The Regulator for Charities in England and Wales
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ENGLISH AND WELSH CHARITIES REGISTERING WITH THE OFFICE OF THE SCOTTISH CHARITY REGULATOR (OSCR)
Functional responsibility
| For action | Charity Services Registration |
1. Introduction
2. The purpose and extent of this guidance
3. Background
4. Proposed wording
5. Operating in Northern Ireland as well
6. How can the amendments be made?
7. What will be the practical effects of the amendment for English and Welsh charities?
8. Other options
Glossary of Terms used in this Guidance
Index to further related information
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1. Introduction | |
| 1.1 The Charities and Trustee Investment (Scotland) Act 2005 and the Office of the Scottish Regulator (OSCR) 1.2 What this means for charities established in England and Wales | |
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1.1 The Charities and Trustee Investment (Scotland) Act 2005 and the Office of the Scottish Regulator (OSCR) | |
| The Charities and Trustee Investment (Scotland) Act 2005 (the 2005 Act) establishes a system of charity regulation in Scotland. The Office of the Scottish Charity Regulator (OSCR) was established through Part 1 of the Act and is required to regulate all charities in Scotland. All Scottish charities who wish to describe themselves as charities must be on the Scottish Charity Register and some charities established in other jurisdictions must also register if they wish to carry out activities in Scotland. All organisations applying for registration as a charity with OSCR must meet the charity test set out in sections 7 and 8 of the 2005 Act. | |
| The relevant provision came into force on the 22 February 2007 and from that date an organisation would technically be in breach of the 2005 Act by calling itself a charity in Scotland without being on the Scottish Charity Register. | |
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1.2 What this means for charities established in England and Wales | |
| OSCR have identified an issue that affects the registration of some English and Welsh (E & W) charities. The consequence is that amendments will need to be made to the governing documents of certain E & W charities that are required to seek registration with OSCR in order that they can meet the Scottish charity test. | |
| There are two basic types of case. Firstly, there are those charities whose objects include a reference to general charitable purposes. The word "charitable" in their governing documents is construed as meaning "charitable in accordance with the law of England and Wales" and so does not necessarily mean that their purposes will be charitable under section 7 of the 2005 Act. Secondly, there are those charities which have purposes which are considered charitable both under the law of England and Wales and under section 7 of the 2005 Act but which have dissolution clauses which permit property to be applied for undefined charitable purposes. Again these are construed as being "charitable in accordance with the law of England and Wales" and therefore not necessarily charitable within the meaning of section 7 of the 2005 Act. | |
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3. Background | |
| 3.1 Charities that need to register with OSCR 3.2 Wording of the governing document | |
| Any E&W charity that: | |
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| will need to apply for registration as a charity with OSCR. If the charity meets the Scottish charity test, it will be registered with OSCR. More information about the Scottish charity test is available on OSCR’s website www.oscr.org.uk. The test requires that: | |
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| For the purposes of registration as a charity in Scotland, it does not matter where the charity is based or what its income level is. There are no exempt or excepted charities under the 2005 Act. | |
| The governing documents of charities established under the law of E&W are interpreted according to that law. However the terms "charitable" and "charitable purposes" do not have precisely the same meaning under the 2005 Act as they do under E&W law. | |
| For this reason, OSCR takes the view that where an E&W charity’s governing document uses the terms "charitable" and "charitable purposes" in its objects and/or dissolution clause it could use or distribute its assets for purposes which are not exclusively charitable in accordance with the 2005 Act. This means that they will fail the Scottish charity test. | |
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4. Proposed wording | ||
| We have agreed a standard wording with OSCR that will enable these charities to meet the Scottish charity test if incorporated into a charity’s governing document. | ||
| 4.1 Interpretation of 'other charitable purposes' and 'general charitable purposes' in the governing document 4.2 Dissolution clause refers to 'other charitable purposes' 4.3 Other wording drafted by a charity's legal adviser | ||
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4.1 Interpretation of 'other charitable purposes' and 'general charitable purposes' in the governing document | ||
| Where a charity is established in E & W and undertakes significant activities in Scotland and its objects make reference to "other charitable purposes" or to "general charitable purposes", this clause will be suitable for use as an interpretation clause for the governing document: | ||
| Throughout this [insert type of GD e.g. Trust Deed], "charitable" means charitable in accordance with the law of England and Wales provided that it will not include any purpose which is not charitable in accordance with section 7 of the Charities and Trustee Investment (Scotland) Act 2005. For the avoidance of doubt, the system of law governing the constitution of the charity is the law of England and Wales. | ||
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4.2 Dissolution clause refers to 'other charitable purposes' | ||
| This clause is intended to be used where the objects clause is acceptable as charitable both in E & W and in Scotland but the charity does not meet the distribution test (i.e. its dissolution clause makes reference to "other charitable purposes) in section 7 of the 2005 Act: | ||
