What is a Scottish Charitable Incorporated Organisation (SCIO)?

people heartA SCIO allows charities to be incorporated but still regulated by OSCR, therefore the charities report to both OSCR and Companies House.

A SCIO is a corporate body which is a legal entity and same rights as a natural person, therefore the charity will enter into similar transactions as a company would such as contracts and employing staff. 

A SCIO gives Trustees some protection from personal liability, however it is not absolute and in some cases, charity trustees may be held responsible for actions of the SCIO

The governing document of a SCIO

A SCIO’s constitution must contain a number of basic elements in relation to the charities governance and other key matters which includes:

  • it must have its principal office in Scotland
  • Have at least two members; these may include some or all of the charity trustees subject to the terms of the constitution
  • The charity must use and apply its property in continuance of its charitable purposes and in accordance with its constitution.
  • The charity must have a name and a charitable purpose
  • Must contain membership rules; who is eligible to become a member and how a person can become a member
  • Must contain charity trustee rules; who is eligible to be a charity trustee?, how charity trustees are appointed
  • A SCIO must have at least 3 charity trustees.
  • Details of the procedure 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 SCIO19942 MACO Tax Planning 45

How a SCIO differs from other charities

The SCIO differs from other charities on the Register in that its existence is dependent upon its charitable status.

In the case of Scottish charities which are not SCIOs, charitable status is awarded to an existing organisation such as a company, trust or unincorporated association. This means that these organisations may continue to exist even if charitable status is withdrawn. Although in the majority of cases they would no longer be entitled to refer to themselves as charities.

The SCIO, on the other hand, becomes a legal entity only when it is entered in the Register and ceases to exist if it is removed from the Register.

The SCIO can’t choose to convert to another legal form, can’t combine with a body which is not a SCIO and cannot seek removal from the Register other than by dissolving itself.

Finally, membership of a SCIO cannot be transferred from one member to another as there must be membership rules in place for eligibility and appointment which needs to be followed.

Applying to become a SCIO

The application must be made by two or more people who will become the first members of the SCIO if the application is successful.19942 MACO Tax Planning 30

The SCIO must always have at least two members, who may also be charity trustees but do not need to be. However, as stated previously a SCIO must have at least 3 charity trustees at all times so this will be necessary to have at the application stage.

Each of the three or more proposed charity trustees must sign a ‘Charity Trustee Declaration Form’ to confirm they are aware of their duties and that they have not previously been disqualified from acting as a charity trustee for any of the reasons set out in section 69 of the 2005 Act.

If any elements of the application are left out or the SCIO does not meet the charity test then OSCR will refuse them.

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

Existing unincorporated charity wishing to become a SCIO

Under section 10 of the 2005 Act, OSCR cannot enter a body (including a SCIO) in the Scottish Charity Register if its name is the same as, or too like that of another charity.compliance

This means that the existing charitable unincorporated association or trust and the new SCIO cannot be entered in the Register at the same time with the same name.

It is also not possible for two charities with the same charity number to be entered in the Register at the same time

For the existing charitable unincorporated association or trust to be able to transfer its assets and liabilities to the new SCIO, the latter needs to be incorporated (that is, entered in the Scottish Charity Register).

If the existing charitable unincorporated association or trust has entered into particular legal contracts, such as leases or service level agreements, it may take some time to transfer these to the new SCIO

Similarly, an existing charitable unincorporated association or trust which obtains benefits on the basis of its charitable status, such as grant funding or rates relief, must consider how these benefits may be affected during the process of changing its legal form.

SCIO requirements

SCIOs must refer to their name and their status as a SCIO on a number of specified documents which are issued or signed by the SCIO or on its behalf.

This includes:19942 MACO Tax Planning 27

  • Any of the specified documents which are hosted on a webpage of a website operated by or on behalf of the SCIO
  • Any of the specified documents which are issued or signed by a third party on the SCIO’s behalf, for example, by a solicitor who is acting on the SCIO’s behalf or an accountant who is requesting payment from another body on behalf of the SCIO.
  • Business letters and emails
  • Advertisements, notices and official publications
  • Any document which solicits money or other property for the benefit of the SCIO
  • Promissory notes, endorsements and orders for money or goods
  • Bills rendered
  • Invoices, receipts and letters of credit
  • Statements of account prepared in accordance with either regulation 8, 9 or 14 of the Charities Accounts (Scotland) Regulations 2006 (as amended)
  • Educational or campaign documentation
  • Conveyances which provide for the creation, transfer, variation or extinction of an interest in land
  • Contractual documentation
  • Bills of exchange, other than cheques

It is a criminal offence for a SCIO’s charity trustees or a person acting on the SCIO’s behalf to issue or sign any of the specified documents which do not include the required information, or to authorise such actions. Any person found guilty of such an offence is liable for a fine not exceeding of up to £1,000.

A SCIO can only make amendments to its constitution if a resolution is passed by more than two-thirds of its members at a general meeting. OSCR must be notified of any changes made.

Accounting requirements

All charities must prepare accounts that are compliant with the Charities Accounts (Scotland) Regulations 2006 (as amended) (the Regulations).

SCIO’s with income below £250,000 can prepare Receipts and Payments accounts, as long as their governing document permits this
MACO TPL business finance chart

SCIO’s with income above £250,000 must prepare fully accrued accounts even if their governing document permits Receipts and Payments accounts.

Dissolving a SCIO

The SCIO can’t choose to convert to another legal form and cannot seek removal from the Register other than by dissolving itself.

However, in addition to dissolving itself, a SCIO which wants its activities to carry on in another form may choose to cease its operations by either amalgamating with another SCIO or transferring its undertaking to a new SCIO.

If two or more SCIOs wish to merge, they must submit to OSCR an Application for Consent to Amalgamate.

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.