Is becoming a SCIO the right choice? The SCIO is a new legal form which provides another option for bodies wishing to register as charities in Scotland, and for those existing Scottish charities which wish to adopt a different legal form. Before making an application to register a SCIO, it is important to consider whether the SCIO will be the most suitable legal form for the proposed charity. There are some significant differences between being a SCIO and being any other kind of body with charitable status in Scotland. The table in section 2.1 below sets out some of the key characteristics of the SCIO as well as those of the most common types of alternative legal form used by Scottish charities. This comparison may help you consider whether the SCIO is suitable for the proposed charity. Each organisation should decide for itself which legal form suits it best. You should consider whether the key characteristics of each legal form will be suitable for your organisation’s size and what it plans to do. As regulator, OSCR cannot offer advice on whether being a SCIO is the right choice for a particular charity. Any body considering the SCIO as a potential option should consider taking advice from intermediary bodies, support organisations and/or professional advisers before making an application to OSCR (see section 8 for a list of useful contacts). Table of key characteristics of SCIOs and other common charitable forms Company Regulator Single regulator OSCR Single regulator OSCR Dual regulators OSCR and Companies House Single regulator OSCR Key legislation Charities and Trustee Investment (Scotland) Act 2005 Charities and Trustee Investment (Scotland) Act 2005 Charities and Trustee Investment (Scotland) Act 2005 Companies Act 2006 Charities and Trustee Investment (Scotland) Act 2005 Trusts (Scotland) Act 1921
Company Legal status Legal personality Can undertake transactions in its own right to land and buildings will be held in the name of the SCIO (advantage in terms of succession) Liability of charity trustees is limited (in most cases) Members are not liable to contribute to the assets if it is wound up No legal personality Some or all of the charity trustees must undertake transactions on behalf of the body Title to land and buildings must be held in the name of one or more individuals on behalf of the charity The charity trustees may have personal liability for the body’s actions and unlimited liability if it is wound up Legal personality Can undertake transactions in its own right Title to land and buildings will be held in the name of the company (advantage in terms of succession) Liability of charity trustees is limited (in most cases) Liability of members is usually limited in the Articles of Association to £1 No personality Some or all of the charity trustees must undertake transactions on behalf of the body Title to land and buildings must be held in the name of one or more trustees (deed of assumption required to evidence new trustees) The charity trustees may have personal liability for the body’s actions although there are certain protections for trustees in trust law and common law
Company Accounting Charity accounting of receipts & payments or accrued accounts depending largely on body’s income level Discretion for charity trustees to choose to exceed minimum requirements if accrued accounts are more suited to the body’s operations Charity accounting requirements Preparation of receipts & payments or accrued accounts depending largely on body’s income level Discretion for charity trustees to choose to exceed minimum requirements if accrued accounts are more suited to the body’s operations Charity and company accounting requirements Accrued accounts only regardless of income level Charity accounting requirements Preparation of receipts & payments or accrued accounts depending largely on body’s income level Discretion for charity trustees to choose to exceed minimum requirements if accrued accounts are more suited to the body’s operations Extent of powers Unlimited powers in furtherance of purposes Subject to any restriction in the governing document Unlimited powers in furtherance of purposes Subject to any restriction in the governing document Unlimited powers in furtherance of purposes Subject to any restriction in the governing document Subject, in certain circumstances, to any restrictions in company law Limited powers Powers set out in governing document – these vary from very restrictive to very wide Powers may be supplemented by those set out in trust law requirement
Company Membership Must have at least two members (who may also be charity trustees) May have a single- tier structure (governed by charity trustees with no additional members) or a two-tier structure (governed by charity trustees with a membership body which has certain powers or duties) Resolutions of members are required before certain actions can be taken Members are subject to some of the duties of charity trustees (see section 5.2.1) Meeting of members must be held at least every 15 Must have at least two members (who may also be charity trustees) May have a single- tier structure (governed by charity trustees with no additional members) or a two-tier structure (governed by charity trustees with a membership body which has certain powers or duties) Governing document sets out the powers that members have and how decisions may be taken Members are not subject to any of the duties of charity trustees Must have at least one member May have a single-tier structure (governed by charity trustees with no additional members) or a structure (governed by charity trustees with a membership body which has certain powers or duties) Resolutions of members are required for certain decisions Members are not subject to any of the duties of charity trustees Does not have a membership structure
Company Specific duties and Duty to keep registers of members and charity trustees, and to make publicly available in certain circumstances (see section 5.3) Governing document must contain a number of basic elements in relation to the body’s governance No specific duties or requirements, other than those set out in the governing document or in policies and procedures adopted by the charity trustees Wide-ranging duties and requirements set out by company law including duty to keep registers of members and directors Duties as set out in the governing document Trustees are subject to the requirements of trust law
Company Removal from the Register and dissolution Removal from the Register results in dissolution by solvent or insolvent route (see section 7.3) Requirement for public notice of dissolution Option for creditors to instigate sequestration and subsequent dissolution (see section 7.4) No option for the body Removal from the Register does not lead to dissolution; body can continue to exist without charitable status but must use remaining charitable assets solely for charitable purposes Dissolution takes place in line with requirements set out in the governing document No requirement for public notice of dissolution (subject to any set out in the governing document) Removal from the Register does not lead to dissolution; body can continue to exist without charitable status but must use remaining charitable assets solely for charitable purposes Dissolution takes place in line with constitutional requirements (normally following a resolution of the members) or at the instigation of Companies House Companies House dissolves the body by removing it from the Companies Register after a public notice period Option for creditors to instigate liquidation and subsequent dissolution Option for the Removal from the Register does not lead to dissolution; body can continue to exist without charitable status but must use remaining charitable assets solely for charitable purposes Dissolution takes place when all trust property is expended or at the discretion of the charity trustees if their powers permit No requirement for public notice of dissolution
details on the remuneration of charity trustees Procedures for dealing with any conflict of interest Details of how the SCIO will use any surplus assets it has at the time of its dissolution. assets must be used for charitable purposes which are the same as or which resemble closely the SCIO’s own purposes.
