Charities (Regulation and Administration) (Scotland) Bill: Parliamentary update- January 2023

On 15 November 2022, we saw the introduction of the long-awaited Charities (Regulation and Administration) (Scotland) Bill (the “Bill”) into the Scottish Parliament, a Bill which, if enacted, will bring about a series of changes to the primary legislation governing Scottish Charities, including:

• giving OSCR wider powers to investigate charities and charity trustees;
• amending the rules on who can be a charity trustee or a senior office-holder in a charity;
• increasing the information that OSCR holds about charity trustees;
• updating the information which needs to be included on the Scottish Charity Register; and
• creating a record of charities that have merged.

The Bill is now at Stage 1 of the legislative process and has been assigned to the Social Justice and Social Security Committee of the Scottish Parliament (“the Committee”) as lead committee, to gather and consider evidence.

Consultation Process

As part of Stage 1, a public consultation by the Committee was opened on 8 December 2022, which will run until 3 February 2023, inviting views from the public on the general principles of the Bill, before the committee reports to the Parliament as a whole in its Stage 1 report. The Committee has indicated that views can be given in a number of ways, either through responses to a short survey, or in the form of a more detailed written response to a consultation that comprises ten long-form questions (both of which can be accessed on the Scottish Parliament’s website: Stage 1 | Scottish Parliament Website).

The Committee’s short survey contains questions regarding participants’ perceived impact of the Bill, particularly asking if it will have an impact on participants’ organisations, and also whether they consider that there are further changes that ought to be made to charity law beyond those set out in the Bill.

The detailed consultation invites participants’ fuller comments on the Bill and the wider charitable sector, focusing on the following points:

1. What are your views on the Scottish Government’s consultation and engagement process leading to the Bill?
2. How has the charity sector changed since 2005, and why is an update or strengthening of legislation needed?
3. The Government is committed to carrying out a wider review of charity law after the passage of this legislation. What are your views on a review?
4. What are your views on the Bill’s Financial Memorandum and the various impact assessments published by the Scottish Government?
5. Will the Bill lead to the Scottish public being better protected, and will charity regulation become more transparent?
6. What are your views on the extent to which the Bill matches OSCR’s original proposals, as set out in 2018?
7. Do you think the Bill makes it easier or more difficult to start and run a charity?
8. Will additional administrative burden be placed on charities? Would this be disproportionate for smaller charities?
9. Does the Bill bring the Scottish regulatory system into line with other parts of the UK? Why is this important?
10. Do you have any other comments or concerns about specific sections of the Bill, or about the Bill more generally?

Initial reaction to the Bill

Whilst reform of charity law will have an impact on a wide range of bodies across Scotland, including universities and colleges who are registered as Scottish charities, there have been concerns raised that the proposed new law does not go far enough in terms of achieving increased transparency and oversight in relation to charities.

Although the Stage 1 consultation on the Bill is still underway, and while the initial reaction from a number of recognised experts has been to welcome the introduction of the Bill, there is some concern that the Bill does not perhaps go far enough. The Convener of the Law Society’s Charity Law Sub-Committee has noted that while the changes in the Bill are “sensible and proportionate”, “a more comprehensive overhaul is needed to put the sector on the strongest possible footing for the future”.[i]

The initial reaction of the Law Society to the Bill is interesting to note and is likely to be mirrored by other stakeholders. It remains to be seen what will be said in Stage 1 evidence to the Committee considering the Bill in Parliament, but concerns such as those raised by the Law Society seem to provide an indication of the scope of potential amendments to the Bill that will be brought forward at Stage 2 in committee and Stage 3 in the Chamber of the Parliament.

An area of concern – notifiable events

One particular area of concern in terms of a potential gap in the Bill is in relation to the Notifiable Events regime, with some suggesting that the Bill would have been an opportunity to provide clarification in statute as to what events are “notifiable” to the Office of the Scottish Charity Regulator (OSCR) in order to ensure transparency.

Since April 2016, with the aim of supporting the work of charities and promoting public confidence in the sector, OSCR has invited charities to self-report to them any ‘Notifiable Event’ that has affected the work of the charity. OSCR’s current guidance explains that these events occur in circumstances where something serious has happened, involving something that threatens to have a significant impact on the charity or its assets. Several examples are included in the guidance as to when it is necessary to notify an event to OSCR, such as fraud and theft, substantial financial loss, incidents of abuse or mistreatment of vulnerable beneficiaries, or a trustee acting whist disqualified. However, this is only guidance and there is no legal requirement on charities to notify OSCR.

Many within the sector consider that it would be useful, and indeed would further enhance the effectiveness of the regime, if a requirement to notify such events were to be enshrined in statute.

Parliamentary Consultation

Given the mixed feelings that there have been regarding the Bill and its contents, the sense that it does not ‘go far enough’ and the concern that an opportunity to overhaul charity law should not be missed, the Committee’s detailed consultation provides a real opportunity for those engaged in the work of charities in their many different forms to provide their views and influence the direction of travel.

The broad questions asked in the Stage 1 consultation in Parliament will enable those involved in running charities to voice their views as to how the proposed changes will impact on the operation of charities on a day-to-day basis; but respondents also have the opportunity to provide views and comments on the Bill more generally and on the historical issues that underline the need for reform of charity law.

We would strongly encourage those involved in the charitable sector, in whatever role, e.g. as an adviser, officer or trustee, to get up to speed on the Bill and the proposals to change the law, and to engage with the parliamentary process where appropriate.

Next steps in Parliament

Once the consultation on the Bill closes on 8 February 2023, the Committee will consider what further evidence it wishes to take, including oral evidence from witnesses attending the Committee as well as further written evidence. Once it completes its Stage 1 consideration, likely to be before summer 2023, it will prepare and publish its Stage 1 report, with a recommendation on whether the Bill should proceed at that point. The final element of Stage 1 will be the Parliament as a whole debating the general principles of the Bill and voting on whether it should proceed to Stage 2.

At Stage 2, there will be the opportunity for MSPs to propose amendments to the Bill in Committee. The amendments will be debated and, if agreed, incorporated in the Bill, with an amended version of the Bill prepared at the end of Stage 2.

By Burness Paull LLP, Scotland, a Transatlantic Law International Affiliated Firm.  

For further information or for any assistance please contact ukscotland@transatlanticlaw.com

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