Excerpt | Paths Forward in Financially Troubled Times - Restructuring and Insolvency Guidebook for Charities and Non-profit Organizations

publication date: May 31, 2021
author/source: The Muttart Foundation in Collaboration with Miller Thomson, LLP

“We are living in unprecedented times.”

If charities and non-profit organizations received a dollar for every time that truism has been repeated over the last several months, none would be facing any financial concerns at all.

But they aren’t getting that dollar. In fact, many are getting very few dollars. And even if finances aren’t an issue right now, planning for the “new normal” is occupying the minds of many people.

For some charities and non-profits, the question of “where to from here” is – and should be – a moment for sober reflection. They wonder when they will be able to make their programs and services available again. They wonder when they can stop relying on virtual meetings and meet face-to-face with people. They wonder if they have the money – or the energy – to carry on.

And there are some people thinking the unthinkable: “Maybe we shouldn’t carry on.”

For some people, those thoughts are driven by financial realities. Reserves – if they existed – are low, if not totally gone. Some staff members have moved on; finding replacements and training them is an expensive proposition. Trying to pivot all fundraising to a virtual reality is difficult or impossible.

For others, it’s a question of energy. Restarting operations is going to be tough. Some people are feeling guilty because they don’t seem to have the same degree of passion that they once had.

The idea of putting in the time – in delivering service, in governance, in fundraising – just seems like far too much effort.

Let’s get some things straight off the top.

First: There is nothing wrong with periodically considering whether your charity or nonprofit should continue operating.

Not only is there nothing wrong with it; it’s probably a prudent thing to do.

Circumstances change, society changes, people change. Those are all realities. Something that was a pressing need 20 years ago might not be as pressing a need today. New players have emerged to meet various needs, and where your group fits within that ecosystem is a question often worth asking.

Second: Stop beating yourself up. There’s no way you could have planned for this.

Unless you are an organization that specializes in disaster-relief, you couldn’t have prepared your organization (or yourself) for what we have been facing. Even if you had an emergency plan in place, you could not have predicted that the whole world would effectively be shut down. You may be feeling guilty because you didn’t have enough money in reserve to tide you over.

You may be feeling guilty because you’ve had to lay off staff. You may be feeling guilty because the people you serve are having to deal with things without your help – or as much help as you would like to give.

The reality is that you simply could not have known what we would all be facing.

Third: You are not alone.

Lots of businesses, other charities and non-profit organizations are going through the same thing you are. They are asking themselves if they can afford to resume services. They are asking whether they’re ready to resume services, or even want to.

In the U.S. and England, some are forecasting that up to one-third of all charities will not recover. They will close their doors. There is no reason to believe that the situation will be any different in Canada.

Fourth: Planning your future is always better than having the future overtake you.

You have options. And not all of these options are negative. If you are thinking of closing because of financial difficulties, there are a number of ways you might be able to continue operating through the use of Canada’s restructuring and insolvency laws.

Remember: it is not a sign of failure to use these laws. They have been drafted to recognize that businesses, charities and non-profits sometimes face circumstances that are beyond their control. The laws give these companies and organizations a chance to pause, regroup and find their way forward.

If you are thinking of closing because you don’t have the human resources or the passion to continue operating, a planned departure gives you the chance to organize things in ways that provide the best possible outcome for your members and for the people your organization serves. There are a number of possibilities, ranging from referring your clients to other organizations to merging with some other charity or non-profit.

To read the full Guide, click here.

This publication came about through a collaboration between The Muttart Foundation and Miller Thomson LLP, a full-service law firm with offices across the country. The Muttart Foundation is grateful to each of the contributors, listed below, but wishes to give special thanks to: Susan Manwaring, head of Miller Thomson’s Social Impact Group, who showed enthusiasm from the first discussions, and her colleagues Craig Mills, a partner at Miller Thomson who contributed his expertise, and Joshua Davis, a Miller Thomson summer student who bore the brunt of the research and writing duties; and Peter Broder, General Counsel and Policy Analyst at The Muttart Foundation, for his written contributions as well as his role in co-ordinating the collaboration.

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