7. The end of a SCIO

7.1 Amalgamating with another SCIO

Section 59 of the 2005 Act makes provision for the amalgamation of a SCIO with one or more SCIOs. Please note that a SCIO may not amalgamate with any other type of body (even although that other body is a charity). This part of the legislation does not take effect until 1 January 2012, and therefore applications cannot be submitted to OSCR until that date.

The 2005 Act defines the amalgamation of SCIOs as two or more SCIOs (‘the old SCIOs’) ceasing to exist and a new SCIO being constituted and entered in the Register as their successor.

If one SCIO wishes to wind up and transfer its assets to an existing SCIO, OSCR will process the application as a dissolution or a transfer of undertaking (see 7.2 or 7.3 below) rather than an amalgamation. This is because the action does not result in a new SCIO being created.

OSCR will assess the proposed constitution and activities of the new SCIO in the same manner as an application for the creation of any other new SCIO (see section 3).

If OSCR decides the proposed new SCIO will pass the charity test, that its constitution contains the required elements and that its name is not objectionable, OSCR will enter the new SCIO in the Scottish Charity Register.

The new SCIO will then become a corporate body with 
a new charity number. The new SCIO’s constitution and its name or working name (if any) are as specified during the application process and its first members are the members of the old SCIOs immediately before the new SCIO was entered in the Register.

The new SCIO must at this point take steps to formally appoint to their positions those three or more persons who were named during the application process as the proposed charity trustees. The process for appointing these charity trustees will be set out in the SCIO’s constitution.

The new SCIO’s entry on the Register will state: 

• the fact the body is a SCIO
• the date on which it was entered in the Register, and
• the fact that it was created following the amalgamation of the old SCIOs, which will each be named.

The old SCIOs will simultaneously be removed from the Register. At that point, all property, rights and liabilities of the old SCIOs transfer automatically to the new SCIO and the old SCIOs are dissolved. As outlined at section 3.3, the new SCIO may wish to take steps to ensure that there are no doubts as to their ownership of heritable property by registering a Notice of Title with the Registers of Scotland.  

If the application for amalgamation is refused, the applicant SCIOs have the right to seek a review of OSCR’s decision following the same process set out in section 3.4 of this guidance.

7.2 Transfer of a SCIO’s undertaking to another SCIO

A SCIO (‘the transferor SCIO’) which no longer wishes to continue to exist, but which does not want its activities to cease, may choose under section 61 of the 2005 Act to transfer its undertaking to another SCIO. This part of the legislation does not take effect until 1 January 2012, and therefore applications cannot be submitted to OSCR until that date.  

Transferring a SCIO’s undertaking involves the transfer of all of the transferor SCIO’s property, rights and liabilities to another SCIO (‘the transferee SCIO’), followed by the wind up of the transferor SCIO. This action differs from the wind up of a SCIO (see section 7.3) which only involves the transfer of any surplus assets, but not any rights or liabilities, to another body which has similar purposes to the SCIO (whether or not that body is a SCIO). 

If a SCIO wishes to transfer its undertaking to another SCIO, it must pass a resolution agreeing to the transfer of undertaking to a specified SCIO. A copy of that resolution must then be sent to OSCR together with an Application to Transfer Undertaking form and a copy of a resolution of the transferee SCIO which confirms its acceptance of the transfer. The resolutions of both the transferor and transferee SCIO must be passed by a two-thirds majority of those voting at general meetings of each SCIO, or unanimously by the SCIOs’ members otherwise than at a general meeting.

The resolution of the transferor SCIO does not take effect until OSCR confirms the resolution, therefore the transferor SCIO must not proceed with the transfer of undertaking until OSCR has provided it with written notice that the resolution is in order.

If OSCR is satisfied with the proposals contained within the resolution of the transferor SCIO, it will confirm the resolution and give notice to the transferor SCIO of that decision. At that point:

• All property, rights and liabilities of the transferor SCIO transfer to the transferee SCIO in accordance with the resolution
• OSCR will remove the transferor SCIO from the Register and it is dissolved.

As outlined at section 3.3, the transferee SCIO may wish to take steps to ensure that there are no doubts as to their ownership of heritable property by registering a Notice of Title with the Registers of Scotland.

If OSCR does not confirm the resolution to transfer the undertaking, it will advise the transferor SCIO of the reasons for its decision and provide guidance if appropriate on the steps the SCIO may take to have a new resolution confirmed. If OSCR has any serious concerns in relation to the proposed transfer, it may also be necessary for OSCR to use its powers under section 31 of the 2005 Act in order to protect the property of the transferor SCIO.

A decision by OSCR not to confirm a SCIO’s resolution to transfer its undertaking is not reviewable. 

