As part of our “Refresh” series, this article has been updated by the author from when it was originally published in February 2017. The original article is Something No Association Wishes Upon Themselves – A Lesson in Dissolving An Association
Bylaws derived from “Articles of Incorporation” do not require a “Dissolution Clause.” So, the question of why some bylaws exclude said clause needs to be asked as part of good governance.
In 2014, Industry Canada sent out 16,000 notices of pending dissolution regarding the new Canadian Not-for-profit Corporations Act that came into force October 11, 2014. 6000 not-for-profit federal incorporations did not respond.
In 2015, Industry Canada sent out over 671 notices to associations with the intent to dissolve the corporation for failure to transit to the new Act. Associations, foundations, charities and similar organizations were given 120 days to comply.
In 2016, for the months of January through May, another 173 notices were sent. It was noted that some associations, from medium to large, were caught off guard and scurried to comply while others, assuming that it was a wakeup call, moved to dissolve.
When considering making the tough call to truly look at the possibility of having to dissolve a long-term association, it is emotional and creates tense times for the Board of Directors. I experienced this personally with a client whose association was over 125 years old. It was strong in good times, but it was losing members over the years.
Volunteer professional associations that are experiencing a decline in membership dues, revenues from programs, sponsors cancelled conferences, etc., need to look forward two years or more to funding at all levels. Change is something that at times is unknown, as in the case of this pandemic. Budget forecasting and assumptions are crucial at this time due to COVID19. The potential option of going bankrupt or dissolving requires frank discussions with the Board of Directors. A Band-Aid approach such as cutting staff, moving more to digital, social media concepts or hiring a consultant to bridge the barriers of what is causing the ship to sink, have possibilities. Is it too late?
These steps are not easy. You have members’ revenue at stake, and you need their approval through a special resolution. If you have more than one class of membership, you must also require their approval as well as non-voting members. There are several documents to complete from the Canada Revenue Agency and Industry Canada. i.e. Certificate of Intent to Dissolve – Certificate of Dissolution*. Timelines need to be established as to when to cease doing business. Investments must be dissolved. Financials as to account payables and receivables need to be resolved. Terms of contracts need to be reviewed, including penalty clauses if cancelled. Bank accounts must be closed, including establishing timelines required in keeping the account open for a period of time. Sponsors must be notified. While this process is being done, it is crucial that several communications go out to members in order to be transparent on timelines and all other actions. For some long-term supporters, resistance may occur based on their longevity with the association.
Recently, I learned about a long-term association under new leadership finding itself in trouble with a bleak outlook down the road. Good leadership, strategic direction and hard decisions had to be made to ensure the longevity of the association. Another 10-year association I work with must make a final decision this Fall. I do not see how they can survive at this point.
Perhaps this article may not sit well with some, but the reality is that there are volunteer professional associations struggling, whether they’re federal or provincial. This is part of risk management and having the knowledge on the so-called back burner. If dissolved, what rights do your members have when not a charity? The best advice out there is to hire a lawyer who is well-versed in handling dissolution of associations. You should also think about including a ‘Dissolution Clause” if not already created, when next you amend your Bylaws.
The Government of Canada website provides information on how to dissolve a not-for-profit association. The information can be found at www.ic.gc.ca/eic/site/cd-dgc.nsf/eng/cs05167.html
*Note: Once an association has filed for Intent to Dissolve, they can reverse the same by applying for a Certificate of Revocation of Intent to Dissolve.
Wendy Sue Lyttle, CAE, CSP
LAL Business2Business Project Management.
Disclaimer: It has been difficult to obtain current stats for this article. Source – Industry Canada, Government of Canada, Ontario Government, Mark Blumberg blog.2018. “Sector.ca 2019 – 85,000 not for profit associations in Canada excludes charities.