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Charities, third & impact sector

Scottish charity law update

Scottish land transparency rules

Regulations have now been passed for the Register of Persons Holding a Controlled Interest in Land to come into being on 1 April 2022. This will place duties on certain landowning structures to disclose on a public register, details of those controlling the landowning entity (they are known as “associates”). The register will require details such as name, address and the capacity (e.g. trustee etc) in which the person has a controlling interest. It is mostly aimed at owners, but some tenants will have duties to provide information as well.

As with other transparency regimes, the aim is to provide details of human beings. That means the registration duties will not stop at the level of e.g. a trust or unincorporated association but ask for details of the trustees themselves. For some positions the rules involve an assessment of whether or not an individual “has the right to exercise, or who actually exercises, significant influence or control.” The emboldened part of that emphasises the rules are focussed on the realities of a relationship and not just the strict legal notion of influence or control.

The location of the entity is not relevant. So, an English structure with Scottish property interests will need to comply with the new rules.

After an initial grace period, there will be criminal penalties attaching to property owning entities which do not comply with their disclosure duties. After that period, there is 60 days from obtaining a controlling interest in which to bring the register up-to-date.

Charities that are CIOs or SCIOs will not be required to register. They form part of exemptions for bodies that are subject to “other transparency regimes”. (Although SCIOs are only subject to a limited transparency regime via OSCR.) Charitable trusts and unincorporated associations have no such exemption.

On “other transparency regimes”, entities subject to the Persons of Significant Control rules will not need to duplicate on this new register the provision of information that can be obtained via Companies House.

Legacies: a Scottish view of Knipe v The British Racing Drivers’ Motor Sport Charity

Many readers will be aware of the Knipe case. For those not aware of the facts, the background, in short, was this. The residue of an estate was to be divided among four organisations. Unfortunately, the names for two of the organisations did not match any actual charity or body. With that issue and a need to determine how the estate should be divided, the court was required.

In a Scottish context, a few high level comments can be made:-

Will drafting is important. Getting the right name of the intended recipient matters. It also matters to provide the executors with sufficient flexibility to deal with certain changes at a recipient charity or to address any misdescription. It may also be the case that there could be specific express instructions as what is to happen if e.g. a charity no longer exists… it might pass to another named charity or fall to other beneficiaries.

Will interpretation in Scotland. The Marley v Rawlings will interpretation Supreme Court decision featured in Knipe. There is short piece of passing Scottish consideration in Marley, but it is of course an English decision. Caution should be applied when seeking to use English interpretation rules as a guide to how a court might consider matters in Scotland.

General charitable intentions. In relation to one part of the residue, the court in Knipe decided that the words “Cancer Research” was sufficiently general to permit the executors to pass that part of the estate to any cancer research charity. As with Scottish will interpretation more widely, care needs to be taken as to how and when the Scottish court will conclude there was a general charitable intention which would allow a similar outcome to that in Knipe. In some ways in Scotland, it pays to be really general and get names really wrong! [We do not however recommend this approach to will drafting at all!]

Will rectification in Scotland. Since the Succession (Scotland) Act 2016 there has been the ability to apply to the court to rectify a will where the deceased’s instructions had not been properly implemented by the drafter of the will. That remedy has been used in the case of mis-naming a recipient organisation. But this rectification route is limited. It only applies to a failure in the implementation of the recording of someone’s wishes and that has been done by someone other than the deceased (e.g. a will writer).

Don’t ‘lose’ legacies before they even happen. Unlike England and Wales, Scotland does not have an equivalent of the register of mergers. When there is the restructuring of a Scottish charity, it is important to consider how future potential legacy income will be protected and secured and end up in the correct home.

Consultations on charity law and charity test guidance

We have previously updated on the current status of the review of Scottish charity law. The latest consultation round has closed. Readers might be interested to read the response from the Law Society of Scotland’s charity law sub-committee (of which we are a member) as a way of delving into the issues currently being considered. We will provide an update when Scottish Government reports back.

In light of the recent New Lanark cases (here is an overview of the decision as we had published in the Journal of the Law Society of Scotland), OSCR has issued a consultation on updates to its “Meeting the Charity Test” guidance. In particular the consultation ask for views on the section on “What is public benefit?” around the issues of assessing contributions to public benefit, including through commercial activities. The consultation and the proposed updates perhaps underline what we said of the New Lanark cases: context matters on the topic of charitable status.

Lots of politics… and then elections too!

Charities and political (or even ‘culture’, as some have described it) matters have attracted lots of attention in recent times. Whether it be the National Trust or student associations, there has been much said about charities engaging in what might be described as political or ‘controversial’ matters. In Scotland charities need to have regard to guidance from OSCR and the Electoral Commission as well as specific Scottish rules that relate to the run-up to elections. Elections for the Scottish Parliament are being held on 6 May.

And charities must also keep focussed on their constitutionally-stated purposes. It will be the purposes in their constitution, articles, trust deed, rules etc that will guide when and how the charity should engage in any issues including those viewed as political or controversial (whatever controversial really means!). For some, their purposes and their raison d’être make it vital that they engage in the political sphere… not for the benefit of politicians and their supporters but to further the charity’s aims and support its beneficiaries.

Charities (whether based in Scotland or not) must adhere to specific rules on campaigning or lobbying and must (as with rates relief cases, charitable status itself or charity tax treatments) know their purposes and keep their activities in line with their purposes… which can in some situations mean engaging in political or controversial matters.