7.3 Dissolving a SCIO

A SCIO may only apply to OSCR to be removed from 
the Register, and therefore dissolve itself, by making an application for a solvent or an insolvent dissolution (see section 7.3.1 and 7.3.2 below) under the Dissolution Regulations.

Section 16(2)(c) of the 2005 Act, which sets out the requirement for non-SCIO charities to seek OSCR’s consent to wind up or dissolve, does not apply to SCIOs. Unlike the situation for non-SCIO charities, there is no requirement for SCIOs to make the application for solvent or insolvent dissolution within a specified timescale of the proposed dissolution date. This is because OSCR, rather than the SCIO itself, carries out the dissolution of the SCIO by removing it from the Register.    
Additionally, SCIOs may not apply to OSCR for removal from the Register under section 18 of the 2005 Act, which is the section which gives non-SCIO charities the right to seek removal from the Register so that they continue to operate without charitable status. This is because a SCIO exists only while it is entered in the Register; it cannot continue to operate without charitable status.

Whether a SCIO applies to be dissolved using the solvent or insolvent procedure, its members are not liable to contribute to the assets of the SCIO when it is wound up. 

7.3.1 Dissolving a solvent SCIO

A SCIO which is solvent may apply to OSCR to be removed from the Register, and therefore dissolved, by submitting the documents listed at Appendix 3.

When OSCR receives the completed application and required documents, it will publish the Notice of Application for Dissolution submitted with the application on its website within 14 days. If any elements of the application are incomplete, OSCR will advise the SCIO which documents are still required and delay publication until after they have been received.

The Notice of Application for Dissolution will be published on OSCR’s website for 28 days, during which time any person may contact OSCR to object to or offer further information regarding the dissolution. This period of time offers some protection to third parties who have been contracting with or otherwise have a relationship with the SCIO by offering them the opportunity to object to the dissolution, for example, if the SCIO owes them outstanding debts.

Once the 28 day publication period has expired, OSCR must make its decision on the SCIO’s application to dissolve within 21 days. There are three decisions open to OSCR:

• To consent to the application
• To consent to the application subject to any condition (the SCIO must provide its written acceptance of any condition before the dissolution can proceed), or
• To refuse the application.

If OSCR consents to the application to dissolve, the SCIO will be free to wind up its affairs within a period of time agreed with OSCR. Once it has done so, it must notify OSCR by providing the following information:

• Evidence that any surplus assets have been passed to the body (or bodies) named in the resolution of the SCIO’s members
• Evidence that any other condition of consent has been fulfilled
• Confirmation from the SCIO’s charity trustees that the SCIO has settled all outstanding liabilities and that it has no remaining assets.

If OSCR is satisfied that the SCIO has wound up its affairs in line with the requirements of the 2005 Act and any conditions of consent, it will remove the SCIO from the Register and the SCIO will therefore be dissolved.

If the application for the solvent dissolution of a SCIO is refused, the SCIO has the right to seek a review of OSCR’s decision following the same process set out in section 3.4 of this guidance. 

7.3.2  Dissolving an insolvent SCIO

A SCIO which is insolvent may, if it has outstanding debts of at least £1,500, apply to OSCR to removed from the Register and therefore dissolved. A resolution that the SCIO’s estate be sequestrated must accompany this application.  

While OSCR deals with the initial application to dissolve and then the removal of the SCIO from the Register at the end of the process, the decision on whether the SCIO shall be sequestrated and the processing of the sequestration are dealt with by the Accountant in Bankruptcy (AiB).

AiB is an Agency of the Scottish Government which supervises the process of insolvency in Scotland and which, in some instances, acts as Trustee in Bankruptcy. In the case of an insolvent SCIO which applies to OSCR to be dissolved, AiB will always act as the Trustee in Bankruptcy; the SCIO is not permitted to nominate its own choice of trustee.

The estate of a SCIO may only be sequestrated as outlined in this section or in section 7.4.

An insolvent SCIO with debts of at least £1,500 may apply to OSCR to be dissolved, by submitting the documents listed at Appendix 4.

When OSCR receives the completed application and required documents, it will publish the Notice of Application for Dissolution submitted with the application on its website within 14 days. If any elements of the application are incomplete, OSCR will advise the SCIO which documents are still required and delay publication until after they have been received.

The Notice of Application for Dissolution will remain on OSCR’s website until the sequestration of the SCIO is awarded or refused; the decision on the sequestration is likely to be made within approximately four to six weeks of the Notice being published.

If within 14 days of having published the Notice of Application for Dissolution on its website, OSCR is satisfied that the SCIO has supplied all the required documents, it will pass the application to AiB to make a decision on whether the SCIO shall be sequestrated.

