Underlying principles

1. Charity trustee duties – what charity trustees must do

Charity trustees are the people who have the general management and control of the administration of a charity. Depending on the individual charity’s constitution, they may be called Board members, directors, management committee members, charity trustees, governors or patrons.

The underlying principles are contained in section 66 of the 2005 Act, which sets out charity trustees’ general duties. The charity trustees must act in the interests of the charity. Most relevantly they must:

• Seek to ensure that the charity acts consistently with its purposes
• Act with care and diligence; charity trustees must manage the affairs of their charity with the same care and diligence that it is reasonable to expect of someone managing the affairs of another person
• In circumstances capable of giving rise to conflict of interest between the charity and any person responsible for their appointment, put the interests of the charity first or, where the charity trustee considers they cannot give priority to the charity’s interests, they must disclose the interest and not take part in any discussion or decision on the matter.

This section also provides that charity trustees must seek to ensure that any breach of duty regarding the conflict of interest above is corrected and not repeated, and that any charity trustee in serious or persistent breach is removed. If charity trustees fail to carry out their duties as set out above, this is regarded as misconduct in the administration of the charity. As regulator, OSCR is required to identify and investigate any apparent misconduct, and, having due regard to best regulatory practice and principles, may take action to correct this and protect the charity and its assets, where appropriate.

If a charity is a company, then charity trustees must also fulfil their duties under company law. Where these duties overlap with those of being a charity trustee, charity trustees must comply with whichever are the more stringent requirements. The same is true of other legal forms where duties of those in management and control are contained in statute or common law.

2. Charity test – the criteria for being a charity

Charities must only advance charitable purposes. A charity’s purposes will usually be set out in its constitution and must be able to be related clearly and directly to one or more of the 16 charitable purposes listed by the 2005 Act (section 7(2)). Our meeting the charity test guidance has more information. The charitable purposes are listed in the glossary in this guidance.

In addition, a charity must demonstrate that its activities provide public benefit in furtherance of those charitable purposes. A charity cannot use its assets for any noncharitable purpose. Where a charity’s activities appear to be directed at achieving non-charitable purposes, this will call into question the body’s underlying purpose, and therefore charitable status.

In considering whether a charity provides public benefit, we must consider:

• Any disbenefit (harm or detriment) arising from the charity’s activities
• Any private benefit gained by individuals or bodies other than as beneficiaries of the charity
• Any undue restriction on access to the benefit provided

These considerations apply throughout the life of a charity. Charity trustees must ensure that the charity always seeks to act solely in pursuit of its charitable purposes and for public benefit. 

3. Ministerial direction and control

Even if a body has charitable purposes and provides public benefit it cannot become a charity if its constitution expressly permits the Scottish Ministers or a Minister of the Crown to direct or otherwise control its activities (though Scottish Ministers do have the power to make an order disapplying this statutory restriction). We interpret ‘control’, in this instance, as the ability for a Minister to intervene in a body’s activities in order to ensure that these activities are carried out as the Minister wishes. We have identified three ways that a constitution might permit this to happen: 

• By creating direct mechanisms, such as giving Ministers a power of direction
• By including specific references to legislation, regulations or orders, to which the charity is subject
• By providing that certain actions require Ministerial consent or approval.

Where a constitution contains such mechanisms, we will consider whether, if they were to be used, this would allow Ministers to control the charity’s activities.