Page 293 - Washington Nonprofit Handbook 2018 Edition

PART 14. CEASING OPERATIONS

CHAPTER 77. Considerations Before Ceasing Operations

A time may come when the directors or members of a nonprofit determine
that it is no longer feasible or desirable to keep the corporation operating in its
current state. In some instances, ceasing operations is not necessary; the directors
may find less extreme approaches to correcting problems. For example, if the
board of directors finds that a nonprofit corporation is no longer able to fulfill its
mission, the board might consider broadening or narrowing the scope of the
corporation’s purpose and/or reducing or changing its activities. Likewise, if the
directors are ready to step away from a nonprofit, it may be possible to elect a new
board of directors with the energy and resources to manage the corporation. If
these options are not realistic then the directors must decide the best approach to
ceasing operations. The options include merger, consolidation, dissolution, or, in
the event of financial difficulties, bankruptcy. This Part provides a general overview

and discussion of each procedure and some considerations for the board of
directors (or members if the organization has voting members) when faced with the
decision to cease operations. The material will focus on mergers and dissolutions
(both voluntary and involuntary) but will also highlight bankruptcy and involuntary
liquidation.

The decision to cease operating is an important one. Like all aspects of their
actions as directors, the steps to cease operating must be undertaken with a focus
on the best interests of the corporation. Before undertaking a merger or
dissolution the board and, if the corporation has voting members, members should
ask themselves what is best for the corporation and the public it serves. Several of
such questions, which will help a board or members decide which approach to take

in ceasing operations, are included here.

• Do current members/directors wish to keep operating the nonprofit?

• Is there an organization that might be interested in acquiring the
assets of the nonprofit?

• Is there an organization with a similar purpose available as a potential
merger partner?

• Are there significant designated charitable assets or significant
liabilities associated with the nonprofit?

WASHINGTON NONPROFIT HANDBOOK -282- 2018