SC033287 The Rangers Charity Foundation

Report under section 33 of The Charities and Trustee Investment (Scotland) Act 2005

SC033287 The Rangers Charity Foundation _01 1. Executive summary

• OSCR has concluded its inquiry into the actions • OSCR found that although the decision was a of Rangers Charity Foundation (‘the Charity’) in breach of legal duties, it was made in good faith agreeing to forego most of its share of the and in the interests of the charity given the risk proceeds of a fundraising event in favour of The that otherwise the fundraising event might not Rangers Football Club plc (in Administration). have taken place.

• OSCR found that the Charity’s decision-making • Having looked carefully at the whole situation, process which allowed important decisions to be OSCR has not found that the ongoing risks to made by one trustee acting alone was in breach charitable assets or to the reputation of the of trustees’ duties and constituted misconduct on sector justify OSCR taking action against any of the part of the charity trustees as a whole. the trustees.

• OSCR also found that the way the decision • The inquiry has taken some time to complete, regarding the fundraising event was taken did partly due to the difficulty of obtaining not comply with the requirements of the Charity’s information from some of the parties involved in Trust Deed. a complex and fluid situation.

• OSCR identified that issues of conflict of interest • This inquiry identified a number of learning inherent in the Charity’s structure had not been points relevant to the wider charitable sector. appropriately dealt with.

SC033287 The Rangers Charity Foundation _02 2. OSCR’s regulatory interest

OSCR’s regulatory functions under the Charities entered into an Agreement with AC Milan Glorie, and Trustee Investment (Scotland) Act 2005 (‘the dated 16 January 2012, to organise and host a 2005 Act’) include encouraging, facilitating and charity dinner and friendly football match between monitoring compliance by charities and identifying Rangers Legends and AC Milan Glorie to be held and investigating apparent misconduct in the on 29 and 30 March 2012 (‘the fundraising event’). administration of charities. Misconduct in the The statements on the websites indicated that administration of a charity is defined as a breach of the Charity intended to forego most of its share the charity trustee duties set out in section 66 of the of the funds to be raised at the event in favour of 2005 Act. The Rangers Football Club plc, which had entered administration on 14 February 2012. Charity trustees are defined in the 2005 Act as the people having the general control and management The purpose of our inquiry was to determine of the charity. They have a duty under section 66 of whether the charity trustees had acted in breach the 2005 Act to act in the interests of their charity of their section 66 duties when they agreed to with the care and diligence it is reasonable to expect reduce the Charity’s share of the proceeds from the of a person who is managing the affairs of another fundraising event in favour of The Rangers Football person and to ensure that their charity acts in a Club plc. manner consistent with its purposes. We are publishing this report of the outcome of OSCR opened an inquiry into the Charity in late our inquiry to highlight learning points for the February 2012 after becoming aware of intense wider charitable sector and in response to the media interest and receiving complaints about media interest in the matter and the complaints we statements on the websites of the Charity and received. The Rangers Football Club plc. The Charity had

SC033287 The Rangers Charity Foundation _03 3. The Charity

The Charity was created by a Trust Deed executed been inactive as a charity trustee for some time by The Rangers Football Club plc dated 24 July and resigned on 4 April 2012. Trustee C left the 2002 and awarded charitable status with effect from employment of The Rangers Football Club plc on that date. 31 January 2013 but remains a charity trustee. Trustee A was removed as a director of The Rangers The Trust Deed gave The Rangers Football Club plc Football Club plc with effect from 1 June 2012. This sole power to appoint new trustees. The Trust Deed ended Trustee A’s connection with the Charity. also provided that the Chair of The Rangers Football Club plc is ex officio Chair of the Charity. This meant When it became clear in June 2012 that The that the Chair of the Charity held that position by Rangers Football Club plc was insolvent, the Charity virtue of being Chair of The Rangers Football Club took legal advice and executed a Supplementary plc. Deed in July 2012 irrevocably revoking the right of The Rangers Football Club plc to appoint trustees On 6 May 2011 The Rangers Football Club plc to the Charity and reinstating the trustees’ power to changed ownership and, as provided in the Trust appoint new trustees. Deed, the new Chair became ex officio Chair of the Charity. The Rangers Football Club plc was renamed RFC 2012 plc and entered liquidation on 31 October At the time we opened our inquiry the Charity had 2012. Since there will not be another Chair of RFC three charity trustees. Trustee A was the Chair of 2012 plc, the charity trustees themselves will in the Charity. Trustees B and C were senior employees future decide which charity trustee will be Chair. of The Rangers Football Club plc. Trustee B had

