Disqualification from being charity trustee etc.
Section 4 – Disqualification: offences
20.Under section 69 of the 2005 Act, various persons are automatically disqualified from acting as a charity trustee (though it is possible to obtain a waiver at OSCR’s discretion). Prior to this Act, the disqualification criteria consisted broadly of the following—
conviction for an offence of dishonesty or for an offence under the 2005 Act,
being an undischarged bankrupt,
having been removed (or treated as having been removed) from office under section 34 of the 2005 Act or its predecessor legislation,
having been removed from office as a charity trustee on the grounds of misconduct under the law of England and Wales,
being subject to a director disqualification order or undertaking anywhere in the UK.
21.This section of the Act expands the disqualification criteria substantially in relation to criminal offences. The first bullet point listed in the paragraph above instead becomes, essentially, conviction for an offence of dishonesty or for an offence specified in inserted section 69A. In turn, an offence under the 2005 Act is moved to the new list in inserted section 69A so there is no change to the substance in that regard. However, a number of additional offences are listed in this new section as well. Some of these might previously have been captured by dint of being an offence involving dishonesty, but some will be captured for the first time.
22.The newly listed offences cover terrorism, money laundering, bribery, perverting the course of justice and a public official being derelict in their duty. The list also covers an offence under section 77 of the Charities Act 2011 which is, broadly speaking, the offence of contravening an order which was made under section 76 of that Act for the purpose of protecting charitable property (for example, an order to a person not to part with property without the approval of the Charity Commission for England and Wales).
23.Superseded offences are captured by the list too, as is aiding, abetting, counselling, procuring or inciting the commission of any of the listed offences. Similarly, attempted offences and conspiracy to commit an offence is captured also.
24.However, as with the original disqualification criteria, it will continue to be possible for a person to apply to OSCR for a waiver where the disqualification relates to the criteria being added by this section of the Act in just the same way as applied under the 2005 Act previously.
25.The Scottish Ministers are given a power to amend this new section 69A by adding or removing an offence. The use of this power would be subject to parliamentary approval by affirmative procedure.
26.Finally, a minor adjustment is made to section 69(3) of the 2005 Act. That section provides that a person is not disqualified if a conviction is spent for the purposes of the Rehabilitation of Offenders Act 1974. The change made by subsection (2)(b) of this section of the Act simply clarifies that in the case of spent convictions, the person is not disqualified by reason of the spent conviction (i.e. implicitly recognising that it is still possible that they may be disqualified separately on other grounds).
Section 5 – Disqualification: other cases
27.This section makes further modifications to the disqualification criteria, beyond the expansion relating to criminal offences already covered by section 4 of the Act (see paragraphs 20 to 25 of these notes).
28.Section 69(2)(b) of the 2005 Act is expanded to cover not just being an undischarged bankrupt but also being subject to various other bankruptcy-related measures. Specifically, this paragraph (as read with the definitions inserted into section 70) now also covers—
being subject to a bankruptcy restrictions order, interim order or undertaking (which is where the period for which a person is subject to restrictions is extended because of dishonest or blameworthy behaviour before or after their bankruptcy),
being subject to a debt relief restrictions order, interim order or undertaking (which is similar but applies in the context of a debt relief order),
being subject to a moratorium period under a debt relief order (which is a process which does not apply in Scotland but is broadly the equivalent of minimal asset bankruptcy in Scotland).
29.Section 69(2)(d) of the 2005 Act is refined to take account of changes to charity legislation in England and Wales. It continues to be the case that it covers a person who has been removed by an order made by the Charity Commission for England and Wales, but the provision is updated to take account of changes to the location and basis of the removal power. More substantively, it is also extended to cover removal not just as a charity trustee but also removal as an officer, agent or employee. As in the 2005 Act originally, removal under predecessor legislation also continues to be covered, but the detail of this is now moved to section 70 along with the definition of the removal order itself.
30.A new section 69(2)(da) is also inserted into the 2005 Act to cover the equivalent removal process under the law of Northern Ireland (as now defined in section 70). However, as at the date of publication of these notes (August 2023), the Northern Irish process does not provide for the possibility of removal as an officer, agent or employee.
31.In addition, new section 69(2)(db) provides that a person who is subject to an order in England and Wales barring them from being a charity trustee there in respect of any charity is disqualified in Scotland as well. The circumstances in which such an order can be issued include where the person has been convicted of certain offences abroad, where HM Revenue and Customs has found the person not to be a fit and proper person, or where the person’s conduct is damaging to public trust in charities. While the provision here only covers an order which applies without limitation in England and Wales, provision is made elsewhere dealing with an order which is more restrictive (see paragraph 33 of these notes).