The United Nations Convention on the Rights of the Child: Scots law incorporation

This is viewed as a landmark piece of legislation passed in March by the Scottish Parliament. In summary, the effect of this incorporation of the Convention will mean that:

  • public authorities must not act in a way that is incompatible with the Convention 
  • courts will have powers to decide if legislation is compatible with the the Convention 
  • the Scottish Government will be able to legislate in other areas to ensure Convention compatibility
  • the Children and Young People’s Commissioner in Scotland would have power to take legal action if children’s rights under the Convention are breached
  • the Scottish Government must publish, and review annually, a Children’s Rights Scheme to evidence meeting the Convention’s requirements and set out its future plans for children’s rights

Charities and third sector bodies working with children and young people should be aware of the effects of this incorporation of the Convention into Scots law.

In a late twist, UK Government queried whether or not the Bill is fully within the legislative competence of the Scottish Parliament. This development has emphasised the complex mix of reserved and devolved matters within Convention incorporation and care will need taken by all those interested in the workings of the new rights and duties as to how the new law will actually operate.

Redress Scotland: legislation passed

The Redress for Survivors (Historical Child Abuse in Care) (Scotland) Bill has now completed its legislative process in the Scottish Parliament. It establishes Redress Scotland to administer a scheme for payments to survivors of historical abuse in residential care settings via contributions from public bodies, charities and others. You can read our previous overview of the provisions here.

For help and advice on Scottish charity law and Scottish legal issues for charities, get in touch with Alan Eccles: alaneccles@bkf.co.uk / 07470808717.

He is an experienced lawyer who is very well known among sources for advising clients on charity law matters.” Chambers High Net Worth 2020

Alan is “highly experienced in advising third sector organisations” … “efficient and has a very in-depth knowledge of the Scottish charity scene” Chambers & Partners 2020

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Charities, third & impact sector

Handforth: a new focus on old truths for good meetings

Remember the start of lockdown(s) when it was all Joe Exotic and Carole Baskin. Handforth Parish Council gave us new cast members for stay at home viewing. A lot has been said about online meetings since the Handforth planning and environment committee brought global attention to the topic of formal meeting effectiveness and governance.

However, for charities conducting meetings (whether of trustees or a membership), the message largely remains the same as what we said in a blog on 4 May 2020. We have returned to some of that in this piece. Even though based on charities, we think that blog could have helped the Handforth committee.

If you read nothing of this blog, we think this comment from our May 2020 blog is worth holding on to:-

Robust and well-developed governance structures and processes are great. But sometimes strong governance is rooted in basics. Good manners, understanding and kindness might be the key touchstones for effective meetings and good decision-making. Certainly, they will support the collective responsibility attached to board decisions. In stressful times and with new technology being used, understanding and kindness with meetings underpinned by politeness and warmth could be never more important.

Read the standing orders – read them and understand them

While others can comment on the specific rules applicable to that committee and the local authority context, it is critical to the legitimacy of any meeting that:-

  • it is called and arranged correctly (in “accordance with the law” as some might put it);
  • those participating in a meeting are indeed permitted to be there;
  • it is clear the basis upon which participants can contribute and vote etc; and
  • there is clarity over how the meeting is started (Handforth offered the new existential conundrum for our times… has the meeting even started?) and ‘run’.

The charity’s constitution should set out rules and provisions for these key steps and processes. There might also be other standing orders to look at too.

On the running of the meeting, how the meeting is chaired is central. That includes having clarity over who is the chair and how a chair is selected. In the Zoom world, that also leads into having clear and agreed protocols on:-

Who is the host? That leads in to clarity over some other powers, such as:-

  • Who has the power of muting/unmuting?
  • Who has the (now famous) power to place a participant in a waiting room?
  • How do participants indicate they wish to contribute?

The contra to who can attend is keeping out those who should not be there. Passwords, waiting rooms, not sharing links etc are all part of that safety and security. It is also part of safeguarding.

Can or should the meeting be recorded? That brings in considerations such as data protection and confidentiality.

What should then happen with that recording? How is it stored?

How are minutes of the meeting taken and agreed? It seems a reading of the minutes of the Handforth meeting does not quite give the flavour that the video did!

Ultimately, everyone needs to comfortable on how the process and technology is to work.

You have no authority here…

You have not authority here…” is partly covered by the constitution and its rules on attendance and anticipation at meetings, as noted above.

Over and above strict legal standing to attend a meeting, there is also the softer issue of those at the meeting having ‘bought-in’ to any external participants. Without that, the meeting could be difficult. The “you have no authority here…” might not just have been about strict legal conduct of a meeting but something deeper into a form of perceived power relationship as if to say “you have no authority over me.”

It can also be unfortunate that these difficulties are sometimes accelerated where there is some degree of underlying factionalism in the group. As ever, that brings us to key charity trustee duties of acting in the ‘interests of the charity’ and working to ‘further its purposes’ (we recognise these terms can on occasion be weaponised) and to act on a collective basis. Understanding the collective nature of decision-making is a fundamental aspect and dangerous to overlook.

#BeKind and “don’t look back in anger”

The Handforth meeting did not go brilliantly. Even the sequel meeting (apparently quite a popular watch!) had its tensions.

As we said earlier, “Good manners, understanding and kindness might be the key touchstones for effective meetings and good decision-making.” We guess that at Handforth or anywhere else, people are joining committees and charity boards for the right reasons. It must only be a tiny proportion who are actually not nice and want to hurt and harm people in what they do and say at a meeting.

Sometimes people will get hot under the collar or stressed or have a rush of adrenaline. They need to appreciate they may have failed to act with good manners. Others in the meeting should not stoke such behaviour. There needs to be, within the bounds of reason (but remember, we don’t think many people are actually at a meeting to ‘be bad’ or that the person ‘is bad’), understanding of why that person is upset and acting as they have done. Both ‘sides’ of any tricky moment need to act with kindness towards each other. Of course, there does comes a point with any disruption. And the credibility and impact of contributions made when tinged with any anger etc will also be undermined. Everyone feeling they have had the proper chance to contribute and have been treated with respect will support post-decision board unity. It will help minimise unfortunate post-meeting fallout and temptations to breach confidentiality and collective responsibility in order to rail against a decision.

