Dissolving an Organization
Take time to make an exit plan when setting up your organization. Knowing how to dissolve an organization is just as important as knowing how to get started.
Dissolution
Dissolution is the last stage of an organization's life and involves the legal termination of a corporation.
There are many reasons to dissolve an organization. Financial shortages, operational issues or completion of the original mission are all reasons.
Low membership numbers may result in a lack of capacity to carry out the tasks. Whatever the reason, there are legal and financial responsibilities for dissolving an organization.
An organization should consult a lawyer, review their bylaws and the governing statute to determine the dissolution proceedings. In general, organization executives are responsible for seeing that debts and liabilities are paid off.
They have the authority to disperse assets and dissolve the organization by a special resolution at a meeting.
A resolution can pass if a notice of the meeting is given, a quorum attends the meeting and the resolution receives a two-thirds majority vote to accept the resolution.
A dissolving resolution should be clear, dated and signed, and could include the following:
- name of organization
- intent to dissolve
- date of dissolution
- assignment of individuals responsible for concluding the business of the organization
Clearly defined motions for dispersing assets will help avoid future disputes. Motions to disperse assets should allow enough time for accounts payable to be processed. Past minutes should be reviewed to compile a list of the organization's assets. Assets might include:
- cash or investments in financial institutions
- cash on hand
- accounts receivable
- physical assets (ex: land, buildings)
The Manitoba Companies Office has forms and instruction sheets for dissolving an unincorporated organization or a Manitoba incorporated organization.
Federally incorporated not-for-profit organizations should visit Corporations Canada for information on changing the structure or nature of the corporation (including dissolution).
Closing accounts
When the organization ceases operations and no longer needs a business number, its accounts must be closed. Canada Revenue Agency provides the forms and information for closing payroll accounts, GST accounts and corporate income tax accounts.
The organization may also have to close a retail sales tax account with Manitoba Finance.
Some financial institutions require a copy of the meeting minutes showing the motion to dissolve the organization and disperse the assets before they will close the accounts.
Leading through dissolution
When dissolving an organization, the board is responsible for leading members and communities through the change. In addition to the legal and financial responsibilities, it is important to help staff, volunteers and clients with the uncertainties they may experience over the loss of the organization. Here are some points to consider:
- How will you inform members and supporters of the closure? It is best to do this before rumors of a closure spread.
- Where can members of the organization go to receive service, information or representation? How can they be directed?
- How do you help board members, members and staff say goodbye in a positive and meaningful way?
- How can the board members and staff (past and present) be honored and given credit?
- Consider documenting the history of your organization and the knowledge it gained. Give these documents to a library, museum or historical society, or pass them on to another appropriate organization.
- Where do letters, pictures, reports and non-financial electronic data get stored once the organization no longer exists? (Legal and financial documents should be stored according to the instructions of the governing statute.)
- How will the organization be remembered and acknowledged?
For further information
please contact leadership@gov.mb.ca.
Other Related Links
- Dissolution- A Guide for Alberta Not-for-Profits (Charity Central) NOTE: Please refer to Manitoba legistation if dissolving a Mantioba not -for-profit organization.
- Paths Forward in Financially Troubled Times: A Restructuring and Insolvency Guidebook for Charities and Non-profit Organizations (The Muttart Foundation) NOTE: Please refer to Manitoba legistation if dissolving a Mantioba not -for-profit organization.
- It's Time to Go: A Self-Guided Workbook to Assist With Nonprofit Organizational Closure (The Muttart Foundation) NOTE: Please refer to Manitoba legistation if dissolving a Mantioba not -for-profit organization.
