Scottish charity law: consultation analysis

Section 3

Criteria for automatic disqualification of charity trustees and individuals employed in senior management positions in charities

Context

Recent changes to the charity legislation for England and Wales have extended disqualification criteria for charity trustees and senior employees, to include the following:

• Unspent convictions for perjury, perverting the course of justice, misconduct in public office, contempt of court and specified bribery, terrorism and money laundering offences.
• Individuals subject to terrorist asset freezing orders.
• Disobedience of specified Charity Commission orders.
• Individuals subject to notification requirements of Part 2 Sexual Offences Act 2003 (on the Sex Offenders register).

To ensure criteria in Scotland are fit for purpose, the option proposed is to extend the criteria for disqualification to ensure parity with legislation in England and Wales, with the provision that individuals could still apply to OSCR for a waiver from disqualification as the law currently allows.

Table 13: Question 8

Should the criteria for disqualification and removal of charity trustees be extended to match the criteria in England and Wales?

	Yes	No	Not Answered	Total
Individuals	86%	9%	5%	127
Charity Sector	84%	2%	15%	164
Other	75%	6%	19%	16
Total	84%	5%	11%	307

Note: Percentages have been rounded therefore percentage totals may not equal 100%.

The vast majority of respondents SUPPORTED plans to extend the criteria for disqualification and removal of charity trustees in Scotland to match the criteria in England and Wales (84%).  

There was strongest support among individuals and charity sector respondent sub-groups.  Within the charity sector, support was strongest among local and national charities and membership/professional bodies.

Only 5% of respondents DID NOT SUPPORT plans to extend the criteria for disqualification and removal of charity trustees in Scotland.

Table 14: Question 9

Should the criteria for disqualification and removal also be extended to those in certain senior management positions?

	Yes	No	Not Answered	Total
Individuals	87%	9%	4%	127
Charity Sector	74%	10%	16%	164
Other	63%	13%	25%	16
Total	79%	9%	11%	307

Note: Percentages have been rounded therefore percentage totals may not equal 100%.

79% respondents SUPPORTED plans to extend the criteria for disqualification and removal to those in senior management positions.  Support was strongest among the individuals sup-group.  Within the charity sector, support was strongest among national charities, followed by local charities.

9% of respondents DID NOT SUPPORT the proposal to extend the criteria for disqualification and removal to those in senior management positions.  Within the charity sector, membership/professional bodies were more likely to not support this proposal.

The final question in Section 3 invited comments to Question 8 and Question 9.

Note: The feedback was not specific to any question, and as such, the following presents our overall analysis of the comments provided.

Where respondents expressed support for the proposals, the feedback considered the following points:

• The proposals to extend criteria made sense, that the additional criteria was reasonable and comprehensive, and that it was aimed at excluding those whose behaviour was unfit for leading a charity.  Some added that the list should be subject to future review and addition if required.
• It was generally reported that it made sense to bring Scotland in line with equivalent legislation for England and Wales.  Aiding consistency between different jurisdictions and creating a “level playing field” was reported to make sense on a number of levels.  Firstly, for charities that operated cross-border or were UK-wide it was reported that this would remove inconsistencies and provide better protection for charities across Great Britain (GB).  

The importance of making sure that a disbarred trustee of one charity was not able to take up a leadership position within another was considered important.  It was also reported that this would help avoid any doubt or confusion by the public, and increase trustee understanding of what was expected of them, their legal and regulatory responsibilities, etc. 

• Trustees and senior managers were said to hold positions of public trust – roles that demanded high levels of professional behaviour, given that they have significant power and control over a charity and its finances.  Feedback was that all positions of responsibility must be included in any extension to criteria for disqualification and removal.  It was considered highly appropriate that trustees and senior managers should be able to demonstrate that they were fit and proper and were of good character (properly vetted).  It therefore made sense that both were held to the same high standards. 

