The International Journal
of Not-for-Profit Law

Volume 2, Issue 4, June 2000

Charity law is an area of increasing importance, and its reform is a subject in which the recently (re-) formed Scottish Parliament has expressed interest. Although the present members of the Scottish Parliament were elected as recently as 1999, Scotland was a separate kingdom until the seventeenth century and has its own legal system whose separate existence was guaranteed by the Act of Union in1701. It is not surprising, therefore, that charities in Scotland are regulated differently from those in other parts of the UK, and that the Scottish Parliament is considering proposals to change the law which governs them.

In recent years reform of the law in England and Wales has been proposed in the report of the Commission on the Future of the Voluntary Sector in England and Wales (Deakin 1996), and in Scotland by the report of the Commission on the Future of the Voluntary Sector in Scotland (Kemp 1997) and in the recently published reports of Dundee University’s Charity Law Research Unit, of which I am a member (CLRU 2000).

The first major evaluation of the statutory supervision of charities in Scotland, conducted by Dundee University’s Charity Law Research Unit, was published on 12th June 2000 by the Scottish Executive Central Research Unit. The evaluation examined the implementation of the principal legislation governing Scottish charities, namely Part I of the Law Reform (Miscellaneous Provisions) (Scotland) Act 1990 (“the 1990 Act”), and two other sets of provisions which are relevant in this area, Part VI of the Education (Scotland) Act 1980 (relating mainly to educational endowments) and section 119 of the Civic Government (Scotland) Act 1982 (relating to public charitable collections). This paper provides a summary of our proposals for reform of the Scottish system.

Three separate reports have been published by the Scottish Executive Central Research Unit as a result of this research. Scottish Charity Law: An Evaluation is the main report; Public Trusts and Educational Endowments examines, at an exploratory level (1) the regulation of public trusts and educational endowments and (2) the reorganisation of public trusts and endowments (both educational and non-educational); Public Charitable Collections, examines some of the problems associated with collections of cash from members of the public, either in the street or from house to house, in aid of a particular charitable cause.

A variety of research techniques were employed for our research, both desk-based and empirical. The desk research involved a legal analysis of the regulatory system in Scotland and comparative studies of the legal position in other jurisdictions, including England and Wales. The empirical study involved a postal survey of 2500 Scottish charities; interviews with 45 advisers to charities; an analysis of the work of the Scottish Charities Office (the main regulatory agency in Scotland), including in-depth scrutiny of 7 cases taken to the Court of Session (Scotland’s principal civil law court); and discussions with the other regulatory institutions.

While recognising that the provisions of the 1990 Act have greatly improved the supervision of charities in Scotland and that the allocation of certain tasks to a number of different regulatory agencies has, on the whole, worked well, we discovered that a significant number of charities were unclear about their legal responsibilities, and small charities without an infrastructure of “umbrella” support had difficulty in implementing some of the legislation. We also consider the current system of providing information to the public about Scottish charities to be unreliable. Charities themselves also expressed a desire for more readily available information and guidance on charity law and regulation.

Concluding that there is a lack of cohesion between the provisions in the different pieces of legislation and that a fresh start is required, we recommend that the existing provisions should be repealed and replaced by a single Act of the Scottish Parliament governing (1) the regulation of Scottish charities and public trusts; (2) the reorganisation of Scottish charities and public trusts; (3) fund-raising by means of public charitable collections; and (4) the provision of information and advice to organisations which are subject to the system and to members of the public.

Specific recommendations include the following:

• a definitive public register of Scottish charities should be established, to be maintained by a new official, the Registrar of Scottish charities
• standards set for charities should be harmonised so as to apply equally to charities of all legal forms, but should make appropriate allowance for small charities
• standards set for charities in Scotland should so far as possible be harmonised with those set for charities elsewhere in the UK
• the Scottish Executive should authorise the terms of general guidance to charities on their responsibilities under charity law
• rationalisation should ensure that all charities, and benevolent organisations seeking to raise funds, are subject to a co-ordinated system of monitoring
• all Scottish charities (and benevolent organisations seeking to raise funds) should be required to submit accounts annually to the Registrar of Scottish charities
• the Registrar of Scottish charities should deal initially with charity-related enquiries and should disseminate general guidance from the Scottish Executive

In a little more detail, our proposals for improvement of the current legislation for charities in Scotland may be summarised as follows:

Definition

• A new definition of “Scottish charity” is proposed: a body which is established under the law of Scotland, or managed or controlled wholly or mainly in or from Scotland, and which has exclusively “charitable” purposes in the sense of UK taxation law – irrespective of whether the body has in fact been recognised as charitable for tax purposes by the Inland Revenue. Scottish charities with educational purposes should be treated in the same way as other Scottish charities.
• Public trusts which are not “charitable”, in the sense that their purposes do not meet the definition of charitable in UK taxation law, should be defined as “non-registerable public trusts” and should be subject to a “light touch” version of the main statutory regime for Scottish charities.
• A new definition of “benevolent organisation” is proposed: a body which is established under the law of Scotland, or managed or controlled wholly or mainly in or from Scotland, and whose purposes are “charitable, benevolent or philanthropic” (within the meaning of the existing legislation governing public charitable collections) but not “charitable” (in the sense of UK taxation law). “Benevolent organisations” seeking to raise funds should be subject to an adapted version of the main supervisory regime for Scottish charities.

