Sustaining Your Organization Through Collaboration
October 8. 2015
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?