All this might create “a better place to play” and will have “take[n] that look from off your face” so you won’t think of the meeting and “look back in anger“. The words of Oasis; not Handforth Parish Council planning and environment committee.

For help and advice on charity law and governance, get in touch with Alan Eccles: alaneccles@bkf.co.uk / 07470808717.

He is an experienced lawyer who is very well known among sources for advising clients on charity law matters.” Chambers High Net Worth 2020

Alan is “highly experienced in advising third sector organisations” … “efficient and has a very in-depth knowledge of the Scottish charity scene” Chambers & Partners 2020

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Charities, third & impact sector

Telephones and charity fundraising on Radio Scotland’s Kaye Adams Programme

Last Thursday I joined the Kaye Adams Programme on Radio Scotland to discuss charity donations. The segment came on the back of research showing a 159% increase in cold calling during the pandemic. There were concerns and anecdotal evidence (reported in the Times) that some of this increase related to charities seeking donations over the telephone and risks of this affecting older and vulnerable individuals.

The research does not appear to provide actual numbers identifying the extent to which charities have been engaging in such practices. Whatever the extent of this, the Kaye Adams Programme gave an opportunity to hear from those in the sector about the matter, to give an overview of the regulatory background and also to highlight that charities seek to positively build long term relationships with donors rather than one-off cold calling.

The discussion began with Daniel Fluskey of the Chartered Institute of Fundraising noting he would need to see further detail on the research as he would be surprised if charities were engaging in cold calling as it was not normal practice. Daniel highlighted that such behaviour would be contrary to rules and standards in fundraising. He was also unaware of increases in complaints to regulators in this regard, which would be indicative of issues. Daniel was clear any such targeting had no place in fundraising and encouraged those with concerns to contact regulators.

Kaye appreciated the pressures on the charity sector recently and the need to reposition fundraising efforts. With that, Corinne Hutton of charity, Finding Your Feet talked of the initial concerns about the impact of the pandemic on fundraising for the charity but said it never once crossed her mind to use cold calling.

Corinne said the key is to build a relationship with the public and donors. For her, creating pressure and guilt could never be part of fundraising. Instead, it was about showing the good things a charity was doing as the basis to encourage support. Following on from Kaye mentioning that charities have had to reposition fundraising in recent times, Corinne discussed the creativity that has been required recently to engage with supporters under the current restrictions, including through fundraising walks and step challenges. But definitely not cold calling! That creativity, the generosity of the supporters and hard work of two team members working on grant applications at Finding Your Feet had helped navigate the last year. Later on in the programme, Corinne said it was about showcasing what a charity does well and gave the example of Children in Need doing this very effectively.

Then it was my turn to join the programme. I started by saying fundraising is part of the overall good governance of a charity. A good governance approach to fundraising being one that builds the longer term relationship with donors. Charities will want to create effective fundraising strategies and not short fixes like cold calling, which good governance would lead a charity to shy away from. I talked about that long term relationship building being epitomised in the strength and importance of legacy giving through wills.

Kaye said there was a concerned text to the programme about correspondence found by a relative from a charity about increasing donations. I gave examples of charities proactively identifying and dealing with issues on potentially vulnerable individuals. And dealing with these situations in order to generally protect the individual such as engaging with family. I also offered a reminder of routes to raise concerns in Scotland: contact the charity; the role of the Scottish Fundraising Standards Panel and OSCR.

A difficult ‘juncture’ was raised by Kaye where charity communications and updates meet placing some degree of pressure on individuals. Even where the communications were well-intentioned. In my view that brought us back to good governance and ensuring teams within charities and those helping charities with communications and marketing understood what was appropriate and acceptable. And with that good governance is the focus on trustee responsibility… trustees need to ensure fundraising practices are appropriate, including where anything is outsourced.

Adam Stachura of Age Scotland concluded things. He made the point that people are generally polite and do not want to hang up on those calling them. Adam reminded listeners that they can say ‘no’ to anyone calling them about any matter and that they can opt out of being called. On that last point, Adam also referenced the role of the Telephone Preference Service, call blocking devices and Trading Standards. All of this would help ensure people were making decisions, including supporting charities, when they had the information and time they needed to make a good decision.

At this blog, we are fans on telephone based songs. Who doesn’t like ELO? But it seems from those joining Kaye that the charity sector has been listening to Telephone by Lady Gaga (featuring Beyonce): “… eh, eh stop telephonin’ me” already appear to be watchwords on effective and appropriate fundraising.

The playback of the discussion can be found here on BBC Sounds… at 2:33:20.

For help and advice on charity law as well as maters such as powers of attorney and other legal support for vulnerable individuals, get in touch with Alan Eccles: alaneccles@bkf.co.uk / 07470808717.

He is an experienced lawyer who is very well known among sources for advising clients on charity law matters.” Chambers High Net Worth 2020

Alan is “highly experienced in advising third sector organisations” … “efficient and has a very in-depth knowledge of the Scottish charity scene” Chambers & Partners 2020

Alan Eccles is “one of the leaders in private client expertise in Scotland.” Chambers High Net Worth 2019 directory

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Charities, third & impact sector

Trading, charitable status, ice-cream and hotels: context matters

This update considers a recent decision of the Court of Session on the application of the Scottish charity test in the context of New Lanark. A case that might be seen to make no change to Scottish charity law while at the same time being significant in focussing attention on the Scottish charity test. A likely reason for charitable status being desired in he New Lanark situation is also worth considering… the matter of Scottish non-domestic rates.

