Link: Case Summary Document
Citation: Office of the Scottish Charity Regulator
Acknowledgement:The Pemsel Case Foundation thanks The Australian Centre for Philanthropy and Nonprofit Studies for its contribution in the drafting of this Case Note.
This was a decision taken under section 28 of the Charities and Trustee Investment (Scotland) Act 2005 (the Act), by the Office of the Scottish Charity Regulator (OSCR). The outcome was a protection order for the assets of the Candy Kids Appeal Trust (the charity).
The charity was set up under a Trust Deed and was recognised as a Scottish charity on 1 October 1997. The charity’s purposes were:
The relief of poverty and the advancement of education by inter alia advising and assisting members of the community who are, or may be entitled to, be in receipt of state benefits to be aware of their entitlement to such benefits and to help such people with their claims wherever possible and to do all things as will properly attain the above purposes.
The charity was first brought to OSCR’s attention in June 2007 when a complaint was received alleging that the charity’s collectors were misrepresenting the charity’s purposes to the public while carrying out street collections using collection cans. OSCR established that the allegations were broadly correct.
The charity’s only means of raising funds was through ‘can collections’, but the charity trustees exercised little control over their collectors and had no written agreements or guidance in place with respect to them. It was OSCR’s view that collectors could be misleading the public as to the purpose of the charity. The labels on the collection cans carried the name of the charity ‘Candy Kids Appeal Trust’, along with the charity’s logo which is a picture of a teddy bear holding a bunch of balloons. Both of these clearly suggested that the purpose of the charity was linked to children and both were thought likely to mislead the public as to the true nature of the purposes of the charity and the activities it was engaged in.
On 3 December 2007, the OSCR issued an order under section 12(3) of the Act for the charity to change its name. The OSCR was never notified if this had been done. Then, in July 2008, the charity trustees submitted an application to OSCR for consent to wind up the charity and to transfer the £30,000 held in its bank account to a nominated charity with similar purposes. While OSCR engaged with the charity, the charity did not complete the winding up process. Since then, despite repeated attempts, the OSCR was unable to contact the last known charity trustees. Moreover, the charity appeared to have been completely inactive.
The OSCR considered that the charity trustees’ failure to complete the winding up process and failure to ensure the proper application of the charity’s assets to be breaches of charity trustees’ duties, and serious misconduct in the administration of the charity. Therefore, perceiving a need to protect the assets of the charity, on 13 February 2012 OSCR served a notice directing the Clydesdale Bank (the charity’s bank) under section 31(7) of the Act not to part with property it was holding on behalf of the charity without OSCR’s consent.
The decision may be viewed at: http://www.oscr.org.uk/media/300131/2012-02-16_section_33_report_candy_kids.pdf
Implications of this case
There were several issues of importance in this situation:
· Misleading the public in street collections;
· Failure to exercise control over street collectors and the moneys they collected;
· Failure to adopt a suitable name for the charity, which would not mislead the public;
· Failure to comply with the regulator’s directions;
· Failure to complete the winding up process, which resulted in wasting of the charity’s funds in paying rent etc without any charitable purpose being served.
Failure to comply with the winding up process will result in OSCR applying to the Court of Session to take action in respect of the misconduct and to appoint a Judicial Factor to transfer the charitable funds to another charity with similar purposes.