tombstone

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Dissolution, or the endmost of an organisation in its current state, is more common than one might think. But when an arrangement seriously considers catastrophe its life, it'southward a hard and complex process. It is a time of mixed and strong emotions for those involved, including a nonprofit board, senior staff, administrative and line staff, partners, and stakeholders.

An arrangement has to brand the hard and momentous conclusion to close for two kinds of reasons: (1) involuntary reasons (e.chiliad., an external shutdown is required, usually initiated through the state'south attorney full general's office or the function of the secretary of state) and (2) voluntary ones (eastward.g., mission has been achieved, a financial crunch has taken identify, board and staff have exhausted their free energy and ideas, or internal interpersonal disputes take overtaken an organization).

Past federal and state law, nonprofit organizations should outline in their articles of incorporation and bylaws all tasks and responsibilities regarding organizational dissolution, and these policies must be followed. Just near nonprofit organizations have not drafted such policies and procedures. The purpose of this article is to outline the steps and tasks involved in dissolving a nonprofit arrangement. And it may serve as a guide for establishing a protocol for an "honorable and respectful transition for all." 1

Our arroyo is based on iv essential principles:

  1. Similar whatsoever organizational initiative, dissolution should be carried out with interpersonal integrity.
  2. A successful dissolution preserves an arrangement's legacy and contributes to a positive commonage memory of the organization.
  3. Laying the groundwork is essential to a successful outcome. Many authors and theorists have addressed this phase of the process. The Gestalt International Study Middle discusses balancing the intimate with the strategic 2, numerous authors talk near attending to grouping dynamics, Eunice Parisi-Carew and Ken Blanchard offering the team charter model 3 , and a model of governance as leadership has as well been developed 4 . Just no affair what it'southward called or how you choose to address it, we are convinced that organizations must pay every bit much attending to the procedure of laying the background for a closure every bit they should to the tasks of the dissolution itself.
  4. During this process, an organization should rely on a network of professional nonprofit experts, legal counsel, human resource back up, and dissolution planning and implementation. While finances may exist paramount in the minds of board members and senior staff, relying solely on internal resources may lead to a less-than-satisfactory event. Using adept input during the dissolution process can better ensure that all aspects are thoroughly addressed and that a board and staff groups are included in the right way and at the right time.

The procedure of endmost a nonprofit organization takes many months. It is important that those implementing the dissolution are prepared for this time frame and equipped with responses to questions from the community well-nigh the status of the process.

The Decision to Deliquesce

An organization's lath and senior management must selection upwardly and carry the burden of this hard emotional procedure, coordinate, and follow through on each step. This is a critical fourth dimension for skilled leadership, governance, and generative thinking. Thus the decision must exist well informed and thoughtful. For the purposes of this article, we presume that an organization'due south board of directors and key staff have exhausted all reasonable alternatives (such as restructuring and downsizing, changes in leadership, mission refocusing, merging with another organization, etc.) and that these deliberations accept been documented in official meeting minutes.

The body vested with the power to make the final decision to discontinue an organization'southward affairs should exist identified in an arrangement'south official documents (eastward.g., manufactures of incorporation and bylaws). The decision must take place at an official meeting that is duly called and documented.

Nosotros also recommend that an system'due south board and key staff make the decision to dissolve privately. In the case of a nonprofit membership system, a lath must make a recommendation to membership for its consideration and approval. In near cases, this means that the data volition and then "go public." Every bit the dissolution program develops, key players in the process should keep these information management issues in listen.

While nosotros often advocate transparency, in this case we advise strict data control. A board and key staff must feel safe in exploring all bug without fear that the customs or other staff will prematurely hear near plans that may never be implemented. You tin imagine the outcome on an system'due south credibility if the word were to get out that it was closing its doors, only to have a final-ditch fundraising endeavor become highly successful. In the meantime, staff may have launched chore searches, and key community partners may harbor serious doubts about the organization'south ability to deliver quality services. To ensure solid data management, the question of where meetings have identify is also a factor. Equally a board and senior staff explore the possibility of dissolution, there volition likely be strong disagreement, frustration, and sadness. "Sound carries," and administrative and line staff suspicions may increment considering of boosted meetings among ability groups. Consider the possible ripple effects on the process.

One time the decision to dissolve has been made, board and fundamental staff must have the time to debrief. Throughout the entire process, those who make the conclusion also as the implementation team must accept aplenty time and space to accost their thoughts. Otherwise, they can't adequately support administrative and plan staff. Left unattended, emotions tin give rise to doubts and dissent and, in turn, create additional problems.

Afterwards an arrangement's lath and senior staff have attended to the above tasks and prior to implementing the dissolution process, it's fourth dimension to engage in planning. Whenever possible, nonprofit dissolution should non be implemented prior to a solid menstruation of idea and planning. Every lath member must recognize that this menses of intense piece of work must exist completed as presently as possible to minimize leaks and the inevitable increasing concern on the office of staff members who are non privy to the proceedings. Board meetings should take place more frequently. It is critical to establish secure electronic mail procedures with unanimous agreement amid those involved. Frequent reminders about confidentiality baby-sit against laxness.

An organization's board should identify a planning group that includes the lath chair and CEO as members. The planning grouping volition be tasked with creating a detailed typhoon of the plan for presentation to the lath. In add-on, because of dissolution's legal implications at both country and federal levels, nosotros recommend that at this stage of planning an arrangement'southward board engage legal quango for the duration of the implementation process.

Developing a Comprehensive Program

A plan for nonprofit dissolution should exist translated into a formal certificate that includes several sections. It should be strategic and tactical in nature and must cover all main areas of the procedure.

Informing Stakeholders and Constituencies

The planning group should identify all the groups and individuals who must be informed about an organization's closing. Each should have an articulated method of beingness informed, along with a designated person or grouping to provide the data and, if needed, required support.

