation of proposed changes such as the charity trustee register and securing any exemptions which may become available, but we hope OSCR will allay these concerns by supporting trustees with guidance and informing the sector well in advance of these new legal and regulatory changes.
If you are a charity with a legal form other than a company limited by guarantee, the register of trustees and need to publish accounts will be a level of disclosure that you have not previously been used to. The organisations best prepared for that will seize the positives, embracing it as another way in which they can tell their story - using the trustees’ annual report and accounts as a shop window to showcase the work they do, the strategies they are following and improvements they are making, to ultimately encourage greater support.
Greater disclosure may, however, deter some donors who prefer to remain anonymous in respect of the charities they give to or the sums of money involved. Grant-giving charities or individuals with serious concerns in that respect would be best advised to speak with their lawyer about the discussions they might have with benefactors or other charities.
Much has also been discussed about the additional powers being given to OSCR, including the ability for it to appoint interim charity trustees in certain circumstances or the new power for OSCR to issue positive directions to charities.
In my experience, however, OSCR is a proportionate regulator. It’s unlikely that we are going to see it take a sudden heavy-handed approach. In fact, I am sure that despite the need for greater compliance, OSCR will not wish to impact the operation of and public benefit provided by charities.
Scots have long been considered philanthropic. The new register of mergers would ensure that philanthropy is not lost. It provides a new means by which to capture legacies, ensuring bequests are retained by successor charities.
Currently, where a charity changes its legal form or merges with another, the original charity ceases to exist and a new entity is established. If a Will is not property drafted to take account of this situation, legacies can fail and the charitable beneficiary would not have any recourse to recover it. The register provides a way of getting around that, ultimately helping charities to capture more income. That has to be seen as a positive, especially in the current economic climate.
There’s no getting away from the fact that much of this Bill is about technical and regulatory processes and improvements. But, for public trust and confidence in the third sector, it has the potential to be an excellent piece of work, and the catalyst for wider review of charity law.
If you have any queries regarding the Charities (Regulation and Administration) (Scotland) Bill, please contact Helen Kidd, Partner and our Head of Charities and Third Sector team.
This articles featured in Third Force News on 18 April 2023.
