Inquiries
Section 15 – Inquiries about former charities etc.
94.Section 28 of the 2005 Act gives powers to OSCR to make inquiries, for either general or particular purposes, about a charity, body or person falling within a paragraph of subsection (1). However, originally, OSCR was not able to make inquiries with regard to a charity, body or person who previously met the criteria in section 28(1) but who, at the time of making the inquiry, no longer did so. For example, where a charity had been removed from the Register and an allegation of misconduct by one of the former charity trustees came to light, OSCR was not able to make inquiries with regard to the body which was formerly a charity, in order to determine whether an application should be made to the Court of Session for an order under section 34(5)(ea) in respect of the former charity trustee. Similarly, if the charity had not just been removed from the Register but had been wound up and had ceased to exist as a body, OSCR previously could not make inquiries with regard to the time when the charity was operating.
95.This section of the Act changes that by inserting a new subsection (2A) into section 28, providing that it does not matter whether a charity, body or person continues to fall within a paragraph of subsection (1) – or continues to exist – for OSCR to make inquiries under that subsection. It also inserts a new subsection (4A) which provides in paragraph (a) that such inquiries must still relate to the period or periods in which the subject of the inquiry did fall within one or more of those paragraphs of subsection (1). The only exception to that is in relation to an inquiry concerning the protection of assets held by bodies which have been removed from the Register. Similarly, paragraph (b) of new subsection (4A) provides that a direction may not be given under section 28(3) of the 2005 Act unless it relates to the protection of assets held by bodies which have been removed from the Register. The ability to direct someone not to do something will not normally be relevant where the person is no longer involved with the charity or body concerned, but may still be relevant in a case where the change in status relates to the body itself and the body continues to hold protected charitable assets.
Section 16 – Notice and obtaining information
96.Under section 29 of the 2005 Act, OSCR may by notice require any person to provide it with, amongst other things, documents and information which it considers necessary for the purposes of inquiries under section 28. The notice must specify a date, which must be at least 14 days after the date on which the notice is given, by which the person is to comply with that requirement. However, section 72 of the 2005 Act also originally required OSCR to give notice to the charity in respect of which the decision was made (being the requirement to provide information under section 29). That presupposed that the haver of the information would be a charity and could also be read as suggesting that the haver was the subject of the inquiry. But that may not necessarily be the case, as the power in section 29(1) is quite wide and the haver of the information could be a third party. Further, the inquiry could be in relation to a body which is not a charity (see section 28(1) of the 2005 Act). In addition, the charity or body may have ceased to exist and so serving notice on that charity or body is no longer possible. Section 73 of the 2005 Act provides that the decision to require information is of no effect unless and until the notice required by section 72 is given and 21 days has lapsed without the charity requesting a review of the decision, or where such a request is made, the date on which OSCR gives its final decision.
97.The interaction of these provisions created some uncertainty as to when the haver of the information was required to comply with the requirement, despite the notice specifying a date of 14 days or more in terms of section 29(2)(b), given that the decision was of no effect by dint of section 73. Further, it was not necessarily clear to whom notices of the decision should be given in terms of section 72. Finally, where the charity or body which was the subject of the inquiry under section 28 no longer existed, it was not possible for OSCR to fulfil the requirement to serve a notice on that charity or body, meaning the decision was of no effect (also by dint of section 73).
98.This section of the Act modifies section 29 of the 2005 Act so that ‘the decision’ to require information is separated from ‘the notice’ given to the haver of the information. Subsection (1) of that section refers to the decision, whereas subsection (2) refers to the notice. Inserted subsection (2A) provides that OSCR must not give notice unless and until “the decision” has effect (in terms of section 73(3)).
99.Further, this section of the Act inserts a new paragraph (ba) into section 72(2) of the 2005 Act to make it clear that, in the case of the decision to make a requirement to provide information under section 29(1), a notice must be given to the charity, body or person with regard to which OSCR is making inquiries under section 28.
100.The effect of these changes is that OSCR must notify the charity, body or other person with regard to which OSCR is making inquiries under section 28 about its decision to require information under section 29(1) in relation to that inquiry. In some cases, the person receiving notice (i.e. the person subject to the inquiry) will be the same person as the haver of the information, but in other cases they will be different persons. The person receiving the notice of the decision also does not need to be a charity. Only after that decision becomes effective, in terms of section 73(3) (following the usual review processes under the 2005 Act), can OSCR serve notice on the haver of the information. The haver of the information will have at least 14 days to comply with the requirement. This will be the actual date of compliance, since the other notice and review provisions will have been satisfied at the point notice under section 29(2) is given. It does not matter if the haver of the information and the charity or body to which the notice of the decision was given is the same person – they will still have at least 14 days or more to comply with the notice under section 29(2).