32.The existing disqualification criteria are also extended in new paragraphs (f) to (i) to cover broadly the following—
having been found in contempt of court in England and Wales,
having being found by the court to have disobeyed an order or direction of the Charity Commission for England and Wales (see section 336 of the Charities Act 2011) or the Charity Commission for Northern Ireland (see section 174 of the Charities Act (Northern Ireland) 2008),
being a designated person under terrorist asset freezing orders,
being subject to notification requirements under Part 2 of the Sexual Offences Act 2009.
33.Finally, at new section 69(2A) of the 2005 Act, provision is made disqualifying a person from being a charity trustee in relation to a specific named charity, or type of charity, if they are barred from being a charity trustee in respect of that charity or type of charity in England and Wales. The types of reasons that such orders can be granted are set out at paragraph 31 of these notes. However, unlike the rules in section 69(2), section 69(2A) does not disqualify a person in respect of all charities; instead, the disqualification is tailored to cover only those charities covered by the order in England and Wales. Where the disqualification is in respect of a named charity only, that will be relevant in Scotland only if it is a cross-border charity.
34.Again, as with the original disqualification criteria, it will continue to be possible for a person to apply to OSCR for a waiver where the disqualification relates to the criteria being added by this section of the Act in just the same way as applied under the 2005 Act originally. A minor consequential amendment is made to ensure that the ability to apply for a waiver covers new subsection (2A) as well as subsection (2) as amended.
35.Further, a person who would otherwise be disqualified by reason of a contempt of court finding will not be disqualified for that reason if, had their conduct been dealt with as an offence instead, the sentence they received was such that the offence would now be considered to be spent under the Rehabilitation of Offenders Act 1974.
36.The Scottish Ministers are then given a power to amend section 69 of the 2005 Act by adding or removing a person or description of person. This power can also be used to amend the related definitions in section 70 – either in consequence of section 69 being amended or not. The latter option would allow, for example, the definition of “undischarged bankrupt” to be updated even though that would not necessitate a change to the list in section 69. The use of this power would be subject to parliamentary approval by affirmative procedure.
Section 6 – Disqualification: senior management functions
37.Originally, the disqualification criteria set out at paragraph 20 of these notes applied only to charity trustees. Charity trustees are the persons who have the general control and management of the administration of a charity. For example, in a charitable company, this will usually be the company directors, while in a charitable trust this will usually be the trustees.
38.This section of the Act inserts a new section 69B into the 2005 Act which extends the disqualification rules to individuals holding office or employment with senior management functions. A senior management function is—
a management function for which the person is not accountable to anyone or is accountable only directly to charity trustees (for example, the chief executive), or
a function which involves control over money for which the person is not accountable to anyone other than another person with senior management functions but which do not relate to money (for example, a chief financial officer who is accountable in line management terms to the chief executive).
39.If a person is disqualified from acting as a charity trustee in relation to a charity (i.e. they are disqualified under section 69 and do not have a relevant waiver), they are also disqualified from having senior management functions in that charity. This disqualification applies only to the extent that trustee disqualification applies. For example, if an individual who would otherwise have been disqualified under section 69 had been granted a waiver to act as a charity trustee of any ex-offenders’ charity, that would automatically flow through and they would not be disqualified from holding senior management functions in such charities without the need to seek a further waiver.
40.By the same principle, if the disqualification arises by virtue of new section 69(2)(db) or 69(2A) (as to which, see paragraphs 31 and 33 of these notes), the disqualification from holding senior management functions only applies to the extent that the person is disqualified in England and Wales. This means that where the order in England and Wales is one which does not apply to acting as an employee at all (i.e. section 181A(5)(a) of the Charities Act 2011 is used) or the jobs or types of job which it applies are limited (i.e. section 181A(5)(b) of that Act is used), that will flow through.
41.In addition, as with the provision relating to charity trustees, it will be possible for a person to apply to OSCR for a waiver. As with the rules in relation to charity trustees, a waiver in respect of senior management functions will be able to be granted in respect of all charities, in respect of a particular type of charity, or in respect of a specific named charity only. It will also be possible to limit the waiver to specific senior management jobs or senior management functions of a particular nature.
42.If a waiver is not granted, it will be possible to seek a review (and, if desired, subsequent appeal) of that decision in exactly the same way as applies in relation to waivers for charity trustees: the consequential modification made to section 71 of the 2005 Act provides for this, while the change made to section 72 ensures that the person who sought the waiver will be notified of the decision in relation to it.
