Scottish Charitable Incorporated Organisation (SCIO)
A Scottish Charitable Incorporated Organisation (SCIO) is a legal structure available to Scottish charities. A SCIO is a corporate body that can enter into contracts, employ staff, incur debts, own property, take legal action its own name, sue and be sued. It provides a high degree of protection against personal liability for its charity trustees and provides reassurance for those entering into contracts with it. Unlike charities that choose the corporate structure of private limited companies, SCIOs are under the direct oversight of OSCR as a single regulator. SCIOs were created by the Charities and Trustee Investment (Scotland) Act 2005 as a new corporate legal form and became available in 2011.
Legal framework
Charities and Trustee Investment (Scotland) Act 2005, Chapter 7 SCIOs
The Scottish Charitable Incorporated Organisations Regulations 2011
Key Features
The key features of a SCIO are as follows:
- SCIOs have legal personality and can therefore hold property and enter into contracts, unlike unincorporated associations
- members of a SCIO typically have limited liability for the charity’s debts (except in cases of misconduct or gross negligence)
- unlike charitable companies, which are subject to both OSCR and Companies House regulations, SCIOs report only to OSCR.
- SCIOs must, ike all Scottish charities, submit annual accounts, a Trustees’ Annual Report, and an annual return to OSCR
Constitution
SCIOs must adopt a constitution approved by OSCR, outlining their charitable purposes, governance, and membership structure. The regulations also require a number of compulsory features and topics that must be included in the constitution.
OSCR - Full details of constitutional requirements
SCIOs can be established as either:
- Single-tier SCIOs, where the charity trustees are the only members
- Two-tier SCIOs, with a wider membership that appoints the trustees and has other powers
Membership structures are explained well in this Factsheet .pdf produced by Edinburgh Voluntary Organisation Council (EVOC)
Formation and process
To form a SCIO, an organisation must apply directly to OSCR. The application must include:
- proposed name of the SCIO
- details of the proposed SCIO's principal office and principal contact person
- the proposed SCIO constitution
- details of the charity trustees
- a statement outlining the SCIO’s proposed activities
- details of any conditions the proposed SCIO will place on accessing the benefits it will provide in order to pass the Charity Test
Full details of the OSCR process to register as a SCIO are available here.
Advantages
The SCIO legal form is designed with charities in mind, unlike company law structures
Advantages over unincorporated charities
- Convenience of corporate personality and permanent succession
- Protection from personal liability
Advantages over charitable companies
- Single regulator
- Simpler and less prescriptive legislation
- Reduced maintenance costs
Disadvantages
Compared with unincorporated charities
- Additional duties for SCIO charity trustees and members
Over charitable companies
- Less well recognised, understood and trusted
- Corpus of case law and legal precedent still in infancy
- Not suitable for single member bodies
Generally
- Less flexibility for mergers, amalgamations, transfers etc
- Removal of charitable status enforces dissolution
- Lack of recognition outwith Scotland (important to consider to international charities)
- Dissolution of a SCIO must be handled under specific OSCR procedures, which can be more complex than for other entities
- On dissolution the organisations ceases to exist – the SCIO status is wholly dependent on the organisation holding charitable status
Transition from other structures
Existing charities can convert to a SCIO structure, subject to OSCR’s processes and approval. The process involves submitting appropriate applications relating to the chairty’s existing legal form.. Once approved, the original charity is effectively re-registered by OSCR as a SCIO and will change its charity number.
Dissolution and removal from the charity register
A SCIO must apply to OSCR to be removed from the Scottish Charity Register, and on completion of a process dissolve itself, by making an application for a solvent or an insolvent dissolution under the Dissolution Regulations.
Further information from OSCR on the end of the life of a SCIO.
Further resources and links
OSCR – SCIOs a guide
OSCR – SCIOs a guide (downloadable .pdf)
For further free, well-informed information, find your local Third Sector Interface (TSI) at the directory page here