The Public Services Reform (Scotland) Act (the Act) comes into force on 1 August 2010 and makes a number of changes affecting Scottish charities and charity trustees. There are provisions specifically relating to charities in Part 9 of the Act and the key amendments for charities operating in Scotland worth noting are as follows.
Trustee Indemnity Insurance
Trustee Indemnity insurance can protect charity trustees from liability in relation to claims made relating to their conduct in their position as trustees. The Act amends the Charities and Trustee Investment (Scotland) Act 2005 (the 2005 Act), clarifying that all charities can purchase Trustee Indemnity Insurance cover for their trustees, should they so wish. Previously, restrictions on remuneration of charity trustees under the 2005 Act meant that the putting in place of trustee indemnity insurance would in most cases fall foul of the restrictions within the Act. It was generally accepted that this was an unintended consequence, and the Office of the Scottish Charity Regulator (OSCR) previously confirmed that it would not have a problem with indemnity provisions within a constitution, but the changes provide clarity and certainty. And being able to take out trustee indemnity insurance may make it easier for certain charities to attract trustees. So, expect to hear a number of offers of charity trustee insurance products in the next few months - and if you opt for it, be sure and check what is covered.
The Appointment of Trustees by OSCR
Under the new Act, Charity Trustees are given the right to make an application to OSCR for the appointment of trustees where, for one reason or another, they are unable to do so under a charity's constitution, for example, where they do not have enough trustees to form a quorum and there is no way of appointing new trustees under the constitution. The new appointment powers are a welcome step that will benefit a number of charities by offering a straight-forward means of remuneration.
Disqualification Orders
The new legislation empowers the Court of Session to rule that a trustee be removed from being involved in the management or control of the charity. This power can be used not only to remove existing trustees but also to prevent persons previously involved in the management or control of charities from being trustees in the future. Arguably, this will provide more "teeth" in connection with OSCR investigations and help to protect charities against mismanagement.
Web Page of a Charity
The Act introduces requirements for charities to display information including their charitable status, their registration number, the charity's registered name and any other name they are known by on their website. Although many charities will already present this information on their websites, the Act confirms this as a legal requirement all charities require to meet. Accordingly, further regulations will be passed to extend the existing Charities References in Documents (Scotland) Regulations 2007 to websites.
From 1 August, OSCR will also have the power to vary, revoke and reconsider decisions which it has made.
Reorganisation of Restricted Funds
The Act will also enable OSCR to approve the reorganisation of restricted funds in certain circumstances (though this provision is not expected to come into force until next year). Funds are restricted if the donor has made clear the purpose for which the funds must be used. OSCR will now be able to authorise the reorganisation of such funds where, for example, an original purpose has become defunct. This is another positive change to enable the efficient use of charitable funds in challenging times.
Disclaimer
The material contained in this article is of the nature of general comment only and does not give advice on any particular matter. Recipients should not act on the basis of the information in this e-update without taking appropriate professional advice upon their own particular circumstances.