How Do I Set Up a Charity in Scotland?
Date: 24/07/2024 | Business & Professional Services, Corporate
Charities provide invaluable services to the public, often plugging the gaps left by the public sector and commercial services. There are currently over 25,000 charities registered with the Office of the Scottish Charity Regulator (OSCR), the regulator and registrar of all charities in Scotland. These range from household name charities operating in many different countries, to local groups which help their local communities. But how can you set up a charity in Scotland?
What is a charity?
In Scotland, an organisation can only call itself a charity if it is registered with OSCR. OSCR’s website contains lots of helpful information on how to become a charity.
In order to become a charity, an organisation must meet the “charity test” set down in Scottish charity law. There are two main parts to this:
- The organisation must have only charitable purposes; and
- The organisation must provide public benefit in Scotland or elsewhere.
Charitable purposes
A Scottish charity must have only charitable purposes. The charitable purposes are set out in Scottish charity law. The list is wide ranging and includes e.g. the prevention or relief of poverty; the advancement of health; the promotion of equality and diversity; and the advancement of animal welfare. You need to tell OSCR what your charitable purposes will be, and what activities your charity will carry out in furtherance of those purposes – for example, running food banks or providing access to education on health and wellbeing.
Public benefit
As part of your application process, OSCR will consider the activities that your charity will carry out, and will determine whether it will provide public benefit. OSCR will weigh this against any potential private benefit (i.e. whether anyone benefits from the charity as a private individual e.g. by being paid a salary). If OSCR considers that the public benefit outweighs any private benefit, then it is likely to grant charitable status.
OSCR will also consider whether the organisation will cause any “disbenefit” (i.e. detriment or harm) to any section of the public – if the disbenefit outweighs the public benefit, it may not be granted charitable status.
What form does a charity need to take?
A charity can take a few forms. The first question you might want to ask is whether you want your charity to be incorporated or unincorporated. If it is incorporated, it is a separate legal entity from the people who run it, and that offers them a degree of protection. If your charity is unincorporated, the people running it will usually have to enter into contracts on its behalf, which can expose them to personal risk.
The most common charity structures are:
- Scottish Charitable Incorporated Organisation (SCIO);
- Company limited by guarantee;
- Trust;
- Unincorporated association.
You should do careful research on each of the options available, to ensure you choose the structure that’s right for your organisation. We can assist you with this process.
Who runs the charity?
Charities are run by charity trustees, who are responsible for the overall control of its affairs. Depending on the legal form your charity takes, you may need a minimum number of charity trustees. You need to tell OSCR who your charity trustees will be. Trustees have legal duties towards the charity, and OSCR can take steps to remove trustees who are not acting in accordance with those duties.
Benefits of being a charity
There are many benefits to being a charity (such as public perception, access to funding, and tax benefits), but these need to be outweighed against the administrative burden of registering with OSCR, and the duties you will be taking on as charity trustees.
How do I apply?
OSCR accepts online applications via its website. You will need to complete a detailed application form and also upload a draft constitution and signed trustee declaration forms from each of the proposed charity trustees. OSCR aims to process applications within 100 days. Sometimes they will contact you to ask questions about your application, which can mean that the process takes longer. If successful, the charity will be registered on the charities register and given a charity number. It is important to remember that the organisation cannot call itself a charity until it has been registered on the charities register.
Where can I get help?
At Davidson Chalmers Stewart we are adept in advising charities on all of these issues. For more advice, please contact Lisa Kitson, at lisa.kitson@dcslegal.com (0131 290 2812).
Disclaimer
The matter in this publication is based on our current understanding of the law. The information provides only an overview of the law in force at the date hereof and has been produced for general information purposes only. Professional advice should always be sought before taking any action in reliance of the information. Accordingly, Davidson Chalmers Stewart LLP does not take any responsibility for losses incurred by any person through acting or failing to act on the basis of anything contained in this publication.
