Do you qualify for disqualification?
Debbie McIlwraith Cameron on the new rules applicable to senior roles within charities
It is a criminal offence to act, or continue to act, as a charity trustee if you are disqualified under the Charities and Trustee Investment (Scotland) Act 2005 and you may be liable on conviction to imprisonment, a fine or both. With such consequences, charities must have a working knowledge of the disqualification criteria.
Existing criteria: You cannot be appointed, or continue to act, as a charity trustee if: (i) you have an unspent conviction for an offence involving dishonesty or under the 2005 Act; (ii) you are bankrupt/sequestrated; (iii) you have granted a Protected Trust Deed/entered into an Individual Voluntary Arrangement; (iv) you have been removed by a court from being a charity trustee, or (v) you have been disqualified from being a company director.
Disqualification is determined before appointment, and if a trustee’s personal circumstances change, they are under a duty to disclose this, as their appointment must automatically cease.
While you may have to rely on information provided in good faith, there are publicly available methods to carry out due diligence, e.g. OSCR’s searchable Record of Removed Persons on its website.
Exemptions: An individual may apply for a waiver from OSCR for a specific charity, a type of charity or charities in general. Each case is considered and decided on its own merits. OSCR lists the variables and supporting evidence it will consider in its guidance.
Some disqualification criteria are time-sensitive. Automatic disqualification because of a conviction, bankruptcy and a Protected Trust Deed only exists while they remain unspent and undischarged.
The changes: The implementation of the Charities (Regulation and Administration) (Scotland) Act 2023 extends disqualification criteria in two ways.
The automatic disqualification list will now include being convicted of the following offences: terrorism, money laundering, bribery, perverting the course of justice, wilful neglect of duty by a public official/misconduct in public office and sexual offences.
The key change is that the criteria will now extend to employees/volunteers holding a role with “senior management functions” within the charity, as well as charity trustees.
The 2023 Act defines “senior management function”: (i) if the function relates to the management of the charity and the individual is not accountable to anyone higher within the charity, except the charity trustees (e.g. the Chief Executive role), or (ii) if the function relates to the control of money, and the only person the individual is accountable to (except the charity trustees) is someone else exercising a senior management function other than to do with the control of money (e.g. Finance Director). In guidance published by OSCR, the regulator is clear that an individual’s role/job title is not the deciding factor; you must consider the function the individual undertakes.
Practical implications: Before the extensions are implemented later this summer, charities should undertake due diligence to ascertain whether any of the current trustees would come under the extended criteria and update any appointment/induction policies, and consider if any of their employees/volunteers carry out “senior management functions” and if they must cease to act.
Trustees may wish to add the potential consequences of automatic disqualification (e.g. loss of the Chief Executive/Finance Director, trustee numbers being below the minimum) and mitigation methods (e.g. due diligence, ability to re-deploy within the organisation) to the charity’s risk register.
If an automatic disqualification event were to occur, depending on the circumstances, it would be advisable to seek HR/employment advice.
Debbie McIlwraith Cameron is a Senior Associate, Turcan Connell