tombstone

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Dissolution, or the closing of an organization in its current state, is more common than one might call back. Only when an organization seriously considers ending its life, information technology's a hard and complex process. It is a time of mixed and stiff emotions for those involved, including a nonprofit board, senior staff, administrative and line staff, partners, and stakeholders.

An organization has to make the difficult and momentous decision to close for two kinds of reasons: (1) involuntary reasons (eastward.g., an external shutdown is required, usually initiated through the land'southward attorney general's role or the role of the secretary of country) and (2) voluntary ones (e.one thousand., mission has been achieved, a financial crisis has taken place, board and staff accept exhausted their free energy and ideas, or internal interpersonal disputes have overtaken an organization).

By federal and country police force, nonprofit organizations should outline in their articles of incorporation and bylaws all tasks and responsibilities regarding organizational dissolution, and these policies must be followed. But most nonprofit organizations take non drafted such policies and procedures. The purpose of this article is to outline the steps and tasks involved in dissolving a nonprofit organisation. And it may serve equally a guide for establishing a protocol for an "honorable and respectful transition for all." 1

Our approach is based on four essential principles:

  1. Similar whatsoever organizational initiative, dissolution should be carried out with interpersonal integrity.
  2. A successful dissolution preserves an organization's legacy and contributes to a positive collective retentivity of the organization.
  3. Laying the groundwork is essential to a successful outcome. Many authors and theorists take addressed this phase of the procedure. The Gestalt International Study Center discusses balancing the intimate with the strategic two, numerous authors talk about attending to group dynamics, Eunice Parisi-Carew and Ken Blanchard offer the team lease model 3 , and a model of governance every bit leadership has besides been adult 4 . But no affair what it's chosen or how you choose to address it, nosotros are convinced that organizations must pay equally much attending to the process of laying the background for a closure as they should to the tasks of the dissolution itself.
  4. During this process, an system should rely on a network of professional person nonprofit experts, legal counsel, human being resources support, and dissolution planning and implementation. While finances may be paramount in the minds of board members and senior staff, relying solely on internal resources may lead to a less-than-satisfactory outcome. Using expert input during the dissolution process tin amend ensure that all aspects are thoroughly addressed and that a lath and staff groups are included in the correct style and at the correct time.

The process of closing 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 about the status of the process.

The Decision to Dissolve

An organization'southward board and senior management must pick upwardly and carry the burden of this difficult 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 presume that an organization's board of directors and cardinal staff have exhausted all reasonable alternatives (such equally restructuring and downsizing, changes in leadership, mission refocusing, merging with another organization, etc.) and that these deliberations take been documented in official meeting minutes.

The body vested with the ability to make the final decision to discontinue an organization's affairs should be identified in an organization's official documents (e.g., articles of incorporation and bylaws). The decision must take place at an official meeting that is duly chosen and documented.

We also recommend that an organization's board and key staff make the determination to deliquesce privately. In the case of a nonprofit membership organization, a lath must make a recommendation to membership for its consideration and blessing. In most cases, this means that the information will and then "go public." As the dissolution plan develops, fundamental players in the process should keep these information management issues in mind.

While we often advocate transparency, in this case we advise strict data command. A board and key staff must feel prophylactic in exploring all issues without fearfulness that the community or other staff will prematurely hear nearly plans that may never be implemented. Yous can imagine the event on an organization'southward credibility if the word were to get out that it was closing its doors, just to take a last-ditch fundraising effort become highly successful. In the meantime, staff may accept launched task searches, and central community partners may harbor serious doubts about the arrangement's power to deliver quality services. To ensure solid information direction, the question of where meetings take place is as well a factor. Every bit a board and senior staff explore the possibility of dissolution, there volition likely exist strong disagreement, frustration, and sadness. "Sound carries," and administrative and line staff suspicions may increment because of additional meetings amidst power groups. Consider the possible ripple effects on the process.

Once the decision to dissolve has been made, board and key staff must accept the time to debrief. Throughout the entire process, those who brand the decision as well as the implementation team must have aplenty fourth dimension and infinite to address their thoughts. Otherwise, they can't fairly back up administrative and program staff. Left unattended, emotions can give rise to doubts and dissent and, in turn, create additional problems.

Later on an organization'south lath and senior staff have attended to the to a higher place tasks and prior to implementing the dissolution process, it'due south time to engage in planning. Whenever possible, nonprofit dissolution should not be implemented prior to a solid period of idea and planning. Every board member must recognize that this menstruation of intense piece of work must be completed every bit soon equally possible to minimize leaks and the inevitable increasing business organisation on the part of staff members who are not privy to the proceedings. Board meetings should take place more oft. It is critical to institute secure e-mail procedures with unanimous agreement among those involved. Frequent reminders about confidentiality guard confronting laxness.

