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Unincorporated Charitable trust

An unincorporated Charitable Trust is a simple structure consisting of a collection of individuals who have come together with shared charitable aims or purposes – commonly relating to the protection and management of money or property (that is specific assets).

This structure is not a democratic one. The Trustees are usually the only members and decision making rests entirely with them. Trustees choose other Trustees - effectively making it a ‘closed shop’. Once they are appointed, the Trustees of a Charitable Trust usually have an unlimited term of office  - they do not have to stand for re-election and can basically hold their offices until they resign (or die).

By its very nature a Charitable Trust only exists as a charity registered with the Office of the Scottish Charity Regulator (OSCR). It will therefore need to pass the two-part Charity Test demonstrating that its purposes are charitable and that its activities/services provide community benefit. The running of the Charitable Trust will be regulated by OSCR with reference to The Charities and Trustee Investment (Scotland) Act 2005.

Advantages to being a Charitable Trust 

  • relatively cheap to set up - although you may incur legal fees for drawing up the Trust’s constitution (called a Trust Deed or Declaration of Trust)
  • relatively cheap to run 
  • shares the advantages of being a registered charity

Disadvantages of being a Charitable Trust

  • not a democratic structure   - this may make it difficult to access some funding streams
  • cannot sign legal contracts in name of group – this means that any lease documents, rental agreements, hire contracts, funding contracts etc will need to be in the name of one (or more) of the individual Trustees.
  • trustees face unlimited personal liability for losses resulting from actions in breach of the Trust. 
  • if the Trust is small - statutory reporting duties and Trustee responsibilities relating to charitable status may outweigh advantages 
  • can be inflexible and not necessarily future-proof - once a Trust has been set up the legal structure can be difficult to change.

Most suitable for:

An Unincorporated Trust may be the best option if your group:-

  • aims to hold property or money ‘in trust’ for a specific purpose
  • does not consider the lack of democratic accountability a problem

Not to be confused with 'Development Trust'

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Last Updated 06/03/2014 10:48

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