Ministerial direction or control
Summary
If an organisation’s governing document says that government Ministers can control what the organisation does or tell it what to do, then usually that organisation cannot be a charity, even if it has charitable purposes and provides public benefit.
This applies to both Scottish and UK Ministers, but Scottish Ministers may disapply this exception (see full detail).
The 2005 Act says that an organisation can’t be a charity if its governing document allows government Ministers to control, direct or stop it from carrying out its activities. This means Scottish or UK Ministers cannot instruct or order the organisation to do something which the organisation must then obey.
When looking at the powers that a governing document gives Ministers, we will consider whether, taken as a whole, it allows Ministers to direct or control the organisation’s activities. In particular:
- How important or central to the organisation’s overall activities are the functions that Ministers can control?
- Can Ministers take the initiative in making an organisation do something, or can they merely react to a request from the organisation or a third party?
- Can the Ministers use their powers whenever and however they wish, or are there limits to this?
The more important, active and open-ended the powers given to Ministers are, the more likely they are to be a problem for the organisation’s charitable status. If the powers in the governing document allow a Minister to actively control the organisation in important ways so that the organisation is not independent, then the organisation is likely to fail the charity test.
This part of the charity test applies only to powers given to government Ministers in an organisation’s governing document. It does not apply to:
- powers a governing document may give to local authorities or other organisations
- other arrangements, such as contracts or service-level agreements with any organisation.
It is open to charities to enter into contracts or agreements with government Ministers, though charity trustees must make sure that they are acting in the interests of the charity when doing so.
Note:
The 2005 Act allows Scottish Ministers to disapply this exception for a particular organisation by making an order in the Scottish Parliament. They have done so in a number of cases, for example in relation to colleges of further education.
Case 1: we removed an organisation from the Register as Ministers clearly had powers of direction
Summary:
An organisation, which had been recognised as a charity under previous law, had a governing document that said:
- Scottish Ministers could issue directions to the organisation, and
- the organisation had to comply with those directions.
Considerations:
The organisation’s governing document clearly gave Scottish Ministers the power to direct its activities, and there was no limit on how and when they could do so. There was no prospect of changing the governing document.
Outcome:
We considered that the governing document allowed Ministers to direct the charity’s activities. We removed the charity from the Scottish Charity Register.
Case 2: Ministers disapplied part of the charity test to keep a charity on the Register
Summary:
A different organisation had a very similar governing document to the organisation listed in Case 1. Ministers could remove the charity’s trustees whenever they wished, and the charity had to seek consent for certain financial transactions.
Considerations:
We considered that the organisation’s governing document would give Ministers the power to control the charity’s activities, and that could therefore not be registered as a charity. However, Ministers made an order to disapply this part of the charity test, as the law allows them to do.
Outcome:
The organisation continues to be registered as a charity.
Case 3: we decided that Ministers did not control a charity’s activities
Summary:
A UK-wide organisation applied for charitable status in Scotland. Its governing document gave UK Ministers a number of powers over the organisation.
Considerations:
We considered the powers the governing document gave Ministers. For instance, Ministers could direct the organisation to make reports and proposals in certain circumstances, and the organisation had to ask Ministers’ consent to borrow or invest some of its funds. However, the organisation was funded by contributions from bodies which benefited from its activities, and its governing document gave those other bodies considerable influence in how the organisation was run. Looking at the whole picture of how the organisation’s governing document worked, we felt that the influence of these other bodies meant that Ministers’ ability to control or direct the organisation’s activities was limited.
Outcome:
We considered that the governing document did not allow Ministers to control the organisation’s activities. The organisation passed the charity test, and the application to become a charity was successful.