Seòmar agus comataidhean

Amendment 22 appears to follow on from a recommendation that was made in the committee’s stage 1 report. In my response to that report, I agreed that

“effective and open communication ... is vital ... to ensure smooth implementation”.

OSCR also wrote to the committee to set out an initial outline for communicating changes to charities. In addition, it confirmed that it would share its plan with the committee ahead of engagement with the sector.

Amendment 22 focuses on charities with two or fewer employees, but that covers 73 per cent of charities. OSCR would, in any event, be expected to aim its support and guidance at the majority of charities. The amendment also requires OSCR to communicate with each charity, but at present it is not possible for OSCR to do that. That is why we have put section 11 in the bill and lodged amendment 20. There are more than 25,000 charities and, although OSCR has contact details for the majority of them, communicating with each one is not technically possible.

However, I am sympathetic to what Mr Balfour is trying to achieve. I would be happy to work with him on a stage 3 amendment that would enhance OSCR’s existing reporting requirements. I therefore urge him not to press amendment 22.

Amendment 23 would require ministers to carry out a review of the act that the bill becomes, starting six months after royal assent, and to lay a report before the Parliament

“no later than 31 December 2025”.

We do not expect the act to be brought into force within six months after royal assent, so there would be no experience of the act in practice at that point. Also, an adequate amount of time is needed for an act to embed so that evidence for a review can be gathered.

I would be open to that, but I am not sure that it would have the effect that Mr Balfour would want. I say that because, if we agreed to an amendment that included a timescale for a review that fitted better with the commencement plans, it would be necessary to divert resources from the wider review that we, as a Government, have already said we will undertake once the bill is enacted. We would be obliged to carry out a review even if nobody was calling for it or had any issues in practice. I do not believe that that is the right approach, particularly when any stakeholders who might want to raise specific points relating to the bill will be engaging with the wider review that we have committed to and will no doubt raise any points there that they want us to consider.

For those reasons, I am afraid that I have to say no to Mr Balfour—I would not be open to that. I do try to oblige Mr Balfour with amendments and assistance, but I will not in this case.

Convener, as I have set out to the committee previously, the Scottish Government intends to take a phased approach to implementation, with at least two sets of commencement regulations anticipated in spring 2024 and summer 2025. That is to allow charities and OSCR the time that they need to prepare for the changes and to give OSCR the opportunity to consult the sector, produce guidance and communicate the changes. The Parliament has the ability to conduct post-legislative scrutiny of any act, so it is not necessary for such actions to be specified in the bill, particularly if the specified timings for them do not align with the expected commencement of the bill.

As I have already mentioned, the Government is committed to conducting a much wider review of charity regulation following commencement of the bill. My officials are already preparing the groundwork for that, and I have carried out meetings on the issue as well. I am committed to working with the sector to shape that review and to ensure that there is a proper opportunity for engagement. During stage 1, members and stakeholders were very clear about the importance of doing that, and I very much agree. A review of the bill would, as I have said to Mr Balfour, hold up that wider review by diverting resources. I therefore urge the committee not to agree to amendment 23 if Mr Balfour moves it.

I am happy to take that away and to provide an update to Mr Briggs and the committee, and we can address that at stage 3, if necessary.

Amendment 3 agreed to.

Amendments 4 to 12 moved—[Shirley-Anne Somerville]—and agreed to.

Section 12, as amended, agreed to.

After section 12

The rationale was to ensure that we provide OSCR with the powers to do what it needs to do, such as in the example that I gave in my introductory remarks of a women’s refuge. If there is a threat to a trustee or a trustee feels that they might be threatened if their information is published, that information can be withheld. We are still upholding transparency, but we are respecting the specific circumstances in which a trustee, for understandable reasons, might not wish their details to be made public. Amendment 1 simply ensures the policy intent of the bill without imposing on OSCR what it might perceive as an additional burden.