101.This section of the Act also inserts a new subsection (4) into section 72 of the 2005 Act which makes provision for cases where inquiries relate to a charity or body which no longer exists. In the case of former charities which no longer exist, a notice must be given to each person who was a charity trustee immediately before it ceased to exist. In the case of a body which has ceased to exist, a notice must be given to the person who in OSCR’s opinion appears to have been concerned in the management or control of the body immediately before it ceased to exist. These notices are only required if and to the extent that it is reasonably practicable to give them. This means that inquiries should no longer be frustrated by the requirement to serve notices on charities or bodies which do not exist. Subsection (4)(a) also restates the rule in section 72(2) where inquiries relate to a body which still exists but without charitable status in relation to a period in which the body was a charity. In such cases a notice must simply be given to the body which was the charity as required by subsection (2)(ba) and the rule in subsection (4)(b) does not apply.
102.This section also makes changes to section 72(2)(a) of the 2005 Act to make it clear that, in relation to the decisions referred to in that section, notices must be sent to the charity, body or person in respect of whom the decision was made.
Section 17 – Ability to issue positive directions
103.Following an inquiry under section 28 of the 2005 Act, a report often needs to be published under section 33 of the 2005 Act. In addition, where the conclusion of the inquiry is that there is a problem which requires to be addressed, there are a number of remedies available to OSCR (some of which require an inquiry to be held first, and others which do not)—
where a charity no longer meets the charity test, OSCR must either ensure that the charity takes steps to remedy that or must remove the charity from the Register (see section 30 of the 2005 Act),
OSCR is empowered to take a number of temporary measures where there has been misconduct by a charity/charity-controlled body, where it is necessary or desirable to act to protect charitable property, where a body is misrepresented as being a charity or as being a Scottish controlled charity, or where there has been misconduct in an activity carried out by a person misrepresenting themselves as acting for a charity; the steps that may be taken can include suspending a charity trustee, restricting the transactions which can be entered into without OSCR’s consent, or directing a financial institution not to part with property without OSCR’s consent (see section 31 of the 2005 Act),
OSCR may opt to apply to the Court of Session for one of the remedies set out in section 34(5) of the 2005 Act or for a transfer scheme under section 35 of the 2005 Act; the remedies available include an interdict preventing specified action from being taken, the removal of a charity trustee, or the appointment of a judicial factor.
104.The measures which can be taken under section 31 of the 2005 Act are almost exclusively directions that something is not to be done. Under section 32 of the 2005 Act, the effect of such a direction is limited to a maximum period of 6 months.
105.This section of the Act introduces a new power for OSCR to issue a direction requiring a positive action to be taken. Similar to certain aspects of the existing interdictory power, the exercise of this new power is limited to cases where, following inquiries, OSCR concludes that there has been misconduct in the administration of a charity or a body controlled by a charity, or that it is necessary or desirable to act to protect charitable property. Where this applies, OSCR will be able to direct the charity or body to take such steps as OSCR specifies in the direction which OSCR considers expedient in the interests of the charity.
106.Examples of directions which might be given under this section could include a direction to appoint additional trustees in order to form a quorum, a direction to take an action required by the charity’s governing document (such as the holding of an annual general meeting), or a direction to take action to remove a charity trustee following misconduct by that person.
107.OSCR is given the ability to revoke a direction or to vary it by allowing more time for compliance or by reducing the required steps. Clarification is also provided that OSCR is able to give more than one direction in respect of the same inquiries. This could mean giving more than one direction requiring positive action to be taken, or it could mean giving one direction requiring positive action to be taken and another direction preventing something else from happening.
108.A positive direction can require the charity to do something that its constitution does not contemplate or which it would not otherwise have express powers to do, but it may not require the charity/body to do something which is prohibited by an enactment or expressly prohibited by the charity’s/body’s constitution or, in the case of a charity, inconsistent with its purposes. Anything done by the charity or body under the authority of a positive direction is treated as having been properly done in the exercise of its powers, although the contractual and other rights of third parties are preserved in respect of anything so done.
109.A number of consequential amendments are made to the 2005 Act in light of this new power—
provision is made in section 3 for the issuing of a positive direction to appear on a charity’s Register entry until it is complied with,
the headings of sections 31 and 32 are adjusted to reflect the fact that section 31 is no longer the only section focusing on the powers of OSCR following inquiries,
section 32 is clarified so that the existing reference to being able to give more than one direction under section 31 in respect of an inquiry also refers to the fact that directions under section 31 can be combined with directions under new section 30B,
section 33 is adjusted to ensure that a report is prepared and published on an inquiry which results in a positive direction being given,
section 65 is amended so that, just as some of the interdictory direction powers do not apply to designated religious charities, nor does the power to issue positive directions apply to such charities (see paragraphs 49 and 50 of the Policy Memorandum for the rationale behind this and explanation of when a religious charity can be designated),
section 71 is modified to ensure that a review and appeal can be sought in respect of any decision by OSCR to issue a positive direction; any review or appeal would be in line with the 2005 Act’s usual procedures,
section 72 is modified to ensure that any notice of a decision to issue a positive direction is served on the person in respect of whom the decision is made (i.e. the charity concerned or, as the case may be, the body controlled by a charity),
provision is made in section 73 so that the effect of any such direction is suspended until it is no longer amenable to review (either because the 21 day period in which OSCR can be required to review it has expired without a review being requested, or because the review/appeal process has been exhausted).