43.It is an offence under the 2005 Act to act as a charity trustee when disqualified from doing so. This rule in section 70(1) of the 2005 Act is extended by the Act so that it is similarly an offence for a person to hold office or employment with senior management functions when disqualified from doing so. As with charity trustees, the penalty on conviction is—
on summary conviction, imprisonment for a period of up to 6 months or a fine up to level 5 on the standard scale (£5,000 as at August 2023, as specified by section 225 of the Criminal Procedure (Scotland) Act 1995) or both,
on conviction on indictment, imprisonment for a period of up to 2 years or an unlimited fine or both.
44.In addition, where a person acts as a charity trustee despite being disqualified from doing so, section 70(2) of the 2005 Act makes provision to ensure that the acts carried out by the charity during the period of that person’s appointment are not invalidated by reason of the disqualification. This rule is also now extended by the Act to cover a person who carried out senior management functions despite being disqualified from doing so.
Section 7 – Record of persons removed from office
45.Under section 34(5)(e) of the 2005 Act, the Court of Session can remove a person from office as a charity trustee in certain circumstances. A person can also be removed from being concerned in the management or control of a body which is controlled by a charity, or from a body which has been misrepresenting itself as a charity. In addition, under section 34(5)(ea) of the 2005 Act, the Court of Session can make an order under which the person is treated as having been removed from a role despite not actually being so removed (for example, because the person resigned in an effort to stave off further proceedings).
46.These orders can be granted where—
there is or has been misconduct in the administration of a charity or a body controlled by a charity,
it is necessary or desirable to act for the purpose of protecting a charity’s property or securing a proper application of that property for its purposes, or
a body which is not a charity has been misrepresenting itself as being one.
47.Beyond the immediate impact of an order for any person who is still in office at the date of granting of the order, a key consequence is that persons who are subject to a removal order or a deemed removal order under either section 34 or the predecessor legislation are automatically disqualified from being a charity trustee (see section 69(1)(c) of the 2005 Act). Such persons can be granted a waiver but the granting of a waiver is at OSCR’s discretion. Waivers can be granted so as to apply to all charities, to particular types of charity, or to a named charity only.
48.Further, under section 6 of the Act, the disqualification rules which apply to charity trustees are extended to apply to certain senior management functions. As such, having been removed from office will become relevant to whether those persons are eligible to hold certain key employment roles in charities (although the rules about waivers are extended by the Act in parallel with the extension of the disqualification criteria – see paragraph 41 of these notes).
49.Section 7 of the Act therefore introduces a requirement for OSCR to keep and maintain a record of persons who have been removed from office in the way described above. As a result of the change made to section 34 of the 2005 Act by this section of the Act, this will equally cover those who are deemed to have been removed from office.
50.Inserted section 70ZA(2) of the 2005 Act sets out the information that the record must contain. Again, when read with section 34(5)(ea) of the 2005 Act as amended by this Act, references to removal should be read (where applicable) as references to deemed removal. The information to be held on this record is otherwise self-explanatory and includes details of any partial waiver that has been granted (i.e. a waiver in respect of a particular type of charity, for a named charity only, or a waiver which relates only to holding senior management functions). In contrast, where a waiver has been granted in unrestricted terms for acting as a charity trustee of any charity, the person’s details will instead be removed from the record by virtue of inserted section 70ZA(3). OSCR will also be able to remove a record where the person has died.
51.Inserted section 70ZB of the 2005 Act provides that OSCR is not only to keep this record but is to make it publicly searchable. This will assist charities in their efforts to check whether individuals they wish to invite to become charity trustees or senior staff members are eligible to act. However, it will only provide information in relation to one aspect of the disqualification test – namely, section 69(1)(c). Other matters continue to be capable of verification by other means (including searching the Companies House register of disqualified directors, a Disclosure Scotland check relating to convictions, and searching the record of removed charity trustees provided by the Charity Commission for England and Wales).
52.The record will be searchable but will not be provided as a document which can be browsed. As such, charities will be able to carry out a search where they have a specific person whose eligibility they want to check, but it will not be possible to simply generate a list of all removed persons without already knowing their details. Provision is also made for certain information to be redacted or capable of being redacted in the interests of privacy. This includes the ability to redact the existence of an entry altogether where OSCR is satisfied (on an application made to it) that having that entry appear in search results is likely to jeopardise the safety or security of any person or premises.
53.Where such an application to redact the existence of an entry is made, changes made by this section of the Act to sections 71 and 72 of the 2005 Act mean that the decision on that application can be the subject of a request for a review (and onwards appeal). It also means that the effect of the decision is suspended pending the outcome of the review/appeal process.
54.Whilst the modifications made by this section require things to be done which involve the processing of personal data, this operates within the framework of and is consistent with UK GDPR and the Data Protection Act 2018. The provision to keep and maintain a record of persons removed from office and to make that record publicly searchable as described above creates a legal obligation for the purposes of Article 6 of the UK GDPR, which operates subject to the constraints and dispensation mechanism described above.
