Charity begins with getting all the essential details in place
Here’s how new charities can be registered in Scotland
With over 25,000 organisations registered with the Office of the Scottish Charity Regulator (OSCR), Scotland’s charity sector has established itself as a key contributor to the nation’s social fabric. Charities provide invaluable services to the public, often plugging gaps between public sector and commercial services.
Scotland’s third sector is comprised of a mixture of household name charities from those which operate across multiple countries to smaller groups supporting their local communities.
Setting up a charity in Scotland involves meeting some key legal requirements, put in place to ensure that public confidence in charitable organisations and the important work they do in society is upheld.
To register with OSCR, Scotland-based charities must meet the ‘charity test’ set out in Scottish law. The two key elements are: the organisation must exist to serve only charitable purposes; and must provide public benefit either in Scotland or elsewhere.
The possible charitable purposes are set out in Scottish charity law which requires organisations to be focused on key outcomes which are wide-ranging and include, for example, the prevention or relief of poverty; the saving of lives; the promotion of equality and diversity; and the advancement of animal welfare. When initially registering with OSCR, an organisation must clearly set out the charitable purposes it aims to serve.
As a further part of the application process, OSCR will consider the services a newly-formed charity is planning to deliver and determine whether these would provide public benefit. This is weighed up against potential private benefit, such as the salaries being paid to people in a proposed charity, to determine whether this is proportionate to the organisation’s social aims.
Before awarding charity status, OSCR must also be satisfied that an organisation’s proposed activities will not cause significant ‘disbenefit’ or detriment to any section of the public.
A charity must also carefully consider which legal form it should adopt, including whether it wishes to be an incorporated or unincorporated organisation.
An incorporated charity is structured as a separate legal entity which provides a degree of protection for the people who run it. In Scotland, many organisations adopting this form are registered as a Scottish Charitable Incorporated Organisation (SCIO). Charitable trusts and charities set up as companies limited by guarantee are also commonly-used structures.
If a charity opts to be unincorporated, the people running the organisation will likely be required to enter into contracts on its behalf, potentially exposing them to a higher degree of personal risk.
A charity is managed by its nominated trustees who have a legal duty towards the organisation and are responsible for overall control of its affairs. Depending on the legal form it takes, a charity may require a minimum number of trustees. Scottish charities must register their trustees with OSCR, which has powers to remove those who fail to act in accordance with their duties.
Organisations seeking charitable status must complete OSCR’s detailed application form and upload a draft constitution and signed declaration forms from each of its proposed trustees. OSCR will aim to complete the process within 100 days, but ultimately this will depend on the complexity of the charity’s application.
If successful, securing charity status can be immensely beneficial. In addition to improving an organisation’s public perception, being registered as a charity can improve an organisation’s access to funding and tax benefits. However, being OSCR-registered does bring administrative burdens and legal duties that need to be carefully considered.