Page 295 - Washington Nonprofit Handbook 2018 Edition

case, a new application for tax-exempt status will need to be prepared and
submitted to the IRS.

When two corporations merge or consolidate, the surviving entity (or the
new entity in the case of a consolidation) will normally receive any bequests
designated for the merged organization. For example, Nonprofit A and Nonprofit B
merge with B surviving. Although A no longer exists, any bequests designated for A
in wills or trusts would pass to B as A’s successor in merger. If A were to simply
dissolve and distribute its assets to B, any bequests designated for A would not
pass to B. This succession is a reason to look favorably at merging instead of
dissolution, but keep in mind that in our merger example, B also assumes all of A’s
debts and liabilities, even contingent ones. Where liabilities are a concern, merger
or consolidation may not be as desirable an option.

b. Effecting a Merger or Consolidation

The officers of the merging or consolidating corporations may spend many
hours negotiating and documenting the terms of the merger or consolidation.
However, the merger or consolidation is not legally in effect, until certain steps have
been taken and specific documents filed with the Washington Secretary of State.
Mergers and consolidations are governed by the Washington Nonprofit
Corporations Act, which should be reviewed and followed at all stages of the
process. In addition, the articles and bylaws of the organizations should be
reviewed for additional requirements, such as approval of an affiliated
organization.

(i) Plan of Merger or Consolidation

The process for performing a merger begins with each corporation adopting
a plan of merger. That plan must identify:

• The names of the corporations planning to merge;

• The name of the corporation into which they will merge;

• The terms and conditions of the merger;

• A statement of any changes in the articles of the surviving corporation
to be affected by the merger; and

• Such other provisions as are deemed necessary or desirable.

WASHINGTON NONPROFIT HANDBOOK -284- 2018