SC033287 The Rangers Charity Foundation _04 4. Findings

The fundraising event costs and satisfy their duty to creditors to derive We wrote to the Charity on 1 March 2012 requesting income from it. information and documentation relating to the Charity and the fundraising event. On 9 March Trustee C considered that assigning the Charity’s 2012 we met with Trustee C who described events interest in the Agreement to The Rangers Football around the time that the Club entered administration Club plc (in Administration) fulfilled the legal duties on 14 February 2012 as “very fluid and fast of a charity trustee because the event would still be moving”. The AC Milan Legends fundraising event able to take place and, in terms of the agreement was due to be held on 29 and 30 March 2012. reached with the Administrators, the Charity would Beneficiaries of funds raised by the fundraising still receive some benefit. Trustee C did not obtain event were to be the Charity and the AC Milan professional advice before making this decision. Foundation. As soon as The Rangers Football Club The date of the decision to assign the event was, plc entered administration, Trustee C alerted the unfortunately, not formally recorded but was made Joint Administrators to its undertaking to provide on or about 21 February 2012. full support for the fundraising event in terms of resources, including the venue to host the friendly Under the terms of the Agreement the Charity had football match and staff to support it. been due to receive up to 60% of the net profit from the fundraising event in addition to a £25,000 It was clear to Trustee C that, since the primary management fee. Mindful that if the fundraising duty of the Joint Administrators was to ensure event did not proceed the Charity would receive the creditors of The Rangers Football Club plc (In nothing, and that it had already incurred costs in Administration) were not prejudiced, use of its relation to organising the event, Trustee C agreed to resources for the fundraising event would need assign the Charity’s interest in the Agreement to The to be justified on a cost benefit basis. Trustee C Rangers Football Club plc (in Administration) on the considered there was a very real risk that the Joint agreement with the Administrators that the Charity Administrators would not permit The Rangers would receive 10% of the net profits together with Football Club plc’s resources to be used for the the management fee. fundraising event. If that happened, the fundraising event would not take place and neither the Charity The only alternative to this assignation that Trustee nor the AC Milan Foundation would benefit. C considered was cancellation. The option of the Charity paying a fee to The Rangers Football Club In Trustee C’s view unless the Joint Administrators plc (in Administration) for the use of Ibrox Stadium had control of the income from the fundraising and facilities was not explored, even though this event they were unlikely to agree to the event may have resulted in less of a reduction in income going ahead. Assigning the Charity’s interest in the to the Charity. However, a fee would have left Agreement with AC Milan Glorie (‘the Agreement’), the Charity in control of event income and this, in dated 16 January 2012, for the fundraising event Trustee C’s view, meant there would be uncertainty to The Rangers Football Club plc (in Administration) over the event taking place. would ensure the Joint Administrators would recover

SC033287 The Rangers Charity Foundation _05 Tickets for the football match were not made as an employee or as a director of The Rangers available for sale until after the assignation to The Football Club plc. If they had acted in the interests of Rangers Football Club plc (in Administration). Tickets one, they would have failed in their duty to the other. for the dinner had already gone on sale but all They could not act in the interests of both. purchasers were contacted to explain the change in circumstances and offered a refund. Charity law also provides for a very specific conflict of interest that may arise between the interests of After the assignation of the Charity’s interest in the charity and those of the person or organisation the Agreement to The Rangers Football Club plc responsible for appointing the charity trustee. (in Administration) Trustee B subsequently advised Should such a conflict arise, the law makes clear OSCR that Trustee C had afforded the utmost the charity trustee’s duty is to act in the interests scrutiny and diligence to the Charity’s affairs and of the charity. A charity trustee who is unable to that Trustee C had acted on behalf of Trustee B put the interests of the charity before those of the throughout the process. We wrote to Trustee A person or organisation responsible for appointing concerning the assignation but did not receive a them is required to disclose the conflict of interest reply. and refrain from participating in any deliberation or decision with respect to the matter in question. The event went ahead as scheduled. In addition to the management fee of £25,000, the Charity The collective duty received £38,286 as its 10% share of the net profit The 2005 Act makes clear that the duty to act in the from the fundraising event. interests of the charity and avoid conflicts of interest is not only a duty on individual charity trustees; it The legal duties of charity trustees is also the duty of their fellow charity trustees to The individual duty ensure that they do so. Section 66 of the 2005 Act places a duty on charity trustees to act in the interests of the charity. When a The relationship between the Charity and The potential conflict of interest arises, charity trustees Rangers Football Club plc must put the interests of the charity first. A charity When we met with Trustee C, the relationship trustee who is unable to do this should declare the between the Charity and The Rangers Football Club conflict and take no further part in the deliberations plc was explained to us as a “symbiotic” one. The and decision-making process about the matter. Charity was effectively seen as a department within The Rangers Football Club plc although we were Each of the three charity trustees had a relationship assured there was an awareness that the Charity with The Rangers Football Club plc either as an “worked to different rules”. The Rangers Football employee or a director of the company. This meant Club plc provided office space and other support for that any decision involving The Rangers Football the Charity. Club plc and the Charity presented the potential for a conflict of interest. When The Rangers Football The extent of the conflict of interest presented by Club plc entered administration and the fundraising the Charity’s close relationship with The Rangers event was put at risk, the potential for a conflict of Football Club plc is indicated by the following interest became real and irreconcilable because of statements that appeared on the Charity’s website the conflict between the charity trustees’ duty to act in late February 2012: in the interests of the Charity and either their duties

