Navigating a Successful Merger of Nonprofit Organizations

by J.B. Maverick

3 min read

Navigating a successful merger between your nonprofit organization and another can be a difficult task. Emotional and financial involvement, along with differences of opinions on how best to combine the two nonprofits, may make it tricky to form one fully operational organization from two independent entities. To make a merger successful, it’s important to know when it’s called for and the best logical and legal ways to move forward.

When a Merger Is a Good Idea

Your nonprofit might be considering a merger for a variety of reasons. At the most basic level, a merger between your nonprofit and another is most warranted when one or both of your organizations is no longer effective operating separately. This means whatever goals were originally set out to be achieved, or whatever problems were originally being solved, are no longer being successfully addressed. This commonly occurs because your organizations can no longer keep up financially, or because there is a lack of desire, manpower, or other resources.

Picking a Merger Partner

Ultimately, it’s best and easiest to merge with a nonprofit that has a similar cause or similar goals. Regardless of what actual functions your organizations serve, it’s crucial that both of your nonprofits’ value systems line up or that key elements of your mission or cause are shared. Merging your nonprofit with another is complicated enough. Trying to force two entirely different organizations together isn’t likely to lead to a satisfactory conclusion.From a financial standpoint, it’s a good idea to merge with an organization that is financially capable of covering its costs and tying up any individual loose ends before merging. Likewise, it’s important your nonprofit can do the same before you consider a merger.

Logical First Steps

A good first step is to thoroughly discuss the potential for a merger with staff members and donors. Be certain that everyone, or at least a solid majority, is in agreement that a merger is the best option for your organization. In many cases, if donors are totally on board, they will end up funding most or all of the merger expenses, which is a key reason to include them in merger discussions early on. If the other nonprofit’s donors are also on board, the cost of merging is one less thing both nonprofits need to worry about.Before your nonprofit pursues a merger with any type of seriousness, you want to take the time and make the effort to perform your due diligence. This gives you background information about the organization and how it’s run, and provides you with facts about that nonprofit’s operating and other standards, as well as it’s ability to carry its weight during the merger.

Not-for-Profit Corporations (NFP) Act

Under the NFP Act that governs the operation of nonprofits in Canada, there are two ways for your organization to merge with another. The long-form model requires both nonprofits to sign and submit a merger agreement for approval by members of each organization. This agreement lays out the terms and ways each organization intends to carry out the merger. The short-form version of this is similar but can typically enable you to effect a merger more quickly, because it only requires approval from the directors of each organization.

Application

Once these agreements are approved, you must submit an application to operate as one nonprofit organization. This application must include the approved merger agreements, documentation of registered office or operating space, a list of the new organization’s board of directors, a Nuans Name Search Report to show there isn’t another organization operating under the name you’ve chosen for your new, combined nonprofit, and a filing fee. Other documentation or verification may be requested or required.Before you merge your nonprofit with another organization, you want to carefully select a good organizational match and make sure you have a clear understanding of how to go about the merger. Taking the time to research and plan helps the process go as smoothly as possible.

References & Resources

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