This note was prepared in consultation with the Scottish Charities Office and the Inland Revenue and attempts to give some very general guidance on charity law as it applies to unions in Scotland. Students' unions should seek their own legal advice as appropriate. The note supersedes the Lord Advocate's statement of 20 October 1983 on expenditure by students' unions. Institutions should not, however, assume that referring to this guidance will fulfil the requirements of Section 22(4) although it will no doubt be of assistance in meeting the obligation.

Provision for the regulation of charities is made in Part 1 of the Law Reform (Miscellaneous Provisions) (Scotland) Act 1990 and associated regulations. An index of all recognised bodies is maintained by the Inland Revenue.

The Lord Advocate's powers under the 1990 Act are exercised on his behalf by the Scottish Charities Office which is a division of the Crown Office. Under this Act, Scottish charities must produce annual accounts and provide these and a statement of their charitable purposes to members of the public on request. The Act also gives the Lord Advocate various powers to make enquiries about Scottish charities and to carry out investigations into alleged misconduct or management. The Lord Advocate has the power under this Act to suspend persons concerned in the management or control of Scottish charities and where necessary to seek further remedies in court to protect or secure a proper application of a charity's property.

A students' union could also be a public trust. A trust is regarded as public if it confers a beneficial interest on the public or a section of the public. Any purpose which is regarded as charitable under the Scottish common law definition (ie not the tax definition) will be public. There may therefore be some unions which have not applied for income tax relief but nonetheless would be regarded as public trusts because they are established for charitable purposes. These bodies would not be subject to the 1990 Act but they would be required to comply with the general requirements of trust law.

Trustees, in particular, must not place themselves in a situation where their interests as individuals conflict with their duties as trustees. They are not allowed to enter into engagements in which they have or can have a personal interest conflicting with the interests of those whom they are bound to protect. Profits must not be made by trustees out of their office unless this is authorised by the constitution or agreed to by those who benefit from the charity.

The law also requires that trustees must act with a due measure of prudence and diligence in the administration of the trust. In office, trustees are bound to exercise the same diligence that a person of ordinary prudence would exercise in the management of his own affairs. Trustees are guilty of negligence if they are found to have administered funds without the required degree of care. The officers responsible may be made to repay any money lost through their negligence.

The fact that a union is a charity does not restrict students from participating in any particular range of activities. It only prevents the use of the union funds for purposes which are outside the objects of the charity. There is no objection to students joining together to collect their own funds for any purposes for which union funds cannot be used.

Some examples of activities that are permissible for charities are given in the following paragraphs. The position of unions that are not recognised charities will depend on the terms of their constitutions. In cases of doubt over whether any proposed expenditure is within the Union's objects, union officers should ask the institution or seek their own legal advice. The costs of taking such advice can properly be paid out of the funds of charities.

A union's own facilities (such as vehicles, audio equipment or rooms where the union is the legal owner) can be lent or hired out to students as a means of assisting students at the institution. However, the union must charge a proper commercial rate if the facilities are hired to non-students or for any other use outside the union's own purposes.

By contrast, union funds cannot be used to promote or support campaigns on matters which may be of general interest or concern but which do not affect members of the union as students. Examples would be industrial disputes, general campaigning on environmental matters, eg environmental policies and road building, or the treatment of political prisoners in a foreign country. A students' union cannot, for instance, pay for coaches to transport students to demonstrations on such issues.

Funds also cannot be used to participate in party political demonstrations, or to persuade members of the public to vote for or against a particular candidate or party in local or national elections or in elections to the European Parliament. By contrast, reasonable expenditure on debating matters of common concern is permissible.

Even where an issue is one which affects students as such, the connection must be sufficiently close to justify any expenditure which the union incurs. Officers need to consider carefully whether the amount being spent is reasonable (a) in relation to any benefit to students which may be expected, and (b) in relation to the financial resources of the union and its other commitments.

If factual information is put forward as part of a campaign which the union can properly support, officers of the union must take care that it is accurate and is not distorted in any way.

A students' union can affiliate to a campaigning alliance, even if the alliance includes non-charitable organisations. But the issues on which the alliance is campaigning must be of a kind which the union could campaign for directly itself. Otherwise a students' union or any club or society (including a political club) can only affiliate to particular campaigns or external organisations for the purpose of obtaining educational material or information which will assist in the discussion and expression of views. Any affiliation fee must be reasonable, and the test of reasonableness will be similar to that mentioned in paragraph 19.

Further guidance on charity law in Scotland can be obtained from the Scottish Office Home Department.

Section 22 of the Act requires the governing bodies of further and higher education institutions to take such steps as are reasonably practicable to secure that the students' union at their institution operates in a fair and democratic manner and is accountable for its finances. This includes seeing that the following happens:

(a) the union has a written constitution which is subject to the approval of the governing body and reviewed by that body at intervals of not more than 5 years;

(b) a student has the right to choose whether to be a member of the union or be represented by it - a student who opts out of membership should not be unfairly disadvantaged in the provision of services or otherwise;

(c) appointment to major union offices should be by secret ballot in which all union members are entitled to vote and that such elections are fairly and properly conducted;

(d) no-one should serve as a sabbatical or paid elected union officer at the institution for more than 2 years;

(e) the financial affairs of the union are properly conducted, with institutional approval of the union's budget and the monitoring of its expenditure;

(f) a financial report of the union is published at least every year and made available to the governing body and to all students - the report should include details of donations to external organisations;

(g) the procedure for allocating resources to groups or clubs is fair, written down and accessible to all students;

(h) details of affiliations to external organisations and their costs should be publicised to students and members of the governing body (the Act also specifies a procedure for review of affiliations);

(i) a complaints procedure is available to students where they are dissatisfied in their dealings with the union or claim to be unfairly disadvantaged by not being a member.

The governing body is required to maintain a code of practice indicating how the above requirements are to be met and the arrangements made to secure their observance. This should be drawn to the attention of all students at least once a year together with any restrictions imposed on the activities of the union by the law relating to charities.

In addition, the governing body is required at least once a year to bring to the attention of all students (and would-be students) the right not to be a member of the union or to be represented by it. It must also provide details of any arrangements made for the provision of services to non-union members which are normally provided by the union.

Further information on the Education Act 1994 can be obtained from the Scottish Office Education and Industry Department.