New Lanark is a famous UNESCO World Heritage site. New Lanark Trust (“NLT”) manages the site. There is also New Lanark Trading Limited (“NL Trading”) which runs activities including visitor attraction, hydro scheme, retail shop, café, and ice cream production. As well as NLT, there is New Lanark Hotels Limited (“NLH”) which, as the name suggest, operates a hotel and other accommodation as well as conference centre, bar and restaurant, wedding venue, beauty treatments and spa. NL Trading and NLH are wholly owned subsidiaries of NLT.

NLT is a registered Scottish charity. It has been recognised as a charity for some time. For those that know and have visited New Lanark that would seem wholly uncontroversial. NLT is the guardian of an important heritage site. NLT’s charitable purposes are stated (per the online Scottish Charity Register) to include:  “(a) the restoration, maintenance and management of those buildings and others in and around New Lanark… (b) securing so far as possible that buildings restored by the Trust shall be occupied and/or put to use with the aim of bringing about the complete revitalisation of the village of New Lanark; (c) stimulating public interest both national and international in the village of New Lanark and its surroundings by means of exhibitions, lectures, the publishing of books and pamphlets supporting research work and by the provision of facilities for visitors in and/or near the village… .” (my emphasises)

NL Trading and NLH apply for charitable status

NL Trading and NLH each separately applied for charitable status from OSCR. OSCR refused to grant charitable status to both. This was on the ground that NL Trading and NLH did not provide public benefit within the terms of the Charities and Trustee Investment (Scotland) Act 2005. A failure to provide public benefit means a body fails the Scottish charity test.

OSCR accepted that some of the activities of these bodies advanced charitable purposes and provided public benefit, but considered that some did not. Those that did not were not incidental, which would have been permissible. OSCR also said that there is a distinction between advancing charitable purposes and undertaking activities which happen to generate funds to be applied for charitable purposes. OSCR concluded that there was no public benefit arising from the activities of these bodies as a whole.

NL Trading and NLH applied to the First-tier Tribunal to challenge the OSCR decisions. The First-tier Tribunal agreed with OSCR.

Undeterred, NL Trading and NLH appealed to the Upper Tribunal. This was on the basis that the First-tier Tribunal had “failed to provide proper, adequate and intelligible reasons” for its decision. This time, the Upper Tribunal sided with NL Trading and NLH. As the Upper Tribunal was making a decision of new, it decided that NL Trading and NLH should be entered into the Scottish Charity Register.

OSCR then appealed to the Inner House of the Court of Session. It has now reached its decision. It has rejected OSCR’s appeal and upheld the Upper Tribunal’s conclusion that NL Trading and NLH should be granted charitable status.

The Court of Session decision

The Court of Session was considering the Upper Tribunal’s decision and whether it not it had erred in law. It was not revisiting the factual conclusions it reached.

In rehearsing the history of the case, the Court of Session noted that the Upper Tribunal concluded (and agreed by OSCR and NL Trading and NLH) a body could not pass the charity test on the basis simply that it would donate any surplus to a charity to apply it for chartable purposes. It was necessary that the activities (which in this case happened to be commercial in nature – charities can be ‘commercial’) of NL Trading and NLH were themselves providing public benefit in terms of the 2005 Act. And in looking at those activities, it should be done as a whole.

OSCR’s position before the Upper Tribunal was that commercial activities could be acceptable for charitable status where (1) they directly furthered a charitable purpose or (2) they were incidental. The court referred to the Upper Tribunal conclusion that this view “missed the point of the argument” from NL Trading and NLH: “that in the overall setting of New Lanark the commercial activity in itself amounted to a public benefit.” If an activity furthered charitable purposes and provided public benefit, it did not matter that the funds raised might be donated to another charity. It would then not be appropriate or necessary to carry out a balancing exercise to determine which of the two aims (raise funds for another charity or furthering the body’s own charitable purposes) was the more important. OSCR and NL Trading and NLH did accept that a “minor or trivial contribution to the charitable purposes” would be insufficient for charitable status.

The Court of Session decision highlighted a part of the Upper Tribunal’s findings: “It is a crucial feature of the New Lanark site that it is not merely preserved, but maintained as a living village so that visitors may, so far as practicable, experience the original concept… At New Lanark the availability of commercial facilities to visitors is, on the evidence, an integral part of the presentation, contributing to the experience which has given the site its reputation and thereby providing pubic benefit.

Accordingly, the commercial activities furthered an appreciation and understanding of the original aims of New Lanark’s founders, David Dale and Richard Arkwright and then Robert Owen to create a living and viable community at New Lanark. The activities of NL Trading and NLH were to be classified as “primary purpose trading” as they directly contributed to the body achieving its charitable purposes… a revitalised, viable New Lanark. The Upper Tribunal was entitled to reach that factual conclusion.

The role of OSCR guidance was discussed in the case. OSCR has obligations to issue guidance. It has published guidance on “Meeting the Charity Test.” It was decided that OSCR guidance is not determinative of the legal interpretation of the 2005 Act. It was noted that the Upper Tribunal decision was made in accordance with the guidance. The Upper Tribunal considered that the commercial activities were an example of primary purpose trading. Reaching a conclusion that hotel accommodation and spa/beauty treatment facilities were also activities designed to further charitable purposes and provide public benefit so as to “enhance the presentation of New Lanark as a living village” and allowed “visitors to immerse themselves more fully” and show the buildings “being occupied in a useful way which contributed to maintaining the village’s life and economy.” Ice cream production was noted as also “contribut[ing] to the presentation of the village as a functioning entity.” It is understood that ice cream production had previously be carried out through a standalone company before being transferred to NL Trading.

