NEW RULES ON REORGANISING ENDOWMENTS
Until recently, charitable bodies which were established by Royal Charter, Royal Warrant or an Act of Parliament have had to endure lengthy, complex and often expensive processes in order to amend their governing document.
As a result of the Charities (Regulation and Administration) (Scotland) Act 2023 (“the 2023 Act”), these legal vehicles are now able to utilise the existing reorganisation provisions under the Charities and Trustee Investment (Scotland) Act 2005 (“the 2005 Act”) in certain circumstances. There was an initial hope during the consultation period for the new legislation that the reorganisation process would apply to such charities in its entirety. However, what we have been given is somewhere in the middle.
On a high-level view of the provisions of the 2023 Act, the 2005 Act reorganisation provisions now also apply in two additional but limited scenarios:
- Charities created by Royal Charter, Royal Warrant or an Act of Parliament can utilise the reorganisation provisions to amend their governing documents in relation to endowments only (akin to reorganising a restricted fund); and
- Charities created by an Act of Parliament which only comprise an endowment can utilise the reorganisation provisions to amend their governing document as a whole.
This statutory amendment came into force on 1st April 2024, which was the first main commencement date for certain provisions contained within the 2023 Act. At the time of writing, we await guidance being published by the Scottish Charity Regulator on how it views the rules being used, although it is anticipated that the existing reorganisation processes will simply apply in the normal way to these kinds of endowment.
If you are unsure whether the extended rules apply to your charity or you would like to discuss the matter further, please get in touch with your usual Turcan Connell contact or email charities@turcanconnell.com.