association or trust to be able to transfer its assets and liabilities to the new SCIO, the latter needs to be incorporated (that is, entered in the Scottish Charity Register). If the existing charitable unincorporated association or has entered into particular legal contracts, such as leases or service level agreements, it may take some time to transfer these to the new SCIO Similarly, an existing charitable unincorporated association or which obtains benefits on the basis of its charitable status, such as grant funding or rates relief, must consider how these benefits may be affected during the process of changing its legal form.
Requirement Non-SCIO Charity Seeking consent to change name Changing Your Charity’s Name – Seeking OSCR’s Consent (s.11 of 2005 Act) Seeking consent to change purposes Changing Your Charity’s Purposes – Seeking OSCR’s Consent (s.16(2)(a) of 2005 Act) Notification to OSCR of changes made Making Changes to Your Charity webpage (s.17 of 2005 Act) Benevolent fundraising Benevolent Fundraising (ss.79 to 83 of 2005 Act and the Charities and Benevolent Fundraising (Scotland) Regulations 2009) Amalgamating with another body Section 7.1 of this guidance (s.59-60 of 2005 Act) Amalgamating Your Charity webpage (s.16(2)(b) of 2005 Act) Seeking consent to dissolve or wind up Section 7.3 of this guidance (Dissolution Regulations) Dissolving Your Charity – Seeking OSCR’s Consent (s.16(2)(c) of 2005 Act) References to charitable status Section 5.4 of this guidance (s.52 of 2005 Act) References to Charitable Status (s.15 of 2005 Act and the Charities References in Documents (Scotland) Regulations 2007 (as amended)) Limited application of charity trustee duties to members Section 5.2.1 of this guidance (s.51 of 2005 Act) N/A
Requirement Non-SCIO Charity Member resolution required for amendment of constitution Section 5.2.2 of this guidance (s.63 of 2005 Act) N/A Duty to keep and supply register of charity trustees Section 5.3 of this guidance (General Regulations) N/A Duty to keep and supply register of members Section 5.3 of this guidance (General Regulations) N/A Duty to hold meeting of members Section 5.2.2 of this guidance (General Regulations) N/A Transfer of undertaking Section 7.2 of this guidance (s.61 of 2005 Act) N/A
involve the Trustee in Bankruptcy taking the following steps: establishing the SCIO’s assets and liabilities publishing a notice of the sequestration in the Register of Insolvencies (this can be accessed at www.aib.gov.uk) holding a meeting of the creditors (if AiB thinks this appropriate) realising the estate and making payments to creditors if there are sufficient funds to do so
The application to create a new SCIO will be assessed in the same way as described in section 3. If OSCR is satisfied that the proposed SCIO will meet the charity test and that its constitution contains the required elements outlined in section 3.1, it will write to the applicant giving its approval in principle to the granting of charitable status to the SCIO, pending the removal of the existing unincorporated association or trust from the Register. If OSCR refuses the application, the applicants have the right to seek a review as set out in section 3.4 above. The existing charitable unincorporated association or trust will then submit to OSCR the Change to SCIO
Appendix 3 Documents required with an application to dissolve a solvent SCIO When applying to dissolve a solvent SCIO, the following documents must be submitted to OSCR: An Application for Consent to Dissolve a Solvent SCIO (this will be available on the Scottish Charitable Incorporated Organisations page of OSCR’s website). This application will include the following details of the proposed dissolution of the SCIO: The SCIO’s assets and liabilities at the time of the application Details of any funds to be returned to a funding body or any other body under a contract or other terms Proposals for how the outstanding liabilities will be met The name of the body or bodies which will receive any surplus assets of the SCIO. A signed statement from the SCIO that it will notify all its known creditors to advise them that it has applied to OSCR to be dissolved. A copy of a resolution of the SCIO’s members that, subject to OSCR’s consent, the SCIO will: wind up its affairs transfer any surplus assets to another named body (or bodies) whose purposes are the same as or resemble closely those set out in the SCIO’s constitution, and be removed from the Register and therefore dissolved. The resolution must be passed by a two-thirds majority of those members voting at a general meeting, or otherwise than at a general meeting, and certified by either at least two-thirds of the charity trustees, or by one of them on behalf of them all if so authorised. Additionally, it must have been passed no more than 21 days before making the application to OSCR. A copy of the SCIO’s constitution, including any amendment. A copy of the register of the SCIO’s charity trustees. A Declaration of Solvency of the SCIO signed by at least two-thirds of its charity trustees, or by one charity trustee on behalf of them all if so authorised (this Declaration will be available on the Scottish Charitable Incorporated Organisations page of OSCR’s website). A Notice of Application for Dissolution of the SCIO (this Notice will be available on the Scottish Charitable Incorporated Organisations page of OSCR’s website).