Context was everything here. One might have arrived at a different outcome if each activity was looked at in isolation. But that would not be right approach. The court also ended by saying “Another tribunal might have reached a different decision, but standing the evidence and the acceptance of the uniqueness of the village, and the aim of presenting it as a living, working community, the Upper Tribunal was entitled to make the findings which it did.

Why this case matters and what next

OSCR status and rates relief

Charitable status matters. It has various financial and ‘softer’, yet valuable benefits. Often, the tax benefits of charitable status are highlighted. Charities can receive donations with the benefit of Gift Aid. Charities can have a primary purpose trade and not pay corporation tax on that trade. That latter one is less relevant for New Lanark as profits of NL Trading and NLH would be donated to NLT and the corporation tax should be ‘washed out’ by doing that.

Gift Aid and corporation tax is an HMRC recognised benefit. OSCR charitable status is not sufficient. Indeed, it is possible (although very, very unusual to obtain the benefits without OSCR registration) However, for non-domestic rates relief, OSCR granting charitable status is a vital factor. The buildings used by NL Trading and NLH will now be in a position to seek to benefit from charities rates relief and that could be very valuable – perhaps the real prize in a case like this. Indeed the 2019 accounts for NLT notes the negative “impact of the loss of business rates relief [being] felt” on NLH’s financial performance. Unless the charitable status case has any further procedure, the next port of call will be the application of rates relief.

Implications for charitable status

The Court of Session stressed that the Upper Tribunal arrived at its conclusion in accordance with the OSCR guidance on “Meeting the Charity Test”. A decision therefore made on the basis that the activities of NL Trading and NLH furthered charitable purposes and provided public benefit. So, no change to what we all already understood perhaps? The position remains that ‘simply’ generating funds for a charitable purpose is not enough to base charitable status.

The New Lanark situation does however provide another opportunity to consider what is ‘charitable’ under Scots law and how a range of apparently non-charitable activities can further a charitable purpose. While New Lanark might be a unique place, the issue of apparently non-charitable activities being the basis for a charity is really quite common. The grant giving-charity that spends much of its time and costs on the activity of investment fund management could have the same analysis applied. What matters is having only a charitable purpose(s) and providing public benefit. It is then up to ingenuity of the sector to come up with ways and activities to further those purposes and deliver public benefit. Sometimes those activities could look or be ‘commercial’. There is nothing in principle wrong with that. The 2005 Act does not set out a test based on carrying out some form of defined or exhaustive notion of “charitable activities”… and frankly nor should it.

The phrasing of a charity’s constitutionally stated purposes is important: if NLT did not have “revitalisation” in its constitution, would there have been a different outcome? Purposes in articles of association and constitutions often prove to be critical. A 2019 Scottish charity rates relief case was an example of that.

The procedure in this case probably had an impact on what has happened and the wider implications of the decision. The appeal to the Upper Tribunal was focussed. And the Court of Session did note that “another tribunal might have reached a different decision“. It was said that New Lanark village has a “uniqueness“. Quite true in many respects. However, it could be that other charitable projects can point to their own factual situation to support charitable status despite the activities, when looked at in isolation or at ‘first blush’, appearing to be non-charitable. The application of the principles in the New Lanark case might not be unique. But that is, in part, due to the findings in New Lanark being that the activities in question did further charitable purposes and provide pubic benefit… even the making of ice-cream.

For help and advice on charity law, get in touch with Alan Eccles: alaneccles@bkf.co.uk / 07470808717.

He is an experienced lawyer who is very well known among sources for advising clients on charity law matters.” Chambers High Net Worth 2020

Alan is “highly experienced in advising third sector organisations” … “efficient and has a very in-depth knowledge of the Scottish charity scene” Chambers & Partners 2020

Categories
Charities, third & impact sector Private client

Distinctively Scottish: haggis… and the law

(pic: as seen at the Kelvingrove Art Gallery and Museum)

It is 25 January. Burns Night. So, naturally, people will be tucking into haggis, neeps and tatties. What could be more Scottish? Well, the law can be quite distinctively Scottish too… it also brought the world (and the law of negligence) the other culinary delight – the snail in a bottle!

Here is a little jaunt through a few personal and charity law points to be aware of as being different from the rules used in other parts of the UK.

Scotland has its own rules on succession and inheritance.

The intestacy rules in Scotland differ from elsewhere. This includes the rights of surviving spouses/civil partners and children.

Forced heirship, in the form of ‘legal rights’ applies in Scotland. This can affect how an estate is distributed… a will is only the start of the story.

The valid signing of a Scottish will is different. If a Scottish domiciled individual signed a will set for signing under English law, it might cause problems. On domicile, please do go read the case about Liverpool resident George Bowie – a “Glasgow man” and avid reader of Glasgow based news – on what it means, for a will, to be Scottish.

When there is no will and there is an intestacy, cohabitants have the right to apply to the court to receive a payment or assets from the estate.

There are distinct rules for the appointment of guardians to young children.

And on the the topic of ‘young’… age 16 is the age of legal capacity rather than 18. That matters for various things, including bare trusts.

How executors act, make decisions and are generally governed can be different when dealing with executors under a Scottish will.

On governed, remember, Scotland has its own court procedures and system and ground of actions and remedies too.

In succession disputes, you might end up in court about cohabitant rights, but ‘disappointed’ individuals will need to find a ground of challenge such as incapacity rather than something around ‘fairness’ like ‘1975 Act’ claims. It also brings us back to legal rights – see above!

