The new route to incorporating your charity
We are changing the process through which Scottish charities can become incorporated to make it clearer and more certain.
Around 140 unincorporated associations or trusts incorporate as Scottish Charitable Incorporated Organisations (SCIOs) or companies every year.
Becoming incorporated can be an important and positive step for charities, as trustees of unincorporated associations can be personally liable if something goes wrong. It can also be important in terms of receiving funding, or being able to enter into particular contracts. It does, however, have implications for the charity in terms of their relationship with their banks, their insurance companies, HMRC, other regulators and so on.
The new process we are introducing from today will mean that charities who want to incorporate will need to apply for status for a new charity and seek consent to wind up the existing one. This better reflects the underlying legal principles in this situation. We will also be providing better guidance to charities about the things they should think about before starting to incorporate, and what else they need to do during the process.
We want to:
- help charities make clear and fully informed decisions about incorporation, with everything known up-front
- help charities avoid some of the risks and complications and delays they encountered with the previous process
- make sure everyone involved knows who owns what and who is responsible for what at every stage
To support charities through this process, we have produced interim guidance which covers:
- why charities may choose to incorporate
- how to incorporate – which includes a clear process map outlining the steps
- any further issues to consider
Included in the guidance are simple checklists to guide trustees through the process. This will allow charities to plan effectively and ensure the transfer process from one body to the other is done correctly. You can view the interim guidance here.
There is also a new ‘Incorporation’ section in our FAQ page which includes details on the new process, explains the reasons for the change and has links to supporting guidance.
We are working with an advisory group, including charity lawyers, the Scottish Council for Voluntary Organisations (SCVO) and representative advisors from Third Sector Interfaces (TSIs) to develop more detailed guidance and make sure we cover the tricky areas that charities and their advisors encounter
We are convinced that this is the right change to make but we know that it has significant implications for the sector. We have thought long and hard before making this decision, and have taken onboard comments made by a consultative panel we convened to help inform our thinking.
As part of our commitment to making this new guidance as fit for purpose as possible, we would love to hear from you if you have specific ideas of what could be usefully included.