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The party is even considering adopting a new name in Scotland, where it does not have a single Member of Parliament.
The review, prepared by a panel headed by Tory Lord Strathclyde, says policies for the Scottish Parliament should be made in Scotland, not handed down from London.
The report also highlights the leadership's failure to listen to party activists in the past, identifying it as the main reason for the slump in Tory fortunes in Scotland.
It also recommends the creation of a Scottish Executive and a convenor for the party in Scotland, directly elected by members in a postal ballot.
Although the idea of a new name was suggested, there are no plans for the Scottish Conservatives to break away from the UK Tories.
The official name of the party in Scotland is the Scottish Conservative and Unionist Party but it seems the word "Conservative" is alienating the voters.
Alternatives being considered include the Scottish Unionist Party, the Scottish Democratic Conservative Party and the Progressive Unionist Party.
Following Labour's example, an electoral college will be established to elect the leader of Tory MPs in the Scottish Parliament.
But the chairman of the party in Scotland will still be appointed by the leader of the UK party, with the approval of the Scottish executive.
A non-executive president will also be appointed. The former Foreign Secretary and Edinburgh MP, Malcolm Rifkind, will be the first in the new ambassadorial-style role.
Mr Rifkind, a high-profile election casualty along with fomer minister Ian Lang, said: "I feel very privileged to have been asked to take on this appointment.
"I look forward to working with Raymond Robertson and our Scottish Tory colleagues to help regenerate and reinvigorate the party for the many challenges which lie ahead."
Scottish Tory chairman, Raymond Robertson, welcomed the changes and said the review's recommendations were far-sighted.
But he said the process was not over and the commission had to sell the reforms to party members throughout the country before presenting a final report to a special conference in March.
Reforms, if implemented, are likely to have traditionalists are up in arms.
Party leader William Hague is keen to reform after the election.
But there has been no improvement in Conservative fortunes in Scotland since the election.
In the devolution referendum in September, Scotland voted overwhelmingly in favour of its own parliament (74.3% for, 25.7% against - 60.4% turnout).
This was after the Tories had campaigned hard against devolution. Lady Thatcher even visited Scotland to join the anti-devolution campaign.
The Scottish Conservative and Unionist Party
The BBC's Devolution site (Scotland)
The BBC is not responsible for the content of external internet sites.
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