Trust law is another Scottish topic, although those wondering why we haven’t mentioned the ‘mixed’ nature of the Scottish legal system will be pondering the true the place of the trust in a system with a Civilian tradition.

With trusts, among the differences include permissible trust periods. Other points like this crop up when dealing with ‘kilted’ life policy trusts.

Toamayto… tomahto. Liferent… life interest. Continuing power of attorney… lasting power of attorney. We could go on.

Oh… and property law procedure and law is quite different. We won’t even dare mention intermediate rights such as equity.

A lot of tax operates at a UK level. Inheritance tax does. Capital Gains Tax does. But not everything does. There are Scottish taxpayers for income tax purposes. Property taxation is not Stamp Duty Land Tax. Rates relief for charities is focussed on charities registered in Scotland.

Powers of attorney get you the same result, but work differently in terms of preparation and drafting. As noted above, the nomenclature is different. The underlying law is different. And we have our own Public Guardian.

The inner workings of the survivorship destination is a ‘fun’ example of how the systems can work diametrically.

What is charity? Well, it can mean something different in Scotland. And it can matter in terms of the regulation of the organisation and the taxation of it. Scotland gets the OSCR for the best-named charity regulator.

Probably by this point, you are saying “enough already!”. So, OK, we will end it here. Well… before we go… we don’t obtain probate!

For help navigating Scottish legal issues, get in touch with Alan Eccles: alaneccles@bkf.co.uk / 07470808717.

Alan is the author of “Scotland” in the textbook, International Succession.

“An experienced lawyer” who is “a superb strategist and is extremely knowledgeable”. Chambers High Net Worth 2020 directory

Alan Eccles is “one of the leaders in private client expertise in Scotland.” Chambers High Net Worth 2019 directory

Alan Eccles… a Legal Influencer for Private Client (UK) – Lexology Marketing Awards

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Charities, third & impact sector Private client

Make a Will: go from to-do to ta-dah!

There are lots of reasons to make a will. There are some here, should you wish to have a look. The conclusion really has to be a will is a good thing to have. It helps you protect your loved ones and support chosen causes.

To make a will, and to do so in a straightforward way, send an email to me… just click here: alaneccles@bkf.co.uk

Making a will is an important thing to do. But it need not take too long to get it sorted. With a fixed fee. And no form filling for you.

Keeping you safe, a will can be made during lockdowns from your home.

What have people said about the experience of getting a will done this way?

“Wow, that was really easy! We’re already done.”

“That was painless.”

“Just a wee note to say that I met up with Alan midweek and he fixed me to sign a will within 24 hours. That’s one slick operation.”

“An experienced lawyer” who is “a superb strategist and is extremely knowledgeable”. Chambers High Net Worth 2020 directory

Alan Eccles is “one of the leaders in private client expertise in Scotland.” Chambers High Net Worth 2019 directory

Categories
Charities, third & impact sector

The ethical charity constitution: hardwiring ESG

The general population will think that charities will be ‘ethical’ beasts by their very nature. But what is ‘ethical’, how is ‘being’ ethical achieved and what does the law allow or require are sometimes not easy things on which to settle. This is often played out via the issue of ethical investing.

In is simplest form the debate or conundrum has boiled down to does a charity put ‘ethics’ above financial performance? A discussion that has evolved significantly over the years. Having strong ethical, social and governance (ESG) principles can support strong financial performance – it is not an ‘either or’ situation.

There is also a growing societal shift that ESG factors are not ‘extras’… they should be the norm. And these factors filter through to trends and spending habits of modern consumers. In the investment sphere, you know ESG matters when it is incorporated in regulatory rules such as MiFID II as well as the creation of the UN Principles for Responsible Investment.

So, if ESG and ethics (or whatever you want to call it) is becoming ‘standard’ and ‘mainstream’, where might that put its position in charity law. While discussing what the law might be is very interesting, we try here to fast forward that bit to consider one clear way to make this subject easier for charity trustees to navigate.

The law and ‘ethical’ considerations by charities

The usual basepoint for the law in this area is a case called Harries (Bishop of Oxford) v Church Commissioners for England from 1991. It was a case about the extent to which the investment policy of the Church of England had to take into account ethical factors (in this particular situation, the promotion of the Christian faith). The court essentially decided that the role of trustees was to maximise financial return. Similar outcomes were reached in other cases (including in Scotland) about the investment duties of trustees and the ability to take wider factors into account.

In England, the Charity Commission’s guidance on investment matters set out a broad position that trustees of any charity can decide to invest ethically, even if the investment might provide a lower rate of return, where:-

  • a particular investment conflicts with the aims of the charity
  • the charity might lose supporters or beneficiaries if it does not invest ethically
  • there is no significant financial detriment

Again in England, the Charities (Protection and Social Investment) Act 2016 introduced a new statutory power for charities to make ‘social’ investments. A ‘social investment’ being one that is made “with a view to both directly furthering the charity’s purposes and achieving a financial return for the charity.”

Spookily, as we finished typing up this blog, it was actually announced that the Charity Commission will be consulting in the spring on updated guidance on ‘responsible investments’.

There is no statutory equivalent to the 2016 Act in Scotland. OSCR has made available (the very well worth reading) “Charity investments: guidance and good practice“. The general duties of Scottish charity trustees also provide the foundation for investment duties: acting in the interests of the charity; furthering the charity’s purposes; and acting with reasonable care and diligence.

So, it might be fair to state that investments can be made (of whatever nature) should the trustees carefully, and applying the right level of care and diligence, determine the particular investment does indeed further the purposes of the charity. It is ‘purposes-led’ investment, if you wish. And ‘purposes-led’ investment might not be just around ‘ethical’ matters but might also cover charities holding large single (sometimes private, unquoted) company shareholdings. The situation of the charity with the large single company holding also leads into the distinct but legally similar issue of how diversification in investment approach is considered by trustees.

