A trust is usually set up where assets (eg property, investments) are given by one person (the Donor) to another (the Trustees) with the intention that is should be applied for the benefit of a third party or the public (the Beneficiary). Once this occurs, the trustees own the asset, but can only apply it in accordance with the trust for the benefit of the beneficiaries.
A trust is not regulated by an external regulator (unless it is a charity), but is subject to various legislation, eg Trusts (Scotland) Acts 1921 and 1961 If it is charitable it will be subject to charity law and regulated by OSCR.
If you are considering setting up as a Trust and are planning to apply for charitable status, why not consider setting up as a single-tier Scottish Charitable Incorporated Organisation? This is a corporate body which provides limited liability for its trustees and is suitable for organisations that want to become charities, but do not want or need the complex structure of company law.
|Little or no set up costs.||Although the law gives greater recognition to the trust (as compared with a voluntary association) as having some form of identity , it is still not a full legal “entity” in the way that a SCIO or company limited by guarantee is.|
|Less administration than a voluntary association, SCIO, company limited by guarantee or IPS, since there is no register of members to maintain, no collection of subscriptions, etc.||Leases/formal contracts have to be entered into in names of trustees. Each time one of these individuals leaves, the assets must be legally transferred to another. The same goes for any legal arrangements the trust has entered into in this way.|
|No formal registration requirements unless a charity, which will be accountable to OSCR.||Legal proceedings cannot be taken by the trust but only by individuals representing it. Similarly, legal proceedings would be taken out against individuals rather than the organisation.|
|No detailed statutory procedures to be followed in relation to members’ meetings, etc.||Trustees could be personally liable for debts if the organisation were unable to meet its debts and liabilities out of its own resources.|
|Useful if you want to retain control amongst a small body of people with no external membership.||There is no concept of accountability to a wider membership or to partner bodies/agencies. In particular a trust could not hold meaningful AGMs since no one other than the trustees themselves would have voting rights.|
|No requirement to notify changes in trustees to any public register nor any requirement to file accounts unless a charity.||Could be seen as “less professional” in the eyes of potential funders.|
|Likely to be less intimidating than a company limited by guarantee or IPS for those considering whether to participate in decision making.|
How is it governed?
A trust is usually created by a document known as a deed. If a charity, the trust deed must be approved by OSCR.
You may choose to set up a trust and register as a Scottish charity if the trust meets the criteria for being a charity. Equally, you can set up a trust without seeking charitable status.
Does it have a legal status, distinct from those who run it?
No. It’s an unincorporated body and those running it, the trustees, have personal liability for its debts and obligations. Trustees must undertake transactions on behalf of the body. Title to land and buildings must be held in the name of one or more individuals on behalf of the charity. Charity trustees may have personal liability for the charity’s actions and unlimited liability when it is wound up.
Find detailed information on how to write a constitution for a trust, with model trust deed and clause by clause guidance.