Governance

Scottish Charitable Incorporated Organisation

A Scottish Charitable Incorporated Organisations (SCIO) is a legal (incorporated) structure exclusive to groups with registered charitable status in Scotland.  To be eligible to apply to be a SCIO your group must therefore have charitable purposes and deliver activities which provide community benefit (these conditions are part of the two-part Charity Test applied to any group seeking charitable status in Scotland).

As a corporate body (for example like a Company Ltd By Guarantee) a SCIO can enter into contracts, employ staff, incur debts, own property, sue (and be sued). 

A SCIO must:-

  • have its principal office in Scotland
  • have two or more members; these may include some or all of the charity trustees subject to the terms of the SCIO’s constitution 
  • have three or more charity trustees 
  • keep and supply a register of members and charity trustees

A SCIO is regulated under the Charities and Trustee Investment (Scotland) Act 2005 with the Office of the Scottish Charity Register (OSCR) as the regulatory body. 

Advantages to being a SCIO

  • members’ personal liability is limited. Charity trustees are protected from incurring unlimited personal liability except in instances where they are reckless; negligent; have acted illegally or have acted outwith their powers in the management and control of the charity
  • one regulatory body – a SCIO only reports to the Office of the Scottish Charity Regulator (OSCR). OSCR not only regulates compliance with respect to the SCIO’s charitable status but also its legal structure. There is no requirement for separate reporting to Companies House.   
  • has the advantages of charitable status

Disadvantages to being a SCIO

  • requirement to keep a register of members – if you have a large/shifting membership this may be difficult to comply with
  • membership is required to take on some of the responsibilities of the Trustees 
  • a SCIO can only exist as a registered charity – if a SCIO loses its charitable status, it legally ceases to exist.   

Most suitable for:

The SCIO structure is most suitable for groups with charitable purposes who:-

  • plan to own or manage assets including running an office or property, employing paid staff, or entering into contractual agreements
  • want the protection of limited liability that comes with being incorporated
  • have a small to medium sized membership that they can keep a register of

How to become a SCIO

Once you have decided that your group wants to become a SCIO, you should first look at developing a suitable constitution or governing document. To make this easier you can use the SCIO model constitution template as a basis. Your SCIO constitution should contain basic information about how your group will be governed. In particular it should also set out:-

  • rules for the charity trustees – who is eligible to be a charity trustee?  How are charity trustees appointed?
  • details of the procedures that members and charity trustees must follow to withdraw from membership or their positions as charity trustees, and how they may be removed from the SCIO 
  • any restrictions your group wants to put on the powers of the SCIO  (A SCIO has powers under the 2005 Act to do anything to further its charitable purposes unless its constitution restricts those powers) 
  • the organisational structures of the SCIO 

     

    • for example, are the charity trustees and the members identical (a single-tier structure), or does it have a separate body of members (a two-tier structure)?
  • procedures for meetings 

     

    • how will meetings be convened and recorded?  This should cover both members' meeting and charity trustees' meetings. 
    • what is the quorum for any meetings of the SCIO?  Again, this covers both members' meetings and charity trustees meetings. 
    • what voting rights do members and charity trustees have? 
    • how will resolutions be passed?
  • any restrictions on the remuneration of charity trustees which are additional to the restrictions in Section 67 of the 2005 Act, for example, a ban on remuneration being paid to charity trustees.  
  • procedures for dealing with any conflict of interest. 
  • details of how the SCIO will use any surplus assets it has at the time of its dissolution.  These assets must be used for charitable purposes which are the same as or which resemble closely the SCIO's own purposes.

Once you have drafted your constitution, two people from your group will need to make the formal application to OSCR. They will need to prove that the group satisfies all the requirements for being a SCIO – including charitable purposes and activities which provide community benefit (the two-part Charity Test).

Converting an existing Charitable Company to SCIO form

Incorporated organisations with existing charitable status, and Industrial and Provident Societies (IPS) may apply to OSCR to convert to becoming a SCIO. They will need to satisfy the requirements of the two part Charity Test and have a suitable constitution (governing document). http://www.oscr.org.uk/

A constitution is a written framework of rules for your organisation.  It is in effect your group's governing document, stating your aims, clarifying decision-making procedures and establishing a basis for good practice.  It will be a basic requirement for your group to operate. You will need it to open a bank account, apply to funders, register for charitable status, become a company, hire staff or acquire premises.

Your group’s governing document will reflect the type of structure you have chosen for your group and will be referred to as a:-

  • Constitution (for Unincorporated Associations)
  • Trust Deed (for Charitable Trusts)
  • Articles (for incorporated groups such as Company Ltd by Guarantee or Community Interest Companies)
  • SCIO ( scottish charitable incorporated organisation)

When you are setting up a community group for the first time, it is essential that the steering group takes time to discuss, clarify and agree the basic aims and purpose of the group.  Why are you setting up in the first place?  What are you aiming to do?

Think carefully not just about where you are now but where you want to be.  Try not to limit your group and its activities in the future.  Be sure you understand and agree on the essential questions about your purposes, membership, management, decision-making processes and finance. 

Writing a Constitution

Your group’s structure – and whether or not your group is seeking charitable status – will determine some of the elements that make up your governing document, but there are key elements or clauses which should be included in any constitution:-

  • the name of your group or organisation
  • the geographic area of benefit 
  • the aims and objectives of your group (also called the purposes).  If your group is considering charitable status the purposes of your group will need to reflect charitable purposes as set out in current charity legislation
  • the powers that the organisation will have (for example, will the group be able to hire staff, raise funds, buy land etc) 
  • your group’s membership  – how do people become members? Who is eligible?
  • membership subscription levels for the organisation 
  • how membership is to be terminated 
  • how any committee structure will work 
  • details of officers such as chairperson, vice-chairperson, treasurer and secretary and their appointment terms of office 
  • terms of any paid officers (if applicable)
  • procedures for general meetings
  • details of the rules of procedure, quorum and voting of all meetings 
  • how the group’s finances are to be spent, accounted for and independently examined 
  • how the group will be dissolved in the event of winding up

Once your group’s committee (or steering group) has reached an agreement on the rules of how your group will be run, and has a clear purpose or aim, they can begin to draft a constitution. Model constitutions, with tried and tested templates, can be used as a basis but it is important not to lose sight of your group’s own aims and rules and to include these in the draft. 

It is a good idea to speak to other similar groups and perhaps look at their constitutions. Your local Third Sector Interface organisation will have assisted many voluntary groups over the years and will also be a good starting point.