Public Information

• A definitive public register of Scottish charities should be set up, to be maintained by a Registrar of Scottish Charities, with all Scottish charities being obliged to register, regardless of size.
• “Benevolent organisations” should be obliged to register with the Registrar of Scottish Charities as a precondition of participating in the proceeds of a public charitable collection.
• Annual accounts and reports of Scottish charities (and of registered benevolent organisations) should be made available to the public via the register.
• The Registrar of Scottish Charities should maintain a register of persons removed by the Court of Session from positions of management or control.

Standard-setting

• Detailed standards should be set by regulation of the Scottish Executive rather than by primary legislation and should so far as possible apply to all organisations subject to the system, with a minimum of exceptions (other than for small charities).
• In all appropriate areas specific standards, such as accounting requirements, should be harmonised on a UK-wide basis.
• General guidance for charities should be authorised by the Scottish Executive in addition to the general and specific standards set by primary and secondary legislation.

Monitoring

• The Scottish Charities Office, as the main dedicated monitoring agency, should be sufficiently resourced to enable full use to be made of the Lord Advocate’s powers under the legislation.
• All Scottish charities (and registered benevolent organisations) should be required to submit accounts annually to the Registrar of Scottish Charities.
• Only local organisers authorised by a registered benevolent organisation or registered Scottish charity should be entitled to apply to a local authority for permission to collect. Central exemptions from local authority permission for national organisations should be discontinued.
• The provisions for the sharing of information between supervisory institutions should be strengthened.

Facilitation

• The Registrar of Scottish Charities should act as the first point of contact for charity enquiries, should facilitate access to the other supervisory institutions as appropriate, and should disseminate authorised general guidance for charities.
• Those responsible for the management or control of a Scottish charity should be entitled to apply to the Court of Session by an informal, “fast track” procedure for definitive directions on how to proceed in situations of difficulty.
• A rationalised system for the reorganisation of Scottish charities and non-registerable public trusts should be provided, and should make due allowance for the needs of small organisations.

The Diagram outlines a revised institutional structure for the legislative and administrative supervision of charities in Scotland.

Diagram Revised Institutional Structure (new or reallocated tasks in italics)

Scottish Executive Legislation Co-ordination Responsibility for Registrar of Scottish Charities Prescription of information to be held on registers Prescription of accounting/reporting standards (including exemptions) Designation of religious bodies Prescription of standards for public charitable collections Authorisation of general guidance Promoting reorganisations Registrar of Scottish Charities Determination of status for registration as Scottish charity Determination of status for registration as “benevolent organisation” Maintenance of registers: Register of Scottish Charities Register of Benevolent Organisations Register of Persons Removed Provision of public access to registers Management of statistical data Reorganisation of dormant accounts Information/advice on reorganisations   Registration of reorganisations Dissemination of general guidance Facilitating access (1st point of contact) Function-related information/advice Reference of misconduct to Lord Advocate

Lord Advocate Investigation Intervention (provisional) Applying to Court of Session for intervention Monitoring disqualifications Opposing/proposing reorganisations Consent to re-organisational resolutions Cross-border monitoring Function-related information/advice Court of Session Appeals on status for purposes of registration Intervention Approval of schemes for reorganisation Provision of definitive directions Cross-border monitoring Local Authorities & Police Permissions for public charitable collections Monitoring of conduct/results of collections Function-related information/advice Reference of misconduct to Lord Advocate Inland Revenue Administration of tax reliefs Monitoring of non-charitable activities/use of funds and reference to Lord Advocate Function-related information/advice

I should emphasise that these recommendations are those of our research team, and not those of the Scottish Executive. Our research reports are currently being considered by the Scottish Charity Law Review Commission which has been established by the Scottish Parliament to examine how charity law might be modernised to meet the needs of both the charitable sector and the general public in the 21st century.

Publications to which reference is made

• Charity Law Research Unit, University of Dundee: Scottish Charity Legislation: An Evaluation (Edinburgh: Scottish Executive Central Research Unit, 2000). Obtainable from The Stationery Office Bookshop, 71 Lothian Road, Edinburgh EH3 9AZ. (CLRU 2000)
• Charity Law Research Unit, University of Dundee: Public Trusts and Educational Endowments (Edinburgh: Scottish Executive Central Research Unit, 2000). Obtainable from The Stationery Office Bookshop, 71 Lothian Road, Edinburgh EH3 9AZ. (CLRU 2000)
• Charity Law Research Unit, University of Dundee: Public Charitable Collections (Edinburgh: Scottish Executive Central Research Unit, 2000). Obtainable from The Stationery Office Bookshop, 71 Lothian Road, Edinburgh EH3 9AZ. (CLRU 2000)
• Deakin Commission: Commission on the Future of the Voluntary Sector, Meeting the Challenge of Change: Voluntary Sector into the 21st Century (London: National Council for Voluntary Organisations, 1996). (Deakin 1996)
• Kemp Commission: Commission on the Future of the Voluntary Sector in Scotland, Head and Heart. The Report of the Commission on the Future of the Voluntary Sector in Scotland (Edinburgh: Scottish Council for Voluntary Organisations, 1997). (Kemp 1997)

*Dr Christine Barker is Senior Research Fellow in the Department of Law at the University of Dundee, Scotland, and for the past four years has been Director of the University’s Charity Law Research Unit. She played a key role in the Unit’s recently published evaluation of Scottish charity legislation, and has written a number of articles on charity law related subjects.