A Means to an End: Dissolving Your Nonprofit with Competence & Finesse

The closure of a nonprofit organization, for reasons good or bad, is a reality for many leaders each year. If you are faced with the prospect of dissolution, it’s important to know that the care and attention you give to the termination of your organization is as important as the care and attention it was given at its start. Leading others through a comprehensive and deliberate wrap-up plan will help stakeholders and the public come to terms with what’s happening and help prevent open issues from lingering. What’s more, the way you approach the end stages of your organization will become an important part of its lasting legacy. 

As with any large transition or change, closing down can conjure up feelings of defeat, uncertainty, sadness, despair, melancholy, bitterness, and more. Even if your organization is closing because it achieved its mission or because the problems you addressed no longer exist, it’s likely that you (and your community) will experience a sense of loss, if nothing else. The end of a project, especially one fueled by passion, can’t help but bring with it a range of emotions; making the actual duties associated with closing feel like a slog, a drain, and a dreaded part of your work. Knowing that all the planning and paperwork are strictly to bring about an end, makes it all the more taxing and uninspiring. 

But, at this critical time in the life cycle of your nonprofit, you have a final opportunity to showcase your leadership skills and to deliver a process befitting a dedicated and committed professional. By handling legal/financial and communication matters with equal aplomb, you’ll do the very best to preserve your organization's reputation and enduring integrity. Unlike the uncompromising nature of the law, communication excellence is up to you. Here’s how to handle both with competence and finesse:

Legal Compliance & How to Get it Right

The legal requirements and procedures for closing down a nonprofit organization are prescribed by state and federal laws and are readily accessible. There are resources available online that outline the process. In addition, attorneys that specialize in nonprofit law, like Rahul Keshap of Shuru Law in Charlottesville, Virginia, can advise and guide you through dissolution and ensure that you don’t miss a critical step. Keshap recommends that groups consider the following as they move toward a shut down:

• Check the law in your state. The details are important and they vary by state. In some cases, you need the specific permission of the attorney general before you dissolve. Be sure to read and follow the rules or hire a lawyer to advise you. In Virginia, for example, dissolution guidance starts at Section 13.1-902 of the Virginia Nonstock Corporation Act.
• Read your nonprofit's articles and bylaws to determine what the decision-making process will be for dissolution. If you have members, they likely have the authority to make this decision. If you don't have members, then it will be a vote by your board of directors.
• If a member vote is required, comply with meeting notice rules. Be sure to provide appropriate notice as required by law or your organizational bylaws and that you understand the threshold for a quorum. 
• Make a plan for the dissolution of assets. Decide what will happen to the organization's assets (money, contracts, intellectual property, etc.) and how its liabilities and claims will be satisfied in the event of dissolution. IRS rules require the assets of all charitable exempt organizations be distributed (A) to another 501(c)(3) organization, or (B) to the federal government or to a state or local government for a public purpose.
• File articles of dissolution with the state, making sure to provide all of the required information about the vote and the process. Once the organization’s affairs are wound down and any assets have been distributed, file articles of termination of corporate existence. 
• Notify the IRS. To learn more about this process, visit the IRS website. 

Communication & How to Execute Like a Pro

While not required by law, the communication aspects of a shutdown are equally critical. Developing and abiding by a skillful and thoughtful communication plan can make the potentially tumultuous (or even scandalous) situation less stressful and emotionally charged. “Remember,” says Filomena Fanelli, CEO and founder of Impact PR & Communications, “closing a nonprofit affects real-life humans, including employees of the organization.” A great communication strategy will help you address the human aspects of the closure along with more compulsory affairs.

How you position the closing, the manner and timing in which you relay the information, and how the entire process is organized and shared will set you apart from the crowd. Regardless of the circumstances, careful planning will provide for a transparent, healthy transition. Use Fanelli’s helpful DO’s and DON’Ts as a guide when creating your strategy:

DO put together a “communications inner circle” as soon as you know a change is ahead for your nonprofit. Ideally, the team should consist of a small group of key decision-makers and counselors, including the executive director, development or community relations director, head of marketing, public relations team and chair of the board(s). 

DON’T communicate with this group over email or phone if in-person is a possibility. When it comes to shuttering a nonprofit, you want to give everyone involved the benefit of hearing your tone of voice, seeing your facial expressions and, just as importantly, reading the room so you can detect how messages are being received on the other side and adjust in real time. If, due to geography or scheduling conflicts, all parties cannot be in one place, consider a video call, which will allow for a greater degree of engagement.

DO put together a timeline. Begin with the anticipated dissolution date and work backward from there, identifying each step on a chart or visual timeline. Share this with the communications team and look at the areas of overlap or see if you can identify any micro-steps you had not previously anticipated.

DO openly discuss the realities of the matter with the inner circle. Transparency is key when deciding what needs to be communicated and what may be tough for audiences to receive. Appoint a single spokesperson, as well as a back-up to that person, to handle media inquiries and ensure they are fully versed with the particulars around the closure, the reasons behind it, and how they are to be communicated.

DO avoid being caught off-guard. Assemble talking points in advance of any conversations with media and other stakeholders. It helps to think through what questions might arise and to create a FAQ with ideal, yet honest responses.

DON’T forget to run all messaging by legal counsel. Good legal advice is always wise, as you can’t take back what you’ve said once you’ve said it.

DO make a list of all key stakeholders that ought to be communicated with before, during and after the non-profit closes its doors. Be sure to include board members, foundation board members, donors, grant funders and foundations, volunteers, staff members at all levels, sponsors, community partners, governing agencies, elected officials, organizations like yours in the area you serve and the individuals you support. Make a list and then ask the inner circle communications team to think one deeper.

DON’T assume that word will simply spread or that all affected parties will understand why the organization is closing and how it impacts them.

DO remain open to feedback and questions. The best, most effective communications are two-way and nothing shows genuine concern like allowing stakeholders to share input or ask for clarification. Maximize buy-in by inviting stakeholders to hear messages in multiple ways, i.e. a mailing, an eblast, an in-person community forum, and social media channels. 

DO remember that how you share information can contribute to your organization’s lasting legacy and how people will remember it in the years to come. No doubt you’ve made an impact and that’s the memory you’ll want to leave behind. 

Bottom line: closing the doors of an organization that was created to promote the greater good can be a heavy task but, as a leader, you have an opportunity to make it less traumatic and frantic for others. You can usher your team, your board, your donors, and your community through an expertly-crafted process with confidence and grace - and posterity will thank you for it.