SC033287 The Rangers Charity Foundation _06 The Club and the Rangers fans have been each with individual responsibility for the decisions tremendous to the Foundation over the last ten of the trustees as a body. In the absence of such years and now it is our turn to stand alongside provisions in the Trust Deed, the Trusts (Scotland) them and Step Up for Rangers. Act 1921 provides that a majority of trustees is deemed to be a quorum of trustees, and this The Rangers Charity Foundation suggested the provides a quorum for the purpose of making Club should now benefit from the match and decisions and entering into contracts. we were delighted that the AC Milan Foundation agreed. Since the Charity had three charity trustees, two were required to make a quorum for decision It appears to OSCR that none of the trustee making. The difficulty for the charity trustees duties relating to conflicts of interest has been however in making any decision regarding a recognised or managed appropriately by the transaction with The Rangers Football Club plc was charity trustees. that, in terms of the provisions of the Trust Deed, all of the charity trustees had an interest. Decision making and the Charity’s Trust Deed We were told that since the change in The Rangers The Charity’s Trust Deed authorises the charity Football Club plc’s ownership in May 2011 no trustees to enter into transactions in which one charity trustee meetings had been held, and since or more of them has an interest only when at then Trustee C had been the only trustee actively least one of the charity trustees has no interest involved with the Charity. Trustee C met with the in the transaction and they have been advised by manager of the Charity on a weekly basis to ensure professional advisers competent to consider the that at least one trustee was fully aware at all times nature of such transaction that its terms are such of the current state of affairs of the Charity. as would be appropriate to a transaction between persons acting at arm’s length. Trustee C highlighted to OSCR the statements in the Charity’s 2011 and 2012 Trustees’ Annual Reports Trustee C acknowledged that in deciding to (part of the Charity’s accounts) that said all major assign the event to The Rangers Football Club decisions were made by charity trustees at periodic plc (in Administration) the requirements for one meetings or else by an individual trustee in the charity trustee not to be conflicted and to obtain interim as necessary. professional advice had not been met. The charity trustees were all connected to The Rangers Football Trustee C considered the decision to assign the Club plc and no professional advice had been Charity’s interest in the Agreement had been taken obtained before making the decision. while acting as the “individual trustee in the interim as necessary” and had informed the other charity Trustee C also acknowledged that an inherent trustees of the decision after it had been made. conflict of interest had been present since the Charity was set up because charity trustees had We have considered the statement in the Charity’s always been connected to The Rangers Football 2011 and 2012 Trustees’ Annual Reports in Club plc. It would therefore appear this provision conjunction with the Charity’s Trust Deed. The in the governing document would never have been Trust Deed does not empower individual charity able to be met in a transaction with The Rangers trustees to exercise trustee powers on their own. Football Club plc. Charity trustees are appointed to act as a body,