An organization's lath should identify a planning group that includes the lath chair and CEO every bit members. The planning group will be tasked with creating a detailed draft of the plan for presentation to the board. In improver, considering of dissolution's legal implications at both land and federal levels, we recommend that at this stage of planning an organisation's board appoint legal council for the duration of the implementation process.

Developing a Comprehensive Plan

A program for nonprofit dissolution should exist translated into a formal document that includes several sections. Information technology should exist strategic and tactical in nature and must comprehend all main areas of the process.

Informing Stakeholders and Constituencies

The planning grouping should identify all the groups and individuals who must be informed most an organization's endmost. Each should have an articulated method of beingness informed, along with a designated person or grouping to provide the information and, if needed, required back up.

Distributing Avails

The critical task of the disposition of assets must meet the standards of the Internal Revenue Service Code and any applicative state laws. In full general, a nonprofit's avails may not be distributed to a board of directors, staff, or other organizational insiders. Most states require that an system's avails exist 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 like purposes.

The nugget distribution component should delineate how all organizational assets volition be distributed to other organizations or parties, including programs, greenbacks, investments, equipment, supplies, and facilities. An nugget distribution document should also include an arrangement's programs and services every bit an asset. Information technology 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 can exist passed on may also proceed some staff employed and office of the arrangement alive. This tin be part of preserving an organization'due south legacy. In the event that the preferred plan for the distribution of assets doesn't piece of work out, it'southward also prudent to develop an alternate programme.

Preserving Organizational Legacy

Any nonprofit organization that has done marketing has addressed the question "What makes us unique?" Periodically, information technology'southward a good idea to ask, "What would this customs be like if we didn't be?" Identifying the contributions of an organization to its community is the first stride toward agreement the organization's legacy for constituencies. Once information technology clearly articulates its contributions, it must assess the depth and latitude of its impact. Information technology is the existent impact that constitutes the legacy, not just the effort of making a contribution. This information is an of import office of an organization'southward public relations and celebration.

Communicating Dissolution to Stakeholders

This portion of an organization'south plan details how an arrangement controls the release of sensitive information to each of the groups identified nether a dissolution program'south section on areas of impact. When it comes to communicating this kind of information, we all live in a "modest town." So dissemination must be orchestrated and coordinated. This part of the plan outlines to all involved what they tin can say, to whom, and when. It should also address what an arrangement will do 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 time. As the system works to implement the myriad details of dissolution, the task of responding to questions and concerns can get left in the grit. Thus having a articulate response program is helpful.

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

Implementing Dissolution

Conspicuously the two key guiding documents for implementation are the nonprofit dissolution plan and a fourth dimension line. Equally mentioned previously, these documents must incorporate all federal and state requirements.

Creating a Fourth dimension Line

Coordinating the timing of each action in your plan is important. Then, in the planning stage, ensure that target dates are feasible. A time line is derived directly from the target dates of the plan. Nosotros advise developing a Ghent chart or a true fourth dimension line. Regardless of the format, the time line helps those involved see how each element of the programme relates, interacts, and overlaps.

Filing Legal Documents

Generally, an system'south offset footstep in the documentation process is to file articles of dissolution with a state attorney general's role and/or function of the secretary of state. The office then issues a public detect. When y'all develop your plan and fourth dimension 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 county. After filing these notifications, the system continues to exist until all existing invoices and other business including legal procedures are completed. All other business organisation, 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 crusade and shared values. During the process of dissolution, it's extremely valuable to reverberate on the history of the system and to create rituals that recognize the difficult work and dedication of those who take been involved.

In addition to recognizing individuals, information technology's also of import to recognize the contributions of the system equally a whole. Nosotros are a culture of peoples and stories. Celebrating the story of an arrangement that is about to close is an important tradition that is all likewise oftentimes forgotten.

Remember, this process tin exist 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 commemoration can be bloodshot and stimulate acrimony or sadness. The cardinal is to program different rituals for dissimilar groups and to exist honest and appropriately open given the group for which this process is intended.

Closing

If your organization has considered dissolution, consider the steps and guidance hither every bit an outline for the plan you lot ultimately put in place. Stressful challenges tend to exaggerate the all-time and the worst of the human being status. Leaders tin 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 demand rapid, clear, and direct attention. Calming any rough internal waters as quickly as possible improves the potential for a successful outcome.

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

Endnotes

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

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

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

iv. 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. Volume 16, Effect 1.