tombstone

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Dissolution, or the closing of an organization in its current land, is more common than one might think. But when an organization seriously considers ending its life, it's a difficult and circuitous 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 organisation has to make the hard and momentous conclusion to close for 2 kinds of reasons: (1) involuntary reasons (e.thousand., an external shutdown is required, normally initiated through the state's chaser general's part or the role of the secretarial assistant of country) and (ii) voluntary ones (eastward.one thousand., mission has been achieved, a financial crisis has taken place, board and staff take exhausted their energy and ideas, or internal interpersonal disputes have overtaken an system).

Past federal and land constabulary, nonprofit organizations should outline in their articles of incorporation and bylaws all tasks and responsibilities regarding organizational dissolution, and these policies must be followed. Simply most nonprofit organizations accept non drafted such policies and procedures. The purpose of this article is to outline the steps and tasks involved in dissolving a nonprofit organization. And it may serve as a guide for establishing a protocol for an "honorable and respectful transition for all." ane

Our approach is based on four essential principles:

  1. Like whatever organizational initiative, dissolution should exist carried out with interpersonal integrity.
  2. A successful dissolution preserves an organization's legacy and contributes to a positive collective memory of the arrangement.
  3. Laying the groundwork is essential to a successful outcome. Many authors and theorists have addressed this stage of the process. The Gestalt International Report Middle discusses balancing the intimate with the strategic two, numerous authors talk about attending to group dynamics, Eunice Parisi-Carew and Ken Blanchard offering the squad charter model 3 , and a model of governance as leadership has also been developed iv . But no matter what it'due south called or how y'all cull to address it, we are convinced that organizations must pay as much attention to the process of laying the groundwork for a closure as they should to the tasks of the dissolution itself.
  4. During this process, an organization should rely on a network of professional person nonprofit experts, legal counsel, human resources support, and dissolution planning and implementation. While finances may be paramount in the minds of lath members and senior staff, relying solely on internal resources may lead to a less-than-satisfactory outcome. Using adept input during the dissolution procedure tin 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 fourth dimension.

The process of closing a nonprofit organization takes many months. It is of import that those implementing the dissolution are prepared for this time frame and equipped with responses to questions from the customs about the status of the process.

The Determination to Deliquesce

An organization's board and senior management must option up and bear the brunt of this hard emotional process, coordinate, and follow through on each step. This is a critical time for skilled leadership, governance, and generative thinking. Thus the decision must be well informed and thoughtful. For the purposes of this article, we assume that an arrangement'due south board of directors and key staff have wearied 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 torso vested with the power to make the concluding decision to discontinue an organization's diplomacy should be identified in an organization's official documents (e.grand., articles of incorporation and bylaws). The decision must have place at an official meeting that is duly called and documented.

Nosotros too recommend that an organization'due south board and fundamental staff brand the conclusion to dissolve privately. In the case of a nonprofit membership organization, a board must make a recommendation to membership for its consideration and approval. In near cases, this ways that the information will so "get public." Equally the dissolution program develops, key players in the process should keep these data direction problems in listen.

While we oftentimes abet transparency, in this case we advise strict data command. A board and key staff must feel safe in exploring all issues without fear that the community or other staff will prematurely hear about plans that may never be implemented. You lot can imagine the effect on an organization's credibility if the word were to get out that it was closing its doors, merely to have a last-ditch fundraising effort get highly successful. In the concurrently, staff may accept launched task searches, and key community partners may harbor serious doubts about the organisation's ability to deliver quality services. To ensure solid information management, the question of where meetings have place is also a factor. Equally a board and senior staff explore the possibility of dissolution, there will likely be strong disagreement, frustration, and sadness. "Sound carries," and authoritative and line staff suspicions may increase considering of additional meetings among ability groups. Consider the possible ripple furnishings on the procedure.

Once the decision to dissolve has been made, board and key staff must take the time to debrief. Throughout the unabridged process, those who make the determination as well every bit the implementation team must accept ample time and space to address their thoughts. Otherwise, they can't adequately support authoritative and program staff. Left unattended, emotions tin give rising to doubts and dissent and, in turn, create additional problems.

