Residential property

Charity law/legal services for charities

We can support your organisation with advice on a variety of key matters from protecting brands and copyrights to employment law disputes, rent reviews and reorganisations.

We take the time to understand your aims and goals and have the expertise to help your organisation achieve these by providing practical advice and solutions to meet your particular needs.

Charity Formation

Setting up a new charitable organisation is an exciting and busy time. We’re here to streamline the process and help take care of the various legalities so you can focus on your plans for your new venture.

There are a number of options available to you as to what form your charity could take – from trusts and unincorporated associations to Scottish Charitable Incorporated Organisations (SCIOs) and companies limited by guarantee. We can discuss everything with you as to which legal form best suits your specific needs.

To be registered as a charity in Scotland, you must satisfy the Office of the Scottish Charity Regulator (known as OSCR) that your organisation meets the charity test. In other words you must only have charitable aims but clearly provide public benefit. As part of that you must have a governing document setting out the charities aims and activities.

We can help manage your application for charitable status and prepare the governing documents and business plans that you’ll need to demonstrate to the OSCR how you will pass the Charity Test. We’ll also provide clear and helpful guidance to charity trustees.

Registering with OSCR doesn’t automatically entitle your charity to tax reliefs. These are only available when you register with HMRC (Her Majesty’s Revenue and Customs). We can help with this too. If you choose to establish your organisation as a company we’ll take care of the registration process for you. We’ll also offer ongoing company secretarial support, making each part of setting up and maintaining your organisation as straight forward as possible, so you can concentrate on meeting all of your key objectives.

Constitution and Governance

Gaining charitable status is the beginning of the process, not the end.

If you’re a trustee then it’s important to keep your constitution under review and regularly consider whether areas of the charity’s governance should be improved.

We regularly carry out “health checks” for existing charities and can help you make necessary improvements.

Some of the questions asked during these “health checks” are:

  • Does the charity continue to meet the charity test?
  • Does the constitution accurately reflect what the charity does on a daily basis?
  • Does the governing document allow the organisation to run efficiently?
  • Do the charity trustees recognise and deal with conflicts of interest effectively?
  • Are the charity trustees fully aware of their duties and the potential consequences of not fulfilling these properly?
  • Are the charity trustees, or the organisation’s members, exposed to unnecessary personal liability?

If the answer to any of these questions is “no”, we can discuss the options with you. Contact us here or for more information download our Fixed Fee Governance Review

Incorporation & changes to legal form

Many charitable Trusts or unincorporated charities choose to incorporate into either a company limited by guarantee or a SCIO with the aim often being to limit the liability of the trustees

We’ll advise you on whether or not this step is necessary. If it is, we’ll talk you through the pros and cons of the structures available and how they’ll benefit your particular charity. We can also guide you through the incorporation process by drafting a new constitution and negotiating the transfer with OSCR.

In addition, we have employment and property teams on hand to help with the mechanics of the transfer to the new company/SCIO, ensuring that the transition is seamless.

Charity Reorganisation

Charities are set up to aid particular causes; such as education, health, equality and diversity.

As social and economic conditions fluctuate over time, needs often change and a charity may want or have to adjust its constitution. If this is the case, it’s possible for a charity to apply to OSCR for approval of a reorganisation scheme.

A reorganisation scheme can result in one of the following:

  • Variation of the constitution of the charity
  • Transfer of property or other assets to another charity
  • Amalgamation with another charity

For example, if a charity was set up to aid a hospital, but the hospital no longer exists, the trustees may wish to adjust the constitution to name other hospitals. OSCR can approve this to allow the resources of the charity to be used more efficiently particularly where trustees had access to significant sums of money which they were otherwise unable to use for public benefit.

We can assist you in preparing and implementing a wide variety of charity reorganisation schemes and can talk you through the various processes.

Reorganisation of restricted funds

If a charity holds assets that have been given to be used for a particular purpose, then these restricted funds must be held separately from the charity’s general funds.

A restricted funds reorganisation scheme can do two things:

  • Change the purpose for which the funds may be used; or
  • Without necessarily changing the purpose of the funds, vary or remove conditions given by the donor

Often, the criteria for using the restricted funds may be impossible to satisfy and there will be a better use for the money. Previously only the consent of a donor or a court could release the funds. Now, it’s possible to apply to OSCR for approval of a restricted funds reorganisation scheme.

Trustees must show that they can use the money to better effect for charitable purposes and that they have taken steps to confirm the wishes of the donor but the person can’t be contacted, is no longer living, or unknown.

Trading Subsidiaries

A charity is allowed to trade (i.e. receive income from business activities), provided that its constitution allows those activities.

In order to take advantage of tax exemptions, the business activity must relate directly to its charitable purposes and not pose a significant risk to the charity’s assets. If there’s a concern about the size or risk of proposed trading activities, it’s wise to consider setting up a trading subsidiary.

A trading subsidiary is not usually required to pay corporation tax on profits it donates to its parent charity. It’s a popular solution for charity trustees who want to raise money from trading activities, while protecting the assets of their charity from trading risks and all in a tax efficient manner

Collation, amalgamation and wind-up

To secure funding or to deliver services more efficiently, a charity might consider sharing resources with another.

This can be achieved in a variety of ways and with different levels of formality. The collaboration may be a precursor to a full merger, if appropriate.

There are a number of things to consider including the effect the arrangement might have on:

  • Charitable status
  • Liability to tax
  • Employees

It’s also important to consider who will control the project and how decisions will be made.

We can help you identify the best way forward and implement the legal structure which best fits your needs.

It’s necessary to apply to OSCR for consent to wind-up a charity. To wind-up you must have the ability to do so in your constitution. Older trust deeds in particular often lack this power, meaning a reorganisation application (see charity reorganisation above) may be necessary before the application for consent can be taken forward.

We can guide you through the process and help identify the key issues in relation to wind up, for example staffing considerations and how assets and/or liabilities can be transferred.

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