Solvency, or being solvent, means that your organisation has enough money to cover its financial obligations. This could include having enough to cover any debts or future payments including staff salaries, rent, and payments to suppliers.
Insolvency, or being insolvent, means that your organisation does not have enough money to be able to meet financial obligations. This would mean that your normal funds and reserves are not enough to cover outstanding debts and future payments.
A solvent SCIO can apply to OSCR to be removed from the Scottish Charity Register. Because a SCIO has to be a registered charity, removing yourself from the Register officially ends or closes the organisation.
The SCIO will need to submit an application to OSCR for dissolution and various supporting information. This will be published on the OSCR website for 28 days and then will either give consent to the application, give consent with any conditions, or refuse the application. Once the SCIO has wound up the trustees have to provide further information to OSCR before they will remove the SCIO from the register e.g. proof of the transfer of any assets and that there are no outstanding liabilities.
If a SCIO has outstanding debts of at least £1,500 then they should apply to OSCR for dissolution with various supporting information. These are the steps that will happen:
There is also a creditor led sequestration (the legal term for bankruptcy) option for any creditor or other third party if they are owed £3,000 or more by a SCIO. For example, if your SCIO rents an office space and you have fallen behind on paying rent, your landlord would be the creditor (the person or organisation you owe money to) and they can petition the sheriff court for the sequestration of a SCIO to recover the debts that are owed to them.
The creditor (or third party) must give notice to both the SCIO and OSCR before the petition is lodged and in this process the creditor can nominate the trustee in bankruptcy (usually an insolvency practitioner).
There is currently no provision to dissolve an apparently insolvent SCIO which has outstanding debts of less than £1500. Insolvent SCIOs which are in that position should seek independent advice and, if possible, come to an agreement with their creditors to settle their outstanding debts. This may then allow the SCIO to apply for a solvent dissolution.
See more guidance from OSCR on closing a SCIO