What is permitted under the 2016 Act or within the notion of ‘purposes-led’ investment is perhaps still not as wide taking into account, as a matter of course, ESG and similar factors. What should charity trustees do about that?

Hardwiring ESG into your constitution  

Given ESG and wider issues of sustainability and responsibility are becoming the ‘norm’ for individuals and even businesses thinking about society, capitalism, consumerism, investments and beyond, should it also be hardwired into the thinking of a charity?

Trustees should not be thrusting their individual views upon a charity. It should be the charity’s view on such matters. How does a charity have a view on matters or how does it construct a view?

It does so through its constitution.

A charity’s constitution is perhaps its brain, soul, conscience and heart. By introducing the ability to take into account ESG etc, into the constitution, it hardwires it in to the brain, soul, conscience and heart of the charity. It gives comfort to the trustees that such factors are part of the charity’s thinking.

The ethical constitution

As ethical, sustainable, responsible and ESG is a norm and a growing one, we have taken the step that the constitutions we prepare for charities should have such considerations hardwired.

It creates a constitutional platform to take ‘purposes-led’ decisions and to have proper regard to those wider factors… which maybe are not really ‘wider’ factors at all. Rather, they are factors trustees and all investors (and humans in their day-to-day) are routinely thinking about when deciding on how to hold and use (charity) assets.

For help and advice on charity law, including setting up a charity, constitutional and structure changes as well as investment legal duties and powers, get in touch with Alan Eccles: alaneccles@bkf.co.uk / 07470808717.

He is an experienced lawyer who is very well known among sources for advising clients on charity law matters.” Chambers High Net Worth 2020

Alan is “highly experienced in advising third sector organisations” … “efficient and has a very in-depth knowledge of the Scottish charity scene” Chambers & Partners 2020

Alan’s published journal work on trustee investment powers and duties has been described in a textbook as “outstanding“.

Categories
Charities, third & impact sector Private client

A review of the year in blogs

TV at this time of year is full of ‘run down’ shows. Here’s another one. We bring you the blogs from 2020 which have had the most reads… and give a shout out to a couple of honourable mentions.

Private client law

The most popular blogs were:-

From a time when lockdown seemed almost novel. A blog that featured thoughts that you hoped would be time-limited, but sadly deserve a fresh read.

Cases about challenges to wills on the basis that the deceased treated a particular child ‘unfairly’ can make the headlines. Here is our reaction to a Canadian case through the prism of the Scottish rules on disinheritance… ‘legal rights’.

Writing a will is a good thing. It helps you take control over what happens to your estate. It is quicker and more reliable than waiting for changes to the intestacy laws to ever happen. We reported on the treacle-like pace of Scottish intestacy law reform… and arrived at a clear and positive conclusion from that process… make a will.

Structuring an estate to get it below £2m can help unlock additional inheritance tax benefits and we covered that in this blog.

#FreeBritney. The Spears family brought global attention to powers of attorney and management of legal affairs via Californian law’s ‘conservatorship’. The clear message in Scotland is, where possible, make a power of attorney. 

Deeds of variation offer an invaluable opportunity to place an inheritance on the right footing. A brilliant estate planning tool not to be overlooked. A summary of deeds of variation and their uses and advantages is in this piece.

Charities and third sector

These blogs got people reading about charity law:-

As is a feature at the moment, something that was supposed to tide us over the worst of the summer, will run into 2021. The ‘relaxed’ member meeting (AGMs etc) rules for various legal entities (including charitable companies, CICs and SCIOs) will continue until March 2021. Here is a review of the rules (a blog updated twice now due to changes to the expiry of the rules).

And on that theme, a May blog on covid-related governance and legal considerations for charities remains a current read.

The value of legacies has been apparent for charity finances in 2020. A positive forecast on future legacy giving means this will continue to be an important income stream for charities. One for charities to make sure they are giving due attention in their planning. This blog covered short and longer term points on gifts in wills.

The Supreme Court handed down significant charity law decisions in 2020. The first was on the duties of members of charitable companies. An important judgment with wider implications as reported in this note.

Best wishes for 2021

We hope you like these updates. As long people continue to read and the law continues to develop, we will continue to keep the blogs coming. And you can follow on twitter too… @WillsCharityLaw

For help and advice on succession and estate planning law or charity legal issues, get in touch with Alan Eccles: alaneccles@bkf.co.uk / 07470808717.

Alan is “a superb strategist and is extremely knowledgeable”. Chambers High Net Worth 2020 directory

He is an experienced lawyer who is very well known among sources for advising clients on charity law matters.” Chambers High Net Worth 2020

Alan is “highly experienced in advising third sector organisations” … “efficient and has a very in-depth knowledge of the Scottish charity scene.” Chambers & Partners 2020

Alan Eccles… a Legal Influencer for Private Client (UK) – Lexology Marketing Awards

Categories
Charities, third & impact sector

Residential care redress

After a consultation, the Redress for Survivors (Historical Child Abuse in Care) (Scotland) Bill has been introduced to the Scottish Parliament. The Bill passed Stage 1 on 17 December and moves to the next steps towards becoming legislation. The Bill is designed to help “acknowledge and provide tangible recognition of harm as a result of historical child abuse in various care settings in Scotland… and provides elements of accountability, justice, and financial and non-financial redress for those who wish to access it.

The Bill is relevant to a range of organisations that have provided care to the children prior to 1 December 2004. That care must have been in a “relevant care setting” in terms of the Bill. The specific reason to an individual being in a “relevant care setting” and it needing to be a residential setting will place limits on the extent of the Bill.