These are three very minor amendments. Amendment 15 removes a redundant cross-reference. Amendments 17 and 19 modify two of the headings in the 2005 act, which OSCR and the Charity Law Association, respectively, flagged as being potentially confusing or inaccurate. My thanks to them for highlighting those points.

I move amendment 15.

Amendment 15 agreed to.

Amendments 16 and 17 moved—[Shirley-Anne Somerville]—and agreed to.

The 2005 act retained the concept of designated religious charities, or DRCs, which existed under preceding legislation. The rules in the 2005 act recognise that many religious bodies operate effective self-regulatory mechanisms by having an internal organisation with supervisory and disciplinary functions and seek to avoid overregulating such charities.

However, the 2005 act places restrictions on whom OSCR can share information with and for what purpose. In general, information can be shared only with public bodies and office-holders for the purpose of enabling or assisting in the exercise of either OSCR or the body’s functions. As a DRC is not a public body and the information to be shared by OSCR would not be for the exercise of its own function, it is not currently permitted.

The bill does not seek to change that original policy intent of the 2005 act. It seeks to address a practical issue identified by OSCR and the DRCs around the ability to share information. Amendment 18 will enable OSCR and the DRCs to share information if necessary for any purpose connected with the exercise of OSCR’s functions or for the purpose of enabling or assisting the DRC to exercise any supervisory or disciplinary functions that it holds in relation to its component elements.

For example, when OSCR receives information from an auditor or independent examiner in relation to the accounts of a charity that is a component part of a DRC, OSCR is currently unable to share that information with the relevant DRC. That DRC, in turn, is then unable to fulfil its regulatory functions. This small amendment will allow DRCs to fully exercise their functions in respect of their component parts, thereby improving and enhancing the regulation of those charities. The amendment makes sure that the current arrangements with DRCs can work properly and that the original policy intent is not hampered by the inability to share information when necessary.

I hope that the committee will agree with the approach that is being taken here and will support amendment 18. As the current position is that some charities are designated as DRCs, the bill needs to ensure that they can exercise their functions as intended by the 2005 act.

I move amendment 18.

Amendment 18 agreed to.

Amendments 19 and 20 moved—[Shirley-Anne Somerville]—and agreed to.

Schedule, as amended, agreed to.

Sections 18 to 20 agreed to.

Long title agreed to.

I have no further comments.

Amendment 1 agreed to.

Section 2, as amended, agreed to.

After section 2

Amendments 3 to 12 refine the record of mergers provisions as introduced following discussions with OSCR about how they will work in practice. They do not alter the fundamental intent of the provisions, which is to ensure that legacies left to charities in wills are retained for the charity sector and that so-called shell charities do not clog up the register simply for the purpose of collecting legacies.

Amendment 3 will provide that a transferee charity has a choice as to whether or not to notify OSCR of the merger rather than being under a duty to do so. Notification of the merger may be done at any time after the transfer of all property, rights and liabilities of the transferor is complete. Although we imagine that, in most cases, transferees will want to notify OSCR of a merger, we do not think that it needs to be a specific duty.

Amendments 4 to 11 will provide that the key date that will trigger the rules on redirection of a legacy will be the date on which notice of a merger is given to OSCR, instead of the date on which OSCR records the merger. That will mean that there is no risk of a legacy being lost due to a delay in OSCR recording a merger—for example, when a merger is notified just before a bank holiday and the testator dies during that weekend. OSCR must still keep a record of all charity mergers that are notified to it, and the record can be used as a reference point to establish what has been notified and when.

The amendments will also provide that a transferor charity will not need to have formally wound up or dissolved in order for the rule on redirecting legacies to apply, which should avoid disrupting any winding-up processes that the charity might have commenced, having already transferred all its property to another charity.