Subsequently an organization's board and senior staff take attended to the above tasks and prior to implementing the dissolution procedure, information technology's time to engage in planning. Whenever possible, nonprofit dissolution should not be implemented prior to a solid period of thought and planning. Every lath member must recognize that this catamenia of intense work must exist completed equally soon as possible to minimize leaks and the inevitable increasing business organisation on the role of staff members who are not privy to the proceedings. Lath meetings should take place more than frequently. It is critical to institute secure electronic mail procedures with unanimous agreement amidst those involved. Frequent reminders well-nigh confidentiality guard against laxness.

An arrangement'south lath should identify a planning group that includes the board chair and CEO as members. The planning group will be tasked with creating a detailed draft of the programme for presentation to the board. In improver, because of dissolution's legal implications at both state and federal levels, we recommend that at this phase of planning an arrangement's board engage legal council for the duration of the implementation process.

Developing a Comprehensive Plan

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

Informing Stakeholders and Constituencies

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

Distributing Assets

The disquisitional task of the disposition of assets must see the standards of the Internal Acquirement Service Lawmaking and whatsoever applicable country laws. In general, a nonprofit's assets may non be distributed to a board of directors, staff, or other organizational insiders. Almost states require that an organisation's assets be distributed to other charitable organizations or governmental bodies. These laws ensure that assets amassed for charitable or other nonprofit activities go along to be used for similar purposes.

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

Preserving Organizational Legacy

Any nonprofit organisation that has done marketing has addressed the question "What makes usa unique?" Periodically, information technology's a skillful idea to ask, "What would this community be similar if nosotros didn't be?" Identifying the contributions of an organization to its community is the kickoff step toward understanding the organization's legacy for constituencies. In one case information technology clearly articulates its contributions, information technology must assess the depth and breadth of its touch on. It is the existent touch that constitutes the legacy, not just the try of making a contribution. This information is an important office of an organization's public relations and celebration.

Communicating Dissolution to Stakeholders

This portion of an organization's program details how an organization controls the release of sensitive information to each of the groups identified under a dissolution program'due south section on areas of bear upon. When it comes to communicating this kind of information, we all live in a "small town." So dissemination must exist orchestrated and coordinated. This part of the plan outlines to all involved what they can say, to whom, and when. It should also address what an system will practice if this aspect of the plan is violated.

In improver to an information-release schedule, an organization may want to institute mechanisms for responding to concerns and questions from the parties involved. Implementation is a pressurized and hectic fourth dimension. As the organization works to implement the myriad details of dissolution, the task of responding to questions and concerns can become left in the grit. Thus having a clear response plan is helpful.

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

Implementing Dissolution

Clearly the two fundamental guiding documents for implementation are the nonprofit dissolution program and a fourth dimension line. Every bit mentioned previously, these documents must incorporate all federal and country requirements.

Creating a Time Line

Coordinating the timing of each action in your plan is of import. So, in the planning phase, ensure that target dates are feasible. A fourth dimension line is derived straight from the target dates of the plan. We advise 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

Generally, an system's first pace in the documentation process is to file articles of dissolution with a land attorney general'southward office and/or office of the secretary of state. The function so bug a public discover. When y'all develop your program and time line, allot fourth dimension for this footstep. Bank check with the IRS regarding requirements for your blazon of nonprofit. You may too need to notify the appropriate officials in your city and canton. After filing these notifications, the organization continues to be 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 leave-taking involves acquittance of the outcome of people coming together for a common cause and shared values. During the process of dissolution, it's extremely valuable to reverberate on the history of the organisation and to create rituals that recognize the hard work and dedication of those who take been involved.

In addition to recognizing individuals, it'southward also important to recognize the contributions of the organization every bit a whole. We are a culture of peoples and stories. Celebrating the story of an organization that is about to close is an important tradition that is all as well ofttimes forgotten.

Call up, this process can be tricky to pull off. Some may be tempted to paint a rosier-than-realistic picture of an organization or its staff. Thus, this kind of celebration can be bittersweet and stimulate acrimony or sadness. The fundamental is to program dissimilar rituals for different groups and to be honest and appropriately open given the group for which this procedure is intended.

Closing

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

The IRS categorizes many unlike types and subtypes of nonprofit organizations, which have a range of sizes and missions. Nosotros exercise not believe in a one-size-fits-all approach, only we hope this article offers guidance for organizations on the cusp of dissolution.

Endnotes

1. Lee Bruder, The V Phases of Board Development, Lee Bruder Assembly, 2004.

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

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

four. 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 Information Networking Association, Boston, MA. Book 16, Upshot 1.