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Supporting Scotland's vibrant voluntary sector

Scottish Council for Voluntary Organisations

The Scottish Council for Voluntary Organisations is the membership organisation for Scotland's charities, voluntary organisations and social enterprises. Charity registered in Scotland SC003558. Registered office Mansfield Traquair Centre, 15 Mansfield Place, Edinburgh EH3 6BB.

Choosing the right structure for your organisation

The type of structure that's right for your organisation will depend on what you're planning to do and how you're going to do it. In this section, we'll talk you through the different kinds of structures available and what kind of activities they might suit. When you've made a decision, you can read our guidance on writing a constitution and use our model constitutions and guidance to get you started.

The key points to remember are:

  • the structure is about how the charity will operate as an organisation, not what you will do
  • some public bodies may require you to be incorporated e.g. a SCIO or a company
  • a charity is not a type of structure, you need to set up an organisation and then apply to register it as a charity.

The right structure at the right time

It is possible to change your structure in the future, so you may make the decision to choose a structure that suits your organisation now with a plan to review it later. This is more straightforward for some of the structures than it is for others e.g. there is an all in one conversion process from a company that is a registered charity to change into a SCIO, but a voluntary association or a trust would need to set up and register a brand new SCIO, transfer all of their assets and then close the old charity down and lose their previous history. You may also need approval from your board, members and OSCR to make these changes.

"We originally just wanted to be a group of friends who hired a workshop. Nobody wanted to be responsible for huge amounts of accounting. But I felt that legally we needed more structure than that, plus I very much want to draw other people in. Because I think what we do is good for the community. So we discussed it all, read all the information, and settled on the voluntary organisation – for the moment."

Anne Muir, The Bird Box Community Workshop

Incorporated or unincorporated organisations

Choosing whether your organisation is incorporated or unincorporated is partly about how you want to manage any risk.

Being incorporated means your organisation is a recognised legal entity which is separate from the people who run it. It means contracts can be in the name of the organisation, and it can directly employ staff. However, it does mean that if you choose to set up as a Company you will have to report to both OSCR and Companies House and follow two different laws: charity and company law. If you choose to set up as a SCIO than you can’t be anything other than a SCIO.

If you are unincorporated, any contracts or financial agreements will probably need to be made in the name of one of your trustees meaning that person may be individually liable for any legal problems or debts.

If you’re planning to buy premises, employ staff, raise large amounts of money, or enter significant contracts then you should consider becoming incorporated.

Available structures

Summary

Ready-made corporate structure specifically designed for charities. The Scottish Charity Regulator (OSCR) is the regulator of this legal form, not just its charitable status. Removal from the Charitable Register equals dissolution.

Charitable status and tax benefits?

Yes, cannot be anything but a charity and must meet the criteria for being a charity.

Does it have a legal identity distinct from those who run it?

Yes. A SCIO can hold property, enter into leases and employ people in its own right. Title to land and buildings will be held in the name of the SCIO (advantage in terms of succession). Members and trustee liability is limited in most cases, not liable to contribute if the SCIO is wound up.

Governance

  • Some charity trustee duties apply to members
  • Minimum of one members’ meeting every 15 months
  • Bar on transfer of membership
  • Minimum of 2 members
  • Minimum of 3 charity trustees
  • Duty to keep and supply to the public a register of charity trustees; and to keep and supply to the members a register of members

Summary

Before SCIOs the most frequently adopted corporate structure for charities. Directors manage business on behalf of members. Registered with Companies House and must comply with Company Law.

Charitable status and tax benefits?

Yes, if it meets the criteria for being a charity

Does it have a legal identity distinct from those who run it?

Yes. A Company can undertake transactions in its own right. Title to land and buildings will be held in the name of the company (advantage in terms of succession)

Members (including the Board) have limited liability (usually £1) to contribute if wound up. Offers creditor protection.

Governance

  • Defined statutory procedures for meeting, resolutions, etc.
  • Additional statutory duties on directors, which in certain cases exceed duties of charity trustees.
  • Must produce accrued accounts no matter the size of turnover.
  • Must keep up to date records of Board members and inform Companies House of changes.
  • Must keep register of members.
  • Directors liable for fines imposed for late annual returns.

Summary

Informal, no general regulation, need to make own rules. Little bureaucracy or set up costs.

Charitable status and tax benefits?

Yes, if it meets the criteria for being a charity

Does it have a legal identity distinct from those who run it?

No. Some, or all, of the trustees must undertake transactions on behalf of the body. Title to land and buildings must be held in the name of one or more individuals on behalf of the organisation. Trustees may have personal liability for organisation's actions and unlimited liability it is wound up.

Governance

Governed according to its own rules, but if a charity, the constitution must be approved by OSCR.

Summary

Best suited to small groups of people who want to manage money or property. Assets are owned by trustees and managed in the interests of beneficiaries on their behalf.

Charitable status and tax benefits?

Yes, if it meets the criteria for being a charity

Does it have a legal identity distinct from those who run it?

No. Some, or all, of the trustees must undertake transactions on behalf of the body. Title to land and buildings must be held in the name of one or more trustees. Trustees may have personal liability for the body’s actions, although there are certain protections for trustees in trust law and common law.

Governance

Governed according to its own rules, but if a charity, the trust deed must be approved by OSCR.

Other structures

Summary

Limited company structure for social enterprise with secure ‘asset lock’ and focus on community benefit. CICS are registered with and regulated by the Office of the Regulator of Community Interest Companies.

Charitable status and tax benefits?

No

Does it have a legal identity distinct from those who run it?

Yes. Members’ liability is limited to any amount unpaid on shares or liability is limited by guarantee.

Governance

The same as for other limited companies, but subject to additional regulation to ensure community benefits. Can pay limited dividends to private investors.

Summary

Halfway between a registered company and an unincorporated association. It has rules of association, yet is an incorporated body with the benefit of limited liability. Must register with the Financial Conduct Authority (FCA)

Charitable status and tax benefits?

No

Does it have a legal identity distinct from those who run it?

Yes. Members have limited liability, but without all the requirements associated with limited liability under the Companies Acts.

Co-operatives can hold property, enter into leases and employ people.

Governance

  • Defined set of rules
  • Committee/officers manage on behalf of members.
  • One member, one vote.

Co-operatives UK can provide help and support.

Summary

Halfway between a registered company and an unincorporated association. It has rules of association, yet is an incorporated body with the benefit of limited liability. Must register with the Financial Conduct Authority (FCA)

Charitable status and tax benefits?

Yes, but only if set up for the benefit of the community (not just members) and it meets the criteria for being a charity).

Does it have a legal identity distinct from those who run it?

Yes. Members have limited liability, but without all the requirements associated with limited liability under the Companies Acts.

BenComs can hold property, enter into leases and employ people.

Governance

  • Defined set of rules
  • Committee/officers manage on behalf of members.
  • One member, one vote.

A Social Enterprise is not a type of legal structure. A social enterprise exists to make a profit just like any private sector business, but their profits (or surpluses) are always reinvested into their social and environmental purposes. A social enterprise can be a registered charity as well, if it can meet the charity test. It could be any of the structures outlined above, there is no separate structure specifically for a Social Enterprise. Social Enterprise Scotland can give you further information and guidance about setting up a social enterprise.

Last modified on 13 October 2022
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