Wider feedback from some respondents included:

• The extension of criteria would afford greater transparency, professionalism and integrity across the charity sector by adopting higher standards of governance.
• It would also help maintain and increase public confidence and trust in the governance, administration and behaviour of those involved in running and managing charities.
• It would protect charities from the risk of abuse.

Wider considerations reported by many respondents included a need to:

• Define what was meant by “certain senior management roles” prior to any legislation being passed, as it was considered too vague.  For example, would it be restricted to the Chief Executive or Chief Financial Officer?  
• Define what the term means for small charities with few/no paid staff. 
  For example, it was reported that not all small charities had a Chief Executive, or more than one member of staff might play a role in the
  day-to-day running of the charity, or that not all small charities had paid staff.  A suggestion proposed included consideration of the nature of the role or function rather than specific job titles.  The Charity Commission for England and Wales published a diagram for charities to identify restricted positions in its guidance, and it was suggested that a similar document be produced by OSCR to assist charities in identifying applicable positions.
• Consider the implications that such rigid criteria might have, for example,
  on ex-offenders recruited by charities as staff or trustees.  Here, some respondents felt that a balance needed to be struck between supporting those with criminal convictions to gain meaningful volunteering and employment opportunities, while simultaneously protecting the reputation
  of a charity.  An extension of criteria could “deprive charities of valuable
  lived experience”.

In addition, the following points were raised by a few respondents:

• Some felt that enforceability by OSCR would be difficult when the senior management post holder was not a trustee.
• It was reported that the disqualification/removal of those in senior management positions should only follow (or accompany) the disqualification/removal of trustees – “It is trustees who carry the primary duties and responsibilities for their charity, and it is therefore trustees who must be the first to be disqualified or removed”.
• That care would need to be taken to ensure that any power to disqualify a senior manager (i.e. giving OSCR the power to dismiss them from their employment) could not be construed as OSCR acting as the trustee of a particular charity.
• There would need to be clear processes for investigation of any potential disqualification, an opportunity to appeal any such decision, and consideration of the time lapse between the original conduct and consideration of disqualification.
• There must be clear and open criteria for waivers/dispensation from disqualification (and associated guidance provided to the sector), use of any powers of removal on a case-by-case basis, and any decision to disqualify should be made proportionately, and the public reassured that OSCR had applied the correct safeguards.
• There should be a time limit for disqualification, variable depending on circumstance (similar to the approach adopted by Companies House).
• Further clarity was said to be required around the following: whether the plan proposed retrospective action; whether the rules would apply to those acting on a temporary basis; and whether trustees or senior managers would be required to repay any expenses, benefits, remuneration or the value of benefits in kind received from the charity during the time when they were acting while disqualified.
• That extension of disqualification criteria for charity trustees might deter potential candidates from applying.
• That there would require to be further consultation once proposals have been worked up in more detail.

Where respondents were not supportive of the proposals a variety of views were provided.  

It should be noted that while these respondents answered “No” to the proposals, a few expressed broad support for the plans or felt that some extension of automatic disqualification might be appropriate. 

The main feedback from respondents who did not support the proposals related to charities working in sensitive areas (e.g. ex-offenders).  Here, it was reported that such charities might want to include ex-offenders as trustees on their board.  Wider feedback was around the ability of those with a criminal record to change/be rehabilitated, and that many convictions might not make an individual unsuitable to be a trustee.

Wider feedback was that making changes simply because the criteria in Scotland did not match that in England and Wales was not an appropriate justification for change.  For some, it was felt that more detail would be required to set the parameters of the proposed alignment and/or to make an informed decision.  

Other points raised by a few respondents were that: 

• The proposal did not define what was meant by “certain senior management roles” or consider the make-up of the charity sector in Scotland (mostly small and medium organisations, including many led by volunteers), and that any proposal to extend criteria to senior management posts should be dealt with by individual charity boards.
• A more suitable focus of OSCR would be to ensure charities and trustees had the correct policies and procedures in place and were aware of their responsibilities.