A trust is a legal arrangement where one or more ‘trustees’ are made legally responsible for holding assets. The assets – such as land, money, buildings, or shares – are placed in trust for the benefit of one or more ‘beneficiaries’.
With a trust, leases and formal contracts have to be entered into in the names of the office bearers who could be personally liable for any debts incurred. Legal proceedings can be taken out against individuals rather than the organisation.
A trust is, by its nature, a single tier body and it would be inappropriate to build into a trust deed provision for an annual general meeting, election of trustees, etc. If your steering group is considering arrangements of that kind, it would be more appropriate to use a single tier SCIO, voluntary association or company limited by guarantee as the legal structure. Find out more in Decide on a Structure and Decide on Membership.
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.
Model trust deed
You can download this model trust deed and use it as the basis for your own organisation’s constitution. Remember that your trust deed needs to be carefully drafted to reflect the aims which the trust will be pursuing in practice, and its activities.
This model reflects the features that are most commonly found in trust deeds in the charity and voluntary sector. The remainder of the trust deed is drafted in such a way as to fulfil the normal requirements for a trust seeking registration as a charity. If you are pursuing charitable status, your steering group will be limited in how far you can depart from the model. Those areas are identified in the detailed clause-by-clause commentary set out below.
Clause by clause guidance
Follow our detailed clause-by-clause commentary on the model constitution; find explanations of what the clause is there for, whether it is required by law, and information about decisions to be made between alternative possibilities.
These are additional clauses you may want to use, again modelled on the most common variants within the sector. They cover such things as:
- Appointment of trustees nominated by corporate and specified outside bodies
- Appointment and removal of trustees
In practical terms, the question of who should be appointed as a trustee where a vacancy arises is left to the discretion of the remaining trustees. However you can use the trust deed to give an element of direction in making future appointments by including a requirement to ensure they reflect certain stated principles. Some suggested provisions are included here.
Forming the Trust
You should circulate the first draft of your trust deed among the steering group so everyone has the opportunity to comment. A trust will be formed without necessarily involving the wider community. If it is felt appropriate that there should be some form of wider consultation, then it is up to your steering group to decide what form that should take. (Given that once the trust is formed, there would be no procedure for electing/re-electing trustees, it would not be particularly appropriate to hold a public meeting to elect the first trustees.)
Signing your trust deed
As and when the draft is finalised, the process of forming the trust simply involves the completion of the signing page of the trust deed, by inserting the number of pages in the document, excluding the signing page, and also the full name of the people (or bodies) named at the start of the trust deed as being the parties who are creating the trust. It should be noted that there is no need for a trustee to sign unless they are one of the people who are creating the trust.
Each of the people creating the trust should then sign on the last page of the document in the presence of one witness who should then sign opposite the signatures. Finally the signed document should be completed by inserting the place of signing (ie nearest post town), the date and the full name and address of the witness. If a corporate body is signing, you should follow the requirements in relation to the signing of a formal document which apply in relation to a body of that kind, eg in the case of a limited company, signatures of two directors, or one director plus company secretary, or one director or secretary plus witness.
Applying to OSCR
If the trust is pursuing recognition as a charity, a certified copy of the trust deed should be submitted to OSCR.
Keep a copy
Each of trustees should be given a copy of the trust deed for future reference, and a copy should also be sent to any accountant engaged by the trust.
In order to protect against the possibility of the trust deed being lost in the future, it would be advisable to register the trust deed in the Books of Council and Session. This is a public register which takes in important documents and issues official extracts; an official extract is treated as equivalent to the original signed document for legal purposes. There is a cost involved in this.