Guide-for-Nonprofit-Organizations-Bankruptcy-Issues-FINAL-with-ads

ooFormation of Special Restructuring Committee• Members• Charter• AssignmentsSchedule near term special and general meetingsThe board chair should emphasize that this is an opportunity for the board to revisit the entity’srole and mission, that the current board members should be energized by this opportunity, andthat few things will make them feel as satisfied as if they can pull the entity successfullythrough the dark of the tunnel and out again into the light.The crisis may (and likely will) identify that board member whose engagement is only skindeep(at this point), and there is not much a board chair can do about that. A disengageddirector is not someone you want around when the dust settles, and not a director on whichmuch time should be spent when time and resources are precious. Identify and nurture theboard members who respond to the call to arms, as their engagement will be redoubled whenthe entity lives to fight another day.Engagement of Professionals to Advise the BoardThe first step that the newly formed restructuring committee should take is to locate andinterview professionals to advise the board in connection with the potential restructuring, andto recommend the hires to the board. These should be professionals familiar with principles ofinsolvency, bankruptcy, and restructuring, but their role will to advise the board generally onthese issues. If and when the time comes to retain professionals to take the entity through abankruptcy filing, the nonprofit itself will retain other professionals to accomplish this goal.The already constituted restructuring committee can be tasked with due diligence in connectionwith the entity’s hire.If your nonprofit functions in a heavily regulated environment, the board should retain, or atleast consult with, attorneys with expertise in that regulated area to advise the board on theimpact that insolvency or a bankruptcy filing may have on the entity. In many cases, theheavily regulated nonprofit already has attorneys with subject matter expertise in theregulatory area. These professionals should not be retained by the board – for a number ofreasons, the entity should always retain different counsel than the board – but can be tappedwith the nonprofit’s blessing to make presentations on the relevant regulatory issues to theboard.Ensuring a Clear Path to Resolution, Consent and AuthorityThe entity is embarking on an unusual path. As stated before, this is not business as usual. Theboard will be faced with a number of decisions that must be well documented and formallyapproved. It will be involving itself in the operations and finances of the entity to a far greaterdegree than before. The board chair and board secretary must ensure that the board’s internalrecordkeeping throughout the crisis is solid and defensible. The board chair should call andconduct board and committee meetings with a renewed focus on protocol. It is not uncommonfor board committees to get lax about their internal recordkeeping, particularly minutes. Thebylaws may, in fact, require that board committees keep minutes, a requirement that is oftenignored. This is the time to reacquaint and reinvest the board in its own governing rules.12