If passed, this legislation would create the Redress Scheme to be administered by a new body, Redress Scotland. Redress Scotland would accept and consider applications made by those (or next of kin, if they have passed away) who have suffered historical abuse. Survivors can claim £10,000 as a “fixed rate payment” and additional individually assed payments (of £10,000, £30,000 and £70,000). The amount will be reduced by any payments previously received – whether from compensation or other scheme. The scheme would be in place for five years.

Redress Scotland will be funded by “contributors”. A “contributor” can be a public body, charity, voluntary organisation or other legal person (not being an individual). A “contributor” must make a “fair and meaningful contribution” to Redress Scotland. In an agreement to contribute, there will be financial modelling conducted or other evidence produced to assess a fair and meaningful contribution. A “contributor” will be added to a published list. This makes matters public as to whether or not an organisation has participated in the scheme.

Where an organisation is a “contributor” and there is an application by a survivor to Redress Scotland for a payment, the payment from Redress Scotland will be made in return for a waiver. The giving of a waiver means the survivor agrees to abandon any ongoing civil actions and waive rights to raise future proceedings.

The Bill exists within a wider approach to seeking accountability, transparency and justice. The Bill recognises barriers to justice that survivors face. In part the scheme aims to move away from adversarial systems of redress. As well as the background and policy underpinning the Bill being difficult, for organisations (including charities) and survivors, the Bill in its current form can introduce difficult choices and decision-making.

For survivors, granting a waiver could be a very significant step and the five year period for the scheme might encourage some to accept a payment and make a waiver for fear the scheme will have closed by the time their own litigation proceedings were concluded. Decisions that might not always be made with the guidance of legal advice.

Organisations will need to consider whether and how they participate in the scheme. For charities (notwithstanding specific charity provisions in the Bill) there will be complex issues of charity law and governance to consider. These will include decisions to apply funds towards the scheme, the use of restricted funds, the level of a contribution, communication about participation in the scheme and cross-border (e.g. for voluntary organisations that had relevant operations in Scotland but are also registered with the Charity Commission for England and Wales) legal considerations.

The Bill moves onto its next stage. Scottish Government’s stated aim is to have the scheme in place by March 2021.

For guidance and help with charity law and governance matters, get in touch:- Alan Eccles alaneccles@bkf.co.uk / 07470808717

He is an experienced lawyer who is very well known among sources for advising clients on charity law matters.” Chambers High Net Worth 2020

Alan is “highly experienced in advising third sector organisations” … “efficient and has a very in-depth knowledge of the Scottish charity scene” Chambers & Partners 2020

Categories
Charities, third & impact sector

Scottish charity law review back on the road again

The Scottish Government’s Programme for Government for 2020-21 included an update on the review of Scottish charity law. It said: “The legal environment within which Scotland’s 29,000 charities operate is critical to all of our ambitions for the third sector. Delayed by the crisis, we will now re‑start our process of co‑production with the sector to review Charity Law and publish our proposals by the end of this parliament.”

Joining an ACOSVO and SCVO organised event this week really gave me the feeling the the project was back up and running after a natural hiatus this year. There even seemed a benefit in having had some time to refresh your own thinking on the various topics covered in the Scottish Government consultation on the review. It also made me revisit those consultation topics.

Here is a summary of the main issues on the review agenda… and also matters that featured in the ‘free text’ of consultation responses that respondents thought merited (further) exploration.

The consultation topics

The matters that were consulted upon covered the following:

  • publication of annual reports and accounts in full and unredacted for all charities on the Scottish Charity Register.
  • an internal database and external register of charity trustees to enable OSCR to hold key information on trustees and for some information to be publicly available (a bit like Companies House).
  • updated rules on disqualification of charity trustees and individuals employed in senior management positions in charities.
  • a power for OSCR to issue positive directions to charities. Currently it can only issue negative directions telling a charity not to do certain things.
  • a power to remove charities from the Scottish Charity Register that are persistently failing to submit annual reports and accounts.
  • requiring Scottish registered charities to have and continue to have a connection in Scotland. 
  • the ability to make inquiries into the former charity trustees of bodies which have ceased to exist and bodies which are no longer charities.
  • creating a new requirement that a de-registered charity’s assets must be used not only to further charitable purposes but also to meet the public benefit test.
  • updates to OSCR’s powers to gather information when making inquiries.
  • the extension of the OSCR ‘reorganisation provisions’ to help charities established under legislation etc have a more streamlined process for making updates to their governance and constitutions.

Beyond the main questions… other matters raised in the consultation responses

The consultation also prompted wider thoughts about areas of reform for Scottish charity law.

Ideas and topics in the mix included a review and re-think of the fundamentals of the Scottish charity test, a renewed look at what ‘public benefit’ means, the role and regulation of social enterprise, payment and remuneration for trustees, the process for existing charities to incorporate (often to become a SCIO), updated rules on SCIO member duties (on member duties see this blog) and winding-up procedures, the interaction between rules and regulatory requirements across UK jurisdictions and regulators as well as developments (on a statutory footing) of the notifiable events framework.

Survey

A survey has now opened to capture current views on parts of the review consultation topics. The survey is open until 5 February 2021. It can be accessed here.

For guidance and help with charity law and governance matters, get in touch:- Alan Eccles alaneccles@bkf.co.uk / 07470808717

He is an experienced lawyer who is very well known among sources for advising clients on charity law matters.” Chambers High Net Worth 2020

Alan is “highly experienced in advising third sector organisations” … “efficient and has a very in-depth knowledge of the Scottish charity scene” Chambers & Partners 2020