Distributing Avails

The critical chore of the disposition of assets must run into the standards of the Internal Revenue Service Lawmaking and any applicable state laws. In general, a nonprofit'south assets may not exist distributed to a lath of directors, staff, or other organizational insiders. About states crave that an organization'due south avails be distributed to other charitable organizations or governmental bodies. These laws ensure that assets amassed for charitable or other nonprofit activities continue to be used for like purposes.

The asset distribution component should delineate how all organizational assets will be distributed to other organizations or parties, including programs, greenbacks, investments, equipment, supplies, and facilities. An asset distribution certificate should also include an organisation'due south programs and services as an asset. It may exist able to identify other organizations that can adopt its programs, especially if a funding stream is associated with these programs. Thinking through which programs tin can be passed on may likewise keep some staff employed and part of the system alive. This can exist part of preserving an organization's legacy. In the event that the preferred plan for the distribution of assets doesn't work out, it's also prudent to develop an alternate programme.

Preserving Organizational Legacy

Any nonprofit organisation that has washed marketing has addressed the question "What makes the states unique?" Periodically, it's a good thought to ask, "What would this community be like if we didn't be?" Identifying the contributions of an organization to its community is the starting time step toward understanding the organization's legacy for constituencies. One time it clearly articulates its contributions, information technology must appraise the depth and breadth of its impact. It is the real impact that constitutes the legacy, not just the try of making a contribution. This data is an important part of an system'southward public relations and celebration.

Communicating Dissolution to Stakeholders

This portion of an organization's plan details how an organization controls the release of sensitive information to each of the groups identified under a dissolution programme's section on areas of impact. When information technology comes to communicating this kind of information, we all live in a "small town." And then dissemination must be orchestrated and coordinated. This part of the programme outlines to all involved what they can say, to whom, and when. It should also address what an organisation will practice if this aspect of the plan is violated.

In addition to an information-release schedule, an arrangement may want to institute mechanisms for responding to concerns and questions from the parties involved. Implementation is a pressurized and hectic time. Every bit the organization works to implement the myriad details of dissolution, the chore of responding to questions and concerns can go left in the dust. Thus having a clear response programme is helpful.

Finally, we strongly recommend creating written advice procedures that include the lath, staff, and other key personnel and organizations.

Implementing Dissolution

Clearly the two key guiding documents for implementation are the nonprofit dissolution plan and a fourth dimension line. Every bit mentioned previously, these documents must contain all federal and state requirements.

Creating a Time Line

Coordinating the timing of each activeness in your program is of import. So, in the planning phase, ensure that target dates are viable. A time line is derived directly from the target dates of the plan. Nosotros suggest developing a Ghent chart or a true time line. Regardless of the format, the time line helps those involved see how each chemical element of the plan relates, interacts, and overlaps.

Filing Legal Documents

Mostly, an organization'southward first pace in the documentation process is to file articles of dissolution with a state chaser general'due south office and/or function of the secretarial assistant of country. The role then issues a public find. When you develop your plan and time line, destine fourth dimension for this step. Check with the IRS regarding requirements for your type of nonprofit. You may also need to notify the appropriate officials in your city and canton. Later filing these notifications, the organisation continues to exist until all existing invoices and other business including legal procedures are completed. All other business, such as signing contracts and running programs, is no longer permitted.

Celebrating

Honorable and thoughtful get out-taking involves acquittance of the result of people coming together for a mutual cause and shared values. During the process of dissolution, it's extremely valuable to reflect on the history of the organization and to create rituals that recognize the hard work and dedication of those who have been involved.

In addition to recognizing individuals, it's also of import to recognize the contributions of the organization as a whole. Nosotros are a culture of peoples and stories. Celebrating the story of an organization that is about to close is an of import tradition that is all as well oft forgotten.

Recollect, this process can be tricky to pull off. Some may be tempted to paint a rosier-than-realistic moving-picture show of an arrangement or its staff. Thus, this kind of celebration can be bloodshot and stimulate anger or sadness. The fundamental is to plan different rituals for different groups and to be honest and appropriately open given the grouping for which this procedure is intended.

Closing

If your system has considered dissolution, consider the steps and guidance hither equally an outline for the plan you ultimately put in identify. Stressful challenges tend to exaggerate the best and the worst of the human being condition. Leaders tin expect that during the process of dissolution, all aspects of organizational culture will heighten. The strengths and the problem spots between individuals, roles and positions, and divisions and groups may demand rapid, clear, and directly attention. Calming any rough internal waters as quickly every bit possible improves the potential for a successful outcome.

The IRS categorizes many dissimilar types and subtypes of nonprofit organizations, which have a range of sizes and missions. Nosotros practice not believe in a one-size-fits-all arroyo, but we promise this article offers guidance for organizations on the cusp of dissolution.

Endnotes

1. Lee Bruder, The 5 Phases of Board Development, Lee Bruder Associates, 2004.

2. Sonia Nevis, Stephanie Backman, and Edwin Nevis, "Connecting Strategic and Intimate Interactions: The Need for Balance," Gestalt Review, vol. 7, no. 2, 2003.

3. Ken Blanchard and Eunice Parisi-Carew, The 1-Minute Manager Builds High Performing Teams. New York: William Morrow and Co., 2000.

4. Richard Chait, William Ryan, and Barbara Taylor, Governance as Leadership: Reframing the Work of Nonprofit Boards, BoardSource, 2005.

Lee Bruder is the founder of Lee Bruder Associates  in New Hampshire.

This commodity was originally published on March 21, 2009.

Copyright 2009. All rights reserved by the Nonprofit Data Networking Association, Boston, MA. Volume xvi, Issue 1.