Is It Time To Reorganise Your Charity? – Charities & Non-Profits – Corporate/Commercial Law

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but over time, their Constitutions may become outdated.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 Perhaps the powers granted to its Trustees are out of
date, making it difficult if not impossible to continue to fulfil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 Sometimes the purposes themselves are now outdated,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.

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.