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

Effect of DissolutionWhile voluntary, judicial, and administrative dissolution are all accomplished by differentmeans, they all lead to the same result: the termination of the nonprofit’s corporate existence.Dissolution does not, however, transfer title to the corporation’s assets, effect any change to thecorporation’s bylaws, or prevent the corporation from suing or being sued. Nor doesdissolution terminate or suspend any proceeding pending by or against the corporation on thedissolution date. A dissolved nonprofit can only conduct those activities necessary to wind upand liquidate its affairs, such as the collection, distribution, and disposal of assets and givingnotice to creditors and either discharging or providing for the nonprofit’s liabilities. Doinganything else, such as continuing to provide services, may expose the directors and officers topersonal liability.Even still, if the nonprofit follows the notice to creditors procedure set forth in the NFPCA, itsdirectors and officers are generally insulated from personal liability for ―known claims.‖ Thisprotection does not extend to claims arising after the date of dissolution, nor does it apply totaxes, penalties, and/or interest on taxes or penalties. Also, while known claims can be barred,the nonprofit itself may still be sued for issues not known to the nonprofit at the time ofdissolution. Of course, at that point, the dissolved corporation likely will be collection orjudgment proof, and it is very unlikely a creditor would bother suing a non-existent entity thathas no money.For more detailed information on nonprofit dissolution, please refer to The Law Project’s Guidefor Nonprofit Organizations: Dissolution of Illinois Not For Profit Corporations.68