The Regulator for Charities in England and Wales
The Office of the Scottish Charity Regulator (OSCR) was established under the Charities and Trustee Investment (Scotland) Act 2005 (“the 2005 Act”) and regulates all charities in Scotland. They are responsible for registering charities on the Scottish Charity Register.
OSCR identified an issue with the registration of some English and Welsh (E&W) charities in Scotland. This statement aims to explain what this is and to set out what action E&W charities need to take as a consequence.
Our initial response was to help any E&W charities affected make the amendments required by OSCR to enable them to register in Scotland. However, because of representations made to us by E&W charities and their advisors, we decided to put applications for the amendment of governing documents on hold while we considered what was in the best interests of E&W charities working in Scotland and to ensure that any solutions suggested complied with the legal framework.
Following discussions with OSCR, they agreed to take no action against charities operating in Scotland who are technical breach of the 2005 Act who were unable to give a timescale for amendments because they were waiting for advice from us.
We have now agreed a standard form of wording with OSCR that will enable these charities to meet the Scottish charity test if incorporated into a charity’s governing document. We believe that this revised wording is clearer and more effective than that originally proposed.
Any E&W charity that wishes to refer to itself as a charity and occupies any land or premises in Scotland or carries out activities in any office, shop or similar premises in Scotland, needs to apply for registration as a charity with OSCR. If the charity meets the Scottish charity test contained in the 2005 Act, it will be entered on the Scottish Charity Register. More information about the Scottish charity test is available on OSCR’s website www.oscr.org.uk. The test requires that the charity’s objects are charitable under section 7 of the 2005 Act and that the charity cannot distribute or apply any of its property for purposes which are not charitable under section 7.
The governing documents of charities established under the law of E&W are interpreted according to that law. However, the terms “charitable” or “charitable purposes” do not have precisely the same meaning under the 2005 Act as it does under E&W law.
The effect of the difference between E&W law and Scots law is that where an E&W charity’s governing document makes reference to “charitable” or “other charitable purposes” in its objects and/or dissolution clause, it is not clear that the organisation can only use its assets for purposes which are exclusively charitable in accordance with the 2005 Act. This means that it will fail the Scottish charity test.
E&W charities that have applied for registration with OSCR and have been asked to make an amendment to their governing documents before they can be registered, will generally need to contact the Commission. In most cases, an amendment to a charity’s purposes or objects can only be made with our consent. Often an amendment to a dissolution clause will also need the consent of the Commission and/or a parent body.
The standard wording we have agreed with OSCR is set out below:
(a) Where a charity is established in E & W and undertakes significant activities in Scotland and its objects clause makes reference to “charitable” or “other charitable purposes”, this form of wording 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.
(b) 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 “charitable” or “other charitable purposes”) in section 7 of the 2005 Act:
Nothing in this [insert type of GD e.g. trust deed] 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.
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. We are currently considering whether a similar problem could arise for E & W charities operating there.
If you need further advice on this issue, please contact Charity Commission Direct.
Some charity legal advisors may wish to draft their own wording appropriate to the circumstances described in 6 and 7 above. Any wording drafted must be approved by us and OSCR before it can be used to amend a charity’s governing document.
Charitable companies
We must give consent under section 64 of the Charities Act 1993 to charitable companies making amendments using the agreed wording set out above as the amendments will affect the manner in which the property of the charity is applied.
Unincorporated charities
In the case of unincorporated charities wishing to use the agreed wording, where an existing power of amendment is used, it is necessary to comply with its provisions.
Schemes
Where there is no power to change the governing document, we may be able to authorise an amendment by scheme.
It is important to note that amending a charity’s governing document in order to pursue purposes that are charitable under both E&W law and Scots 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.
As a result of this, trustees wishing to amend their charity’s governing document as described above, will be asked to confirm that they are satisfied that the change will not, or is unlikely to, restrict its activities in England and Wales or elsewhere.
A more radical approach would be to restructure the E&W charity to create separate trusts or separate charities. We will consider such cases on an individual basis and any charity wishing to explore this approach is welcome to discuss their proposals with us.