Facing Closure

This must be the worst situation for Management Committee members (as well as for everyone else who is part of the organisation), but unfortunately, closure does happen.

Sometimes organisations are forced to close down because their funding has been cut, and no substitute money can be found.

Assess your options

Blame and scapegoating are frequent visitors at such times and should be evicted as soon as they surface.  It is essential that Management Committee take a long clear look at the current state of the organisation - perhaps with the help of an independent advisor - and identify the options for the short and long term.  This assessment should include:

  • The impact on the client group of change (e.g. a reduction in services or transfer of activities) or closure;
  • Financial strengths and weaknesses, including assets (e.g. premises and equipment);
  • Internal capacity: morale, skills and knowledge of staff and volunteers;
  • External opportunities and threats, including identification of possible merger or transfer options where organisations provide similar services;
  • Potential for rescue: by local authorities, government or major trusts;
  • Legal and constitutional requirements: what does the governing document allow for at closure in terms of the process to be followed and re-distribution of assets?; and
  • Timetable required: for change and consolidation, merger or closure.

Ultimately it is up to the Management Committee to determine whether there are sufficient resources, and goodwill, to maintain core services, or whether the organisation must devise an exit strategy (i.e. plan for merger or closing down).  If the decision is the latter, then is closure to be rapid, or staggered?

More on strategic options in managing change.

Going for survival

If the decision is to try and survive, then seriously consider the following:

  • Invest in realistic planning, implementation and review;
  • Carefully construct a fundraising strategy;
  • Neutralise any negative reputation, internally and externally; and
  • Prepare service users or local people to fight cuts or closure.

In the battle to save the organisation, bear in mind that life carries on afterwards.  It is unwise to adopt tactics that offend funders and significant players in your networks.

What are the lessons to be learnt from real life attempts by Management Committees at rescuing and restoring their organisations?  It is certainly very hard work; it consumes a lot of time and energy, and at times will feel frustrating and unrewarding.  Other people will not necessarily appreciate your actions, and you may not be thanked - at least in the short term.  But the remarkable resilience of so many people in the voluntary and community sector comes from a long experience of forging change, despite the odds.

But for an organisation in crisis to recover successfully, there are other essentials too.  The process is dependant on Management Committee members working together as a team.  It is this cohesion that is at the heart of good governance, and which ultimately makes the difference when organisations face an uncertain fate.

Remember! Good governance, in times of success, provides the robustness necessary to work effectively when the going gets tough.

Going for merger

When independent survival is not an option, some organisations may find that they are able to continue delivery of some services and activities by merging functions with another organisation.  This approach is difficult, but most frequently considered by organisations who remain focused on the impact that closure would have on their beneficiaries. 

When determining whether this is an option, you may find it helpful to discuss and consider:

  • Is another organisation providing similar services?
  • Is another organisation targeting similar beneficiaries?
  • Are the services or activities of your group potentially complementary to another organisation? and
  • If location is key, then consider what other groups are active in a similar geographical area?  Or could you merge with another similar group to cover a larger geographical area?

Successful mergers require a high level of commitment, willingness to compromise and effective negotiation skills.  They also require an acceptance that survival in this manner will require some sacrifices, whether of staff, supporters, ownership or activities. 

However, such consolidation of resources, services and expertise, can ensure that beneficiaries are better served as the long term future of certain activities and services becomes more secure.  Such rationalisation of activities makes more effective use of existing resources and may be more favourably regarded by future funders.

For more information on Mergers and Closures go to: https://www.charitycommissionni.org.uk/manage-your-charity/mergers-and-closures/

Going for closure

If the decision is to close, then consider:

  • What your governing document says about dissolving the organisation (the how, what and when of winding an organisation depends on whether it is incorporated or unincorporated);
  • The extent of the assets of the organisation and the options for disposing them, e.g. are there legal requirements about who should benefit from the disposed assets?;
  • The timetable required for seeing the process through.  This includes stopping activities, dismissing staff, closing premises, paying bills, terminating contracts and, if appropriate, de-registering with the charity regulator;
  • The cost implications, i.e. having the finances to cover the cost of the process of winding up.  You also need to consider the implications for management committee members in terms of personal liability if the organisation cannot meet its financial obligations; and
  • Who is left, or best placed, to oversee the winding up and ultimate dissolution.

For more information on winding up or dissolving an organisation go to: http://www.nicva.org/resource/winding-and-dissolving-organisation