Nonprofit Mergers, Assets Transfers, Dissolutions, and Other Structural Changes

Structural changes during a nonprofit lifecycle are inevitable and can take the form of asset transfers, mergers, strategic alliances, joint ventures, conversions, or dissolutions.

Where a nonprofit faces shrinking funding streams, collaborations, and strategic alliances to reduce overhead, streamline operations and increase efficiencies are imperative to the survival of any charitable program.

Before entering a merger, joint venture, or other strategic alliance, both parties should engage in a thorough due diligence process to ensure the strengths of both parties can be leveraged to achieve a common objective and goal.

Oftentimes, structural changes such as mergers or asset transfers involving a substantial portion of any nonprofit’s assets require the involvement of state regulators, such as the state Attorney General’s Office, Secretary of State, or Corporations Commission imposing notice, written requests for approvals, or waivers of objections.

Tovella Dowling guides its clients through the entirety of structural change transactions from the due diligence phase, government and regulatory approvals, and finally negotiation and execution of formal agreements memorializing such transactions.

With our deep understanding of the legal mechanics involved in these types of transactions, the attorneys at Tovella Dowling can opine on creative structures and non-traditional models to create sustainable revenue streams to solidify their client’s impact.

Not only does Tovella Dowling assist in the formation and exemption of nonprofits, including those recognized as exempt from taxation under Internal Revenue Code Sections 501(c)(3), 501(c)(4), 501(c)(6), 501(c)(7), it is well versed in the legalities surrounding the winding up and dissolution process.

The laws governing the dissolution of nonprofit corporations are governed by state law, and thus vary slightly depending upon the dissolving entities’ state of incorporation.

Notwithstanding, the process among various states is quite similar and involves an approval process under the applicable agency tasked with oversight of nonprofit organizations.

Tovella Dowling assists in crafting plans of dissolutions, petitioning state agencies for waivers of objections relating to the winding up and dissolution process, notice to creditors, liquidation and creditors hearings, judicial dissolution procedures, identification, and distribution of final assets to approved beneficiaries, and regulatory dissolution filings.