Commentary on Provisions The schedule Paragraph 9 – Removal from register: protection of assets
167.Section 19 (removal from register: protection of assets) of the 2005 Act provides that even when a body has been removed from the Register, any assets held by the body before it was removed which were raised to be used for charitable purposes are effectively “locked” for charitable uses. It has widely been taken as read that the assets must also be used for public benefit, in order to meet both pillars of the charity test (see section 7(1) of the 2005 Act). In practice, former charities are likely to continue to apply their pre-removal assets in a way which does provide such public benefit since, on the face of it, they are under a continuing obligation to apply such assets in the same way as if it were still a charity. However, section 19(1) originally referred only to assets being applied “in accordance with [the charity’s] purposes as set out in its entry in the Register immediately before its removal” so did not in terms restrict their use of the assets to charitable purposes which give rise to the provision of public as opposed to private gain. It is assumed that permitting former charities to use their assets in this way was not an intended policy intention of the 2005 Act.
168.This paragraph of the Act’s schedule makes technical changes to section 19 in order to remove any ambiguity about what former charities are able to do with their assets, so that it aligns with the charity test. Subsection (1) is replaced by 2 new subsections ((1) and (1A)), which reworks the provision to provide, in addition to existing the requirements, that former charities must apply those assets for public benefit in Scotland or elsewhere. Subsections (1B) to (1D) make provision about what is meant by public benefit for the purposes of this section, by essentially replicating section 8(1) (public benefit) of the 2005 Act in subsection (1B) and applying section 8(2) for the purpose of determining whether a body is applying its protected charitable assets for public benefit in subsections (1C) and (1D). No changes are made to what is meant by “public benefit” in either the context of registered charities or former charities.