Commentary on Provisions The schedule Paragraph 4 – Ability to allow duplicate charity names as part of merger
130.When an application for charitable status is made, the key assessment is whether the applicant meets the charity test. However, under section 5 of the 2005 Act, there are also some less substantive matters which have to be satisfied in order for OSCR to be able to enter the body on the Register. Specifically, the body’s name needs to be unobjectionable and the application needs to comply with any regulations made by the Scottish Ministers about the procedure for applications.
131.The application process is of course relevant to all proposed charities. However, one subset of applications relates to charities which wish to change their legal form. The 2005 Act provides a bespoke conversion process only for charitable companies or charitable registered societies which wish to become SCIOs (see section 56 of the 2005 Act). Accordingly, if, for example, an unincorporated association or a trust decides that it wishes to benefit from the protection of limited liability status and therefore opts to become a SCIO or a charitable company, this can only be achieved by the setting up of a new charity. The existing charity then winds up in favour of that new entity.
132.When this occurs, the charity will often wish to retain the same name. Its charitable purposes and activities will usually be largely unchanged, and the outside world may not notice any difference in their dealings with the new incorporated charity. However, as noted above, section 5 of the 2005 Act prevents a charity from being registered if its name is objectionable. There are a number of different reasons which can cause a name to be considered objectionable (see paragraph 137) but the one that historically caused problems for charities changing legal form was that the name could not be the same as, or too like, the name of another charity. As such, either the existing or the new charity needed to temporarily adopt a different name until the other was removed from the Register. For example, a new charitable company had to be set up with a different name and then, once the transfer of assets to it was complete and the old charity had wound up, change its name to the name of the old unincorporated body. This required the name to be changed, with permission sought accordingly, with both OSCR and Companies House.
133.To better accommodate this process, this paragraph of the Act’s schedule makes a change to section 5 of the 2005 Act so that OSCR does not have to refuse an applicant entry to the Register on account of its name being the same as, or too close to, another charity’s name – provided that the application is being made in connection with a proposed merger with the charity concerned. This would cover the paradigm case, which is a straightforward change in legal form where an unincorporated charity winds up in favour of a new incorporated charity run by the same or mostly the same people. However, it would also cover a more complicated “true” merger situation where, for example, there is an amalgamation by two unincorporated charities which is being effected by the setting up of a new incorporated body.
134.The change made allows OSCR discretion as to how a similarity in names is dealt with and whether it should preclude registration of the applicant or not. This allows OSCR to consider the individual facts and circumstances of each case.
135.The 2005 Act (section 12) also allows a charity to ask OSCR to review another charity’s name on the basis that the names are too alike. As this is just a power, it is not removed – although a charity which is changing legal form would not of course in practice voice any objection to the name of the other body. However, OSCR’s original duty to act where it becomes aware (otherwise than via an objection from the charity concerned) of an objectionable name is moderated so that it is not required to act where the name is one that it allowed (despite being the same as, or too like, another charity) because the charity concerned was merging with the other charity. But while the duty is removed, the changes made to section 12 mean that OSCR remains entitled to act provided it is satisfied that it is no longer appropriate for the names to be the same or so alike (for example, because the planned merger has been abandoned).