At the same time, OSCR will notify the SCIO it has made the referral and advise the SCIO to pay the debtor application fee direct to AiB. The fee is currently £200 (this is set by the Bankruptcy Fees (Scotland) Regulations 1993) (as amended)) and must be paid to AiB by post, telephone, bank transfer or in person within 21 days of AiB receiving the application from OSCR (see Appendix 5 for details of how to pay this fee). AiB cannot process the application until the fee is received, therefore the applicant SCIO should endeavour to pay this sum to AiB as soon as possible.

If the fee has not been paid within this timescale, AiB must refuse the application to award sequestration. The fee is non-refundable, even if the application is refused by AiB, as it meets some of the administrative costs of assessing and processing the application.

AiB, on receipt of the fee, will then assess the application to determine if the SCIO is insolvent with outstanding debts of at least £1,500. If it is satisfied this is the case, the AiB will award sequestration of the SCIO’s estate and notify OSCR and the SCIO of its decision. OSCR will in turn publish the award of sequestration on its website and remove the Notice of Application for Dissolution. Details of the sequestration will also be entered into AiB’s Register of Insolvencies which can be accessed at www.aib.gov.uk.  

The sequestration process will take a minimum of 15 months to complete, although it may take considerably longer depending on the number or type of assets the SCIO holds, and depending on how easily the Trustee in Bankruptcy can access the information he or she requires. 

In summary, the process of sequestration will involve the Trustee in Bankruptcy taking the following steps: 

• establishing the SCIO’s assets and liabilities
• publishing a notice of the sequestration in the Register of Insolvencies (this can be accessed at www.aib.gov.uk)
• holding a meeting of the creditors (if AiB thinks this appropriate)
• realising the estate and making payments to creditors if there are sufficient funds to do so

Once the sequestration of the estate is complete, AiB 
will transfer any surplus assets to the body named in the resolution of the SCIO’s members (see Appendix 4). AiB will then notify OSCR that the sequestration is complete and provide copies of the final accounts of the estate. The Trustee in Bankruptcy will remain in office until this point.

OSCR will then remove the SCIO from the Register and the SCIO will therefore be dissolved.

7.4 Creditor-led sequestration

As well as an insolvent SCIO itself taking steps to wind up its estate, the Dissolution Regulations make provision for a SCIO’s creditors and other third parties (a temporary administrator or a member State liquidator appointed in main proceedings) to petition the sheriff court for the sequestration of the SCIO if they are owed at least £3,000 by the SCIO. This offers third parties (most commonly creditors) which contract with the SCIO a route by which they can recover debts owed to them in a fair manner or otherwise instigate the orderly wind up of the SCIO’s estate.

If a creditor or other third party wishes to lodge a petition in court for the sequestration of a SCIO’s estate, he or she must first notify both OSCR and the SCIO of this intention. The notification must be delivered between 7 and 14 days before the petition is due to be lodged, and the sheriff cannot award sequestration without proof that OSCR and the SCIO have been notified of the petition. The SCIO against whom the petition has been lodged will be given an opportunity to challenge the petition as part of the court procedure.

If the petition is successful and sequestration of the estate is awarded by the court, the Trustee in Bankruptcy who has been appointed must notify OSCR of the award. OSCR will at that point publish a notice of the award of sequestration on its website and state that the SCIO will be dissolved once the sequestration is complete. The process and timeframe of creditor-led sequestrations are on the whole the same as when a SCIO applies for its own sequestration (see section 7.3.2). 

In the case of a sequestration of a SCIO’s estate which 
is the result of a third party’s petition, the Trustee in Bankruptcy need not be AiB. The third party lodging the petition instead has the option of nominating a Trustee in Bankruptcy who may be an insolvency practioner or AiB. If the third party does not nominate a Trustee in Bankruptcy, the court will appoint AiB to this role.

Once the sequestration of the estate is complete, the Trustee in Bankruptcy will transfer any surplus assets to another body (or bodies) which has similar purposes to those of the SCIO as set out in its constitution. If AiB is acting as the Trustee in Bankruptcy, it will ask the SCIO to identify this recipient body and then seek confirmation from OSCR that the purposes of the recipient body are sufficiently similar to those of the SCIO. In the event that AiB has not been nominated as the Trustee in Bankruptcy, the insolvency practitioner who is appointed to that role is under a duty to ensure the assets are transferred to an appropriate recipient body; again, he or she may wish to do so in consultation with OSCR.  

Once any surplus assets have been transferred in this manner, the Trustee in Bankruptcy will notify OSCR that the sequestration is complete and provide copies of the final accounts of the estate. OSCR will then remove the SCIO from the Register and the SCIO will therefore be dissolved.