| Nothing in this [document] shall authorise an application of the property of the charity for purposes which are not charitable in accordance with section 7 of the Charities and Trustee Investment (Scotland) Act 2005. | ||
| Some charity legal advisors may wish to draft their own wording appropriate to the circumstances described in section 4.1 and 4.2 above. Any wording drafted must be approved by us and OSCR before it can be used to amend a charity’s governing document. However, in any event, most charities will require the Commission’s consent in order to amend their governing documents in the required manner. | ||
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5. Operating in Northern Ireland as well | ||
| At present Northern Ireland is taking steps to set up a charity regulator. The draft Charities (Northern Ireland) Order 2007 is currently with the Northern Ireland Assembly. Because we don’t yet know the final form of the legislation, we cannot be clear about what, if any, issues there might be for E&W charities that operate in Northern Ireland. Although it has not been formally agreed with the authorities in Northern Ireland, we have drafted a form of wording which we expect will cover charities wishing to work there. It is set out below and can be used now in order to cover charities working in Northern Ireland. | ||
| The wording in section 4.1 above can be modified to cover E & W charities working in Northern Ireland if necessary. It makes reference to any statutory provision in force in any part of the UK: | ||
| Throughout this [document], "charitable" means charitable in accordance with the law of England and Wales provided that it will not include any purpose which is not charitable in accordance with any statutory provision regarding the meaning of the word charitable" or the words "charitable purposes" in force in any part of the United Kingdom. For the avoidance of doubt, the system of law governing the constitution of the charity is the law of England and Wales. | ||
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6. How can the amendments be made? | |
| 6.1 Charitable companies 6.2 Unincorporated charities 6.3 Schemes | |
| We can give consent under section 64 of the Charities Act 1993 to charitable companies making amendments using the agreed wording set out in section 4 above. | |
| In the case of unincorporated charities wishing to use the agreed wording in section 4 above, where there is a power of amendment it must be complied with. | |
| Where there is no power to change the governing document, we may be able to authorise an amendment by Scheme. We cannot do so by an Order under section 26 of the 1993 Act because the amendment will alter the purposes of the charity. A Scheme can be offered if there are cy-près grounds. Section 13(1)(e)(iii) of the 1993 Act is likely to apply in most cases, in other words, "where the original purposes, in whole or in part, have, since they were laid down……ceased in any other way to provide a suitable and effective method of using the property available by virtue of the gift, regard being had to the spirit of the gift". Most of the charities in question will already be operating in Scotland and they will not be able to continue to do so without amending their objects. This means that we can take the view that the original purposes have ceased to provide a suitable and effective method of using the property available. | |
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7. What will be the practical effects of the amendment for English and Welsh charities? | |
| It is important to note that the effect of amending a charity’s governing document in order to pursue purposes that are charitable under both E&W law and Scottish law is, in effect, to narrow its purposes. At the moment the two sets of legislation only differ slightly, but it is possible that what is charitable or what constitutes public benefit under the two jurisdictions may differ more widely in the future. We have, therefore, given careful consideration to whether we would be justified in giving our consent to such a change. | |
| Because of the issue described above, trustees wishing to amend their charity’s governing document as described in section 4 above, will be asked to consider when deciding whether to make the amendments referred to in this guidance whether they are satisfied that the change will not, or is unlikely to, significantly restrict their charity’s activities in E & W or elsewhere. | |
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8. Other options | |
| If there are any charities that have practical difficulties with the approach described in this OG, we may be able to discuss possible solutions with OSCR. Two other options have been suggested to us which will need to be considered on a case by case basis and are therefore only outlined in this OG. These are: | |
| 8.1 Setting up a separate charity to operate in Scotland 8.2 Setting up a Scheme to declare separate trusts | |
| An affected charity could: | |
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| This would work if the charity concerned had the power to transfer from the existing charity to the new one or if the Commission authorised the transfer either by order or scheme. There would be costs involved in setting up the new charity, but the advantage would be that there would be two separate entities which could evolve differently if charity law developed differently in the separate jurisdictions. | |
| A charity could ask us to establish a Scheme declaring separate trusts over the assets which the charity uses in Scotland. The original charity would then be trustee of the charity established under the Scheme. The Scheme charity could then be registered in Scotland as well as in E & W. The advantages and disadvantages would be similar to those in section 8.1 above; however, some solicitors are encouraging this option as a less expensive method of establishing a separate charity. | |
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Glossary of Terms used in this Guidance | |
| Charitable company | |
| Charity trustees | |
| Cy-près | |
| Excepted charities | |
| Exempt charities | |
| Governing document | |
| Land | |
| Order | |
| Scheme | |
| Trustees | |
Index to further related information
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