Amendment 4 will also give the Scottish ministers the power to clarify what is meant by notice being given. In most cases, the giving of a notice will be instantaneous, using email or OSCR’s online system. However, where notification is sent by post, there might be a need to make specific rules around when a notification of a merger should be treated as having been given—for example, when delays occur due to postal strikes.

It might transpire that there is no need to bring forward regulations to clarify that type of point. However, given that section 12 introduces a new process, I want to ensure that any unforeseen issues relating to notification that arise in practice can be swiftly addressed, particularly once OSCR has established a process for dealing with merger notifications.

Amendment 12 corrects a referencing error in relation to the definition of a will.

I move amendment 3.

This group deals with notices that are given both by and to OSCR. I will speak to amendments 14 and 20 first, which deal with notices that are given by OSCR.

Amendment 14 makes a minor change when OSCR is obtaining documents from a third party for an inquiry into a former charity. The amendment clarifies the application of the rule that ensures that, when a body continues to exist but without charitable status, notice is served by OSCR on the body that used to be a charity.

Amendment 20 is designed to provide OSCR with alternative methods of serving notice in certain circumstances.

As part of its overarching duty to act in a fair, transparent and proportionate way, OSCR is required to serve notice on a charity or a charity trustee before it can take specified regulatory action—for example, issuing a direction.

However, in some cases, OSCR does not have accurate contact information for the charity or trustees in order to serve the notice, which means that OSCR is prevented from pursuing regulatory action, as it is unable to serve the required notice. Although the introduction of an internal schedule of trustee details held by OSCR will, in large part, address that problem, there will, inevitably, be cases in which contact information is unavailable or becomes out of date.

Amendment 20 will allow OSCR to serve the relevant notices by other means—for example, by publishing a notice on its website. Serving notice by other means would be used as a last resort when previous attempts to contact the charity directly had failed. That will allow OSCR to continue its regulatory action.

Amendment 20 relates only to notices in respect of which the action being taken is such that it is still appropriate to take it even if the charity or body in question cannot be contacted directly. For example, if a direction is issued to a bank not to part with charity funds but the charity also needs to be notified of the direction, there would be value in issuing that direction to the bank even if the charity itself cannot be located and can be notified only by means of a public notice.

I turn to notices that are given to OSCR. Amendment 16 addresses concerns that were raised by stakeholders—in particular, the Law Society of Scotland—about the current requirement that charities wishing to take certain actions that require OSCR’s consent give OSCR at least 42 days’ advance notice before they take the relevant action.

Amendment 16 does not remove the need for charities to obtain OSCR’s consent before taking such actions; it means that, once OSCR grants its consent, the charity will be able to act straight away, if it wishes, instead of having to wait until the end of the 42-day period.

I hope that the committee will agree with the approach that is being taken to all these notice requirements and that it will support all the amendments in the group.

I move amendment 14.

Amendment 14 agreed to.

Section 14, as amended, agreed to.

Sections 15 and 16 agreed to.

After section 16

Amendment 2 addresses the recommendation made by the committee at stage 1 to provide for a dispute mechanism in connection with OSCR’s appointment of interim trustees. The committee raised the issue that there was a lack of recourse for any existing charity trustees of a charity to which interim trustees are appointed. The amendment addresses that issue by extending the established review and appeal mechanism under the Charities and Trustee Investment (Scotland) Act 2005 to appointments of interim trustees in cases in which it is known that there are still some existing charity trustees continuing to act.

The new provision that is introduced by section 8 is designed primarily to capture those small number of cases in which there are no trustees acting for the charity. However, I accept that there might be some occasions on which an existing trustee could still be acting and a right of review over OSCR’s decision is warranted. The same is also true of the existing appointment process, which is restated by section 8.

In that scenario, although the aim is that the existing trustees would ask OSCR to step in because they are unable to make an appointment themselves, that request does not have to be unanimous. As such, I agree that it is right that there should be a review and appeal mechanism for any trustee who wants to challenge that decision. I hope that members will therefore support the amendment.

I move amendment 2.