Is it time to reorganise your charity?
Scotland is proud to have over 25,000 registered charities. Whether focused on community development, education, animal welfare, or supporting those in need, our charities play a vital role both across the country and beyond.
Many charities in Scotland have been established for decades, but over time, their Constitutions may become outdated. Charity reorganisation is a crucial step to ensure these charities can continue to fulfil their purposes efficiently in today’s evolving landscape.
Legal Director Karen Oliver provides expert guidance on why updating is important, the key steps involved and how our Private Client team can support you throughout the process.
Why consider charity reorganisation?
There are many reasons why a charity might wish to update its Constitution. Perhaps the powers granted to its Trustees are out of date, making it difficult if not impossible to continue to fulfil its purposes. Sometimes the purposes themselves are now outdated, with funds no longer applied in the same meaningful way as when the charity was initially set up. There may also be issues with the appointment of Trustees, with many historic Constitutions including provision so that people in particular roles, such as the head of a local organisation or school, are also appointed as Trustees of the charity. In today’s busy world, these individuals may not be able to commit to the role of Trustee in the same way as their predecessors.
Older Constitutions also tend to lack the flexibility we seek to include when setting up a new charity today. Updating your Constitution allows you to ensure appropriate provisions are in place so your charity can continue meeting your aims on a long-term basis, as well as streamlining administration, thereby allowing you to operate more efficiently going forward.
Does charity reorganisation need OSCR’s consent?
Certain updates require OSCR’s prior consent. These include updates to the charity’s name and purposes.
Most other changes do not require consent provided that the charity has the appropriate powers of amendment in its Constitution. In practice, many charities do not have such powers and consent is therefore still required. As part of any update we can assist Trustees to incorporate powers of amendment to make future changes easier.
Where consent is required, OSCR aims to reach its decision within 13 weeks for charities who have a gross annual income of less than £1,000. For charities with an income above this threshold, the process can take around 6 months. Very complex applications can take even longer. It is therefore important to forward plan if changes are required by a set date.
Reorganisation options
There are various options open to a charity which wishes to reorganise. If there are only one or two problematic provisions, a Supplementary Deed can be put in place to adjust the wording of these clauses. Where the Trustees wish to make more sweeping changes, perhaps including a more up to date suite of powers to enable them to manage the Trust Fund more efficiently, an entirely new Constitution can be prepared to replace the existing documentation.
For some charities, more fundamental changes might be appropriate, with an update to the charity’s form. Historically most charities in Scotland have been set up as Charitable Trusts. Other charities have been established as Charitable Companies in order to secure the very helpful separate legal persona and limited liability for Trustees. Nowadays we also have a new form of charity, the Scottish Charitable Incorporated Organisation (SCIO), which is in essence a hybrid between the two and offers a very efficient model for many charities. When making changes to their charity, Trustees should consider whether a move from one type of charity to another might be advantageous.
Is now the right time for charity reorganisation?
If you are finding the administration of your charity burdensome or are encountering issues fulfilling your charity’s purposes, now is definitely the right time to consider a reorganisation. Our Private Client team at Stronachs will be very happy to discuss the options open to your particular charity and guide you through the process.