SC033287 The Rangers Charity Foundation _07 5. Conclusion

OSCR concludes that since the Charity was that otherwise the event may not have taken place, set up, there has been an inherent conflict in which case the Charity would have received no of interest present as a result of the charity benefit at all. trustees’ connection to The Rangers Football Club plc. At the time we opened our inquiry the assignation of the Charity’s interest in the Agreement to The Based on the information provided to us, we Rangers Football Club plc (in Administration) had further consider that the decision-making already taken place. OSCR has no powers under process in the Charity, which allowed a decision the 2005 Act to direct the Charity to renegotiate to be taken by one trustee to assign the the assignation to increase its share of net profit Agreement with AC Milan Glorie to The Rangers from the fundraising event. We also recognised that Football Club plc (in Administration) without the Joint Administrators’ primary duty to creditors consultation with the other charity trustees and would preclude such renegotiation. We were aware without a quorum, was in breach of the charity as well that, when tickets for the football match trustee duties. In addition, the conflict of interest became available for sale, the basis on which presented by the assignation was not managed the event was going ahead was well publicised. appropriately and professional advice was not Members of the public may have bought tickets obtained as required by the Charity’s Trust Deed. specifically to benefit The Rangers Football Club plc (in Administration) rather than the Charity. A breach of section 66 charity trustee duties is misconduct in the administration of a charity. Our deliberations included an assessment of the When we find misconduct OSCR has powers under risk the three charity trustees might pose to other the 2005 Act to apply to the Court of Session to charities of which they are also charity trustees, with disqualify individuals from acting as charity trustees a view if necessary to monitoring these charities in future. However, when considering use of our proactively in future. To assess this risk, we wrote powers, we must bear in mind the principles of asking them for information about other charities best regulatory practice, and these require such with which they are involved as charity trustees. use to be proportionate, accountable, consistent, Trustee C remains a charity trustee of the Charity, transparent and targeted only where there is and Trustees B and C disclosed to us the names evidence it is needed. of other charities with which they are involved as charity trustees. After careful consideration of the circumstances in which the decision to assign the Charity’s interest After assessing carefully the information we hold in the Agreement was made, we have concluded about these charities, and in the knowledge that that although the decision was a breach of legal we have made Trustees B and C aware of our duties the circumstances were such that it would finding of their breach of duties, we consider that not be a proportionate use of our regulatory powers the risk posed is minimal and that it would not be to take further action. The decision to assign the proportionate to undertake proactive monitoring of Charity’s rights in the contract was made in good these charities. faith and in the interests of the Charity given the risk

SC033287 The Rangers Charity Foundation _08 Trustee A did not respond to any of our requests for information, including a request for information about other charity trustee roles. As a result, we have been unable to assess the risk posed to other charities of which Trustee A may be a charity trustee. Should we become aware that Trustee A is a charity trustee of another charity we will consider the risk this might pose. We have made Trustee A aware of our finding of breach of charity trustee duties.

SC033287 The Rangers Charity Foundation _09 6. Outcome

Since our inquiry opened, Trustee C has taken We have recommended to Trustees A, B and C independent legal advice to improve the Charity’s that they obtain training in their section 66 duties governance, particularly in relation to its relationship because we consider their understanding of their with The Rangers Football Club Limited, the new charity trustee duties needs to be strengthened. company. Trustee C appointed two new charity We look to them to develop a proper awareness trustees in June 2013. Trustee C has also been that section 66 requires charity trustees to act advised that the Charity should put regulations in in the best interests of the charity and with the place to govern the Charity’s relationship with The care and diligence it is reasonable to expect of Rangers Football Club Limited, and this will be taken a person who is managing the affairs of another forward with the new charity trustees. person, particularly in relation to decision making, identifying and handling appropriately potential conflicts of interest and ensuring they understand and comply with provisions in the charity’s governing document.

SC033287 The Rangers Charity Foundation _10 7. Learning points for the wider sector

• The ability to identify and manage appropriately • Many governing documents contain provisions potential conflicts of interest is a key element regarding: of the section 66 charity trustee duties. Charity o the minimum number of board meetings that trustees should be able to identify potential must be held each year. When the governing conflicts of interest when they arise, obtaining document is silent, it is for the charity trustees professional advice or training if required, and to decide how regularly they should meet. should have a policy in place to ensure that However, charity trustees should ensure any potential conflicts of interest are managed sufficient meetings take place to fulfil their appropriately. Charity trustees should also duties as charity trustees and enable them to remember that it is not only the responsibility have the general control and management of of individual charity trustees to act only in the the charity; interests of the charity and avoid conflicts of interest, but also the duty of their fellow charity o the minimum number of charity trustees a trustees to take reasonable steps to ensure charity may have. Charity trustees should that they do so. Further information about ensure the number of charity trustees handling conflicts of interest is available in our does not fall below the number required to publications “Guidance for charity trustees: ensure effective decision making and that acting with care and diligence” and “Who’s in they comply with the terms of their charity’s Charge: control and independence in Scottish governing document. charities”. Both of these publications may be • Charity trustees should ensure that they are downloaded from our website, www.oscr.org.uk. aware of the minimum number of trustees that • When a charity trustee’s appointment is ex must participate in decision making to make officio it is particularly important they are made certain that the decisions are properly taken. aware of the responsibilities they are taking on. • Charity trustees should ensure that information Charity trustees should ensure that an ex officio contained on the charity’s website furthers the trustee, who may be completely unfamiliar with charity’s purposes and accurately reflects the the charity and may never previously have acted actions taken by the charity trustees. as a charity trustee, receives a comprehensive induction into the charity and their section 66 duties to enable them to fulfil their role effectively.

SC033287 The Rangers Charity Foundation _11 2nd Floor Quadrant House 9 Riverside Drive Dundee DD1 4NY P. 01382 220446 E. [email protected] W. www.oscr.org.uk APS Group Scotland 282563 (08/13)