An update to Scottish charity law – the Charities (Regulation and Administration) (Scotland) Act 2023

The Charities (Regulation and Administration) (Scotland) Bill was passed in June 2023, thereafter receiving Royal Assent and becoming an Act in August 2023.

This blog highlights the key changes brought by the Charities (Regulation and Administration) Act 2023 (the “2023 Act”).

The 2023 Act brings about a series of changes to the primary legislation governing Scottish charities, the Charities and Trustee Investment (Scotland) Act 2005 (“the 2005 Act”), with the overarching aim of strengthening and updating the current legislative framework governing Scottish charities. During the parliamentary process, it was made clear that the 2023 was not intended to revisit the fundamental principles of the 2005 Act.

Detail of 2023 Act and Changes

The 2023 Act brings about a number of key changes including:

• increasing the information that OSCR holds about charity trustees in an internal schedule of charity trustee details;
• updating the information which needs to be included on the Scottish Charity Register (including names of charity trustees);
• a requirement for statements of accounts of all charities to be published by OSCR and the power to remove charities from the Scottish Charity Register that fail to submit accounts;
• giving OSCR wider powers to investigate charities and charity trustees, including former charities and their trustees;
• changes to the circumstances which will result in disqualification of trustees;
• individuals who perform senior management functions may also now be disqualified (as opposed to solely the charity trustees);
• charities can be removed from the register for having an insufficient connection to Scotland;
• the removal of the 42 day period in relation to changes which require prior OSCR consent;
• giving OSCR the power to issue positive directions to charities; and
• creating a record of charities that have merged.

While certain of these adjustments will only impact on particular charities in particular circumstances (for example the record of charities that have merged), a number of the other changes  will apply across all of Scotland’s 25,000 charities and so, if we recommend to all organisations that they should familiarise themselves with the changes and reflect as to any consequential impact these may have.

Commentary on the 2023 Act

It is fair to say that a lot of the detail that is incorporated within the 2023 Act is probably as had been anticipated by the sector, particularly having regard to the various consultation exercises that have led us to this point. While the detail of the adjustments is outlined within the 2023 Act, much will also come down to the application of the changes and new powers by OSCR and so it will be interesting to see how these areas develop in practice over time.

And while it is positive to see proposals that aim to strengthen and update the current legislative framework, it is perhaps somewhat disappointing that the 2023 Act was not being used as an opportunity to address wider issues affecting the Scottish charities sector.

One such area is in relation to unincorporated associations looking to change legal form to a Scottish Charitable Incorporated Organisation (“SCIO”). Often these organisations can be in a somewhat tricky position as regards issues around limited liability and separate legal personality, but changing legal form to an SCIO for example (which would address some of those issues), can often be a daunting prospect. This is particularly so where those organisations have substantial assets to be transferred over to a newly incorporated SCIO. Addressing that issue could have a very real and meaningful impact on a large number of Scottish charities.

It had also previously been mooted that new charities legislation could look at the current Notifiable Events regime and perhaps place that on a statutory footing, thereby enhancing the regime. This would have benefits for both charities in terms of a better understanding of expectations and requirements, and for the regulator and the public in terms of improved monitoring of charities.

It is worth noting that the Scottish Government has undertaken to commence a wider review of Scottish charity law now that the 2023 Act has passed, it will be interesting to see how their findings unfold.

Commencement of the 2023 Act

The provisions of the 2023 Act will come into force in two phases – the first of which happened on 1 April 2024. The Charities (Regulation and Administration) (Scotland) Act 2023 (Commencement No. 1, Transitional and Saving Provisions) Regulations 2024 (the “2024 Regulations”) focuses on the OSCR powers, particularly the inquiry powers. This includes OSCR having the power to remove a charity from the Charity Register if it fails to provide accounts (and does not engage with OSCR), or if it has no or negligible connection to Scotland. OSCR will also be able to issue positive directions and use their inquiry powers to look into former charities. Additionally, from 1 April OSCR has removed the requirement to apply for their consent to make certain changes within a certain time period – prior consent continues to be a requirement but there is no longer a specific time period associated with this.

We expect that the second phase will be in summer 2025 but full details are awaited, we will provide an update when this information is available. The second phase will include the commencement of the public register of charity trustees and the changes to the disqualification criteria.

Our Burness Paull experts in charity law, Emma Maxwell and Emma Manson, are able to assist with any advising on the impact of the changes brought about by the new legislation.