Tips and Answers to Your Questions
Deciding to Restructure

The Dissolution Decision

When a nonprofit reaches the point where its leaders feel it can no longer operate, several added challenges arise. Whether the problem is the sudden loss of a major contract or donor, malfeasance, or the gradual wearing away of viability by year after year of operating losses, a nonprofit should not simply close its doors and go away. Since a nonprofit is governed for the public benefit, its leaders must determine a way of closing down that preserves any possible services or funds for its mission.

Here are some ideas to consider when contemplating dissolution of your nonprofit:

• Difficult as it might seem, frank discussions about dissolution are necessary. Board and staff should be involved in the discussion, but the board should ultimately chart the best course it can.

• Avoiding this discussion will only bring the organization to a point where, when it can no longer ignore reality, it has fewer options.

• A valuable and sound program could be salvaged from a failing nonprofit by transferring it to another organization through some form of strategic restructuring, where it might continue to provide service under a more stable umbrella.

• Creditors are often willing to take less than full payment in exchange for actually getting paid; some will even write off the debt as a donation. Don’t be afraid to negotiate.

• Board members may start to flee as the situation seems hopeless. Steps must be taken to keep the board together and working on the problem. Engage every board member in the process.

• Staff should be kept apprised of every development. Often they will stick with the organization to the end if they are kept informed and involved in the problem.

• Speak frankly with major funders. Some may be willing to help out with transition funding.