Sustaining Your Organization Through Collaboration October

The Dirty Words Collaboration, Merger, Consolidation Nonprofit organizations are exploring how to work together in new and creative ways. Why?  Demand for services is up, along with competition for financial resources, making the drive towards efficiency increasingly important.  Duplication of services is viewed as wasteful.  Some types of restructuring are equated with cost-savings.  The social issues that nonprofits address are larger and more complex and call for scaled-up solutions. Understanding the types of strategic alliances is a good first step in determining a fit for your organization. There’s general agreement that the types of strategic alliances follow a continuum. At one end are informal arrangements. At the other end are those that require high levels of formality, shared decision-making, and organizational integration.

OPTIONS FOR SUSTAINABILITY Collaboration: Includes information sharing, program coordination, and joint planning. Organizations involved in collaboration remain independent with full decision-making power. Administrative Consolidation: Typically aimed at increasing efficiency, includes formal agreement for contracting, exchanging, or sharing services. Organizations involved in administrative consolidations share decision-making powers. Joint Programming: A restructuring where organizations share the launch and management of one or more programs. Organizations involved in joint programming share decision- making powers for the program while maintaining their independence in managing their own programs. Corporate Merger/Acquisition: Includes full integration of all programmatic assets and administrative functions.

Collaboration Endorsement: Providing approval or support of a concept or action already conceptualized or completed by someone else. Example: letters of support. Co-sponsorship: Two or more organizations share (although not always equally) in providing a program or service. Affiliation: A loosely connected system of two or more organizations with a similar interest(s). Federation/Association: An alliance of member organizations established to centralize common functions.

Collaboration Coalition: Independent organizations that usually share a political or social change goal. Consortium: Organizations and individuals representing customers, service providers, and other agencies who identify themselves with a specific community, neighborhood or domain. Network: Organizations that share resources for mutual benefit, such as service provision.

Collaboration Joint Venture: A legally formed alliance in which member organizations maintain joint ownership (generally through a joint governance board) to carry out specific tasks or provide specific services. Management Agreements/MOU’s: Typically aimed at increasing efficiency, includes formal agreement for contracting, exchanging, or sharing services.

Acquisition and Divestiture Acquisition: One organization acquires a program or service previously administered by another organization. Divestiture: One organization "spins off" a program or service to another organization.

Two Really Dirty Words Merger: where 2 nonprofits become one corporation, and one of the original constituent corporations becomes the surviving corporation. Consolidation: where two or more nonprofits consolidate to form a new corporation.

The Dirtiest Word Dissolution: When the nonprofit cannot no longer financial survive and the Directors resolve to dissolve the corporate entity. Requires Court and AG approval

How to Address the Big Gorilla in the Room  Board and Executive Staff initiate the internal discussion of collaboration Who, What, When, Where?  Approaching the Target Entity Friendly or unfriendly Gorilla?  Developing a Collaboration Plan/Execution/Impact

MAKING THE BOLD MOVE Steps Toward Merger/Consolidation I.Preliminary Board approval II.Due Diligence III.Draft Plan for Merger or Consolidation IV.Approval of the Plan V.Submission to AG/Court VI.Certificate of Merger filing with Secretary of State VII.Effect of Merger or Consolidation

Preliminary Board Approval It is recommended that each board preliminarily discuss an approval to move forward with exploring merger or consolidation and vote to permit their executive Staff to begin the process. Best Practice: Invite constituent boards and staff to a joint presentation of the Who, What, Why and When. This will provide an opportunity to tell interested parties about the process and what to expect.

Due Diligence***** The process by which each constituent organization review the others business operations to determine the feasibility of a merger or consolidation.

Due Diligence checklist FINANCE OPERATING GOVERNANCE GIFTS/ENDOWMENT COMPLIANCE/LITIGATION PROPERTY

Plan For merger or consolidation The board of each corporation proposing to merge must adopt a plan of merger or consolidation which must set forth the following: The name of each constituent corporation and the name of the surviving corporation. If any constituent corporation was formed under a different name, the name under which it was formed. For each constituent corporation, a description of the membership and holders of any certificates evidencing capital contributions or subventions, including their number, classification and voting rights, if any. If there are none, a statement to that effect.

Plan For merger or consolidation The terms and conditions of the proposed merger, including the manner and basis of converting membership or other interest in each constituent corporation into membership or other interest in the surviving corporation, or the cash or other consideration to be paid in exchange for membership or other interest in each constituent corporation. In the case of a merger, a statement of any amendments or changes that the merger will effect in the certificate of incorporation of the surviving corporation.

Plan For merger or consolidation Most Important Part: Terms and Conditions of the Plan FINANCE OPERATING GOVERNANCE GIFTS/ENDOWMENT COMPLIANCE/LITIGATION PROPERTY

APPROVAL OF the Plan of Merger or consolidation The board of each constituent corporation, upon approving such plan of merger or consolidation shall submit such plan to a vote of the members in accordance with the following: (1) Notice of meeting shall be given to each member whether or not entitled to vote. A copy of the plan of merger or consolidation or an outline of the material features of the plan shall accompany such notice. (2) The plan of merger or consolidation shall be approved at a meeting of the members by two-thirds vote as provided in paragraph (c) of section 613 (Vote of members). (3) If any merging or consolidating corporation has no members entitled to vote thereon, a plan of merger or consolidation shall be deemed approved by the members of the corporation when it is adopted by the board of such corporation pursuant to section 902 (Plan of merger or consolidation). (b) Notwithstanding authorization as provided herein, at any time prior to the filing of the certificate of merger or consolidation, the plan of merger or consolidation may be abandoned pursuant to a provision for such abandonment, if any, contained in the plan of merger or consolidation.

APPROVAL OF the Plan of Merger or consolidation Attorney General Court

Certificate of merger or consolidation After the plan of merger or consolidation is approved, a certificate of merger or consolidation must be signed on behalf of each constituent corporation. The certificate of merger must set forth the following: The name of each constituent corporation and, if the name of any constituent corporation has been changed, the name under which it was formed. The name of the surviving corporation. For each constituent corporation, a description of the membership and holders of any certificates evidencing capital contributions or subventions, including their number, classification and voting rights, if any. If there are none, a statement to that effect.

Certificate of merger or consolidation In the case of merger, a statement of any amendments or changes in the certificate of incorporation of the surviving corporation to be effected by the merger. In the case of a consolidation, all statements required to be included in a certificate of incorporation for a corporation formed under the N-PCL except statements as to facts not available at the time the plan of consolidation was adopted by the board. The effective date of the merger or consolidation if other than the date of filing of the certificate of merger or consolidation by the Department of State.

Certificate of merger or consolidation The date when the certificate of incorporation of each constituent corporation was filed by the Department of State or, in the case of constituent corporations created by special law, the chapter number and year of passage of such law. The manner in which the merger or consolidation was authorized with respect to each constituent corporation, including the date of the meeting of the directors or members and whether the approval was by a vote at a meeting or by unanimous written consent.

Effect of merger or consolidation Upon filing of the Certificate of Merger or Consolidation it is effective. All real and personal property will vest in such surviving or consolidated corporation.* Surviving or Consolidated Corporation shall assume and be liable for all obligations, liabilities, penalties of each constituent corporation.

QUESTIONS?