Charity Governance

A merger is when two or more non-profits or charities join together as one unified entity. Below is a 13-point due diligence checklist to keep handy when contemplating a merger with another charity.

     · Evaluate the different types of mergers: amalgamation, consolidation, transfer of assets etc

     · Confirm both parties are registered charities with the Canada Revenue Agency (CRA)

     · Review the laws and restrictions pertaining to a merger to make certain you qualify

     · Obtain full approval of the merger from the directors, board members, donors, stakeholders, officers etc from both parties

     · Weigh the reasons for merging, as well as the benefits and risks involved

     · Establish a non-disclosure agreement between both parties

     · Make certain all parties involved are current in their legal and tax documents, financial statements, and insurance documentation

     · Perform a comprehensive review of all assets of both parties

     · Consider all debts, liabilities, leases or contracts that a party may be tied to

     · Inquire if any party has restricted funds or donations

     · Ensure there is sufficient time and funds in place to implement the merger

     · Form a committee involving both parties to oversee and implement the details of the merger

     · Establish an agreement with all employees on the role they will take in the newly merged organization

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Non-profits and charities should always get legal counsel early on in the process to avoid major setbacks. Poorly designed or executed processes can be costly to any organization. Non-profits should follow the four steps below to help them through the process.

     1) Establish your goals
     2) Hire a lawyer
     3) Get the right formalities in place
     4) Stay focused