In Maine, How Do I Dissolve a Nonprofit Corporation?

Learn about how to dissolve a nonprofit company in Maine.

Not all non-profit organizations are eternal. A nonprofit company may collapse due to a lack of required money, irreconcilable conflicts among the directors or members, or the organization simply decides that it has completed its mission and no longer needs to exist. Whatever the cause, if you decide to dissolve a Maine nonprofit company, you must go through a dissolution procedure. The dissolution of a company needs a vote or other official authorisation, the submission of crucial paperwork with government authorities, and a number of additional processes known together as winding up the business.

The particular methods for terminating a Maine nonprofit organization will differ based on a few key factors. Keeping this in mind, the following limitations apply to this article:

It only applies to Maine nonprofit companies (not all nonprofits are incorporated)
It only applies to charities that have applied to the IRS and been explicitly authorized as 501(c)(3) tax-exempt organizations (not all nonprofits are tax-exempt, and not all tax-exempt nonprofits are 501(c)(3) organizations).
It only covers voluntary dissolution based on a decision made by the nonprofit’s directors and, where applicable, the nonprofit’s members (a nonprofit may be involuntarily dissolved through a court order, or for administrative reasons such as failing to file an annual report); and it only covers dissolution and winding up of nonprofits that have already begun carrying on activities (there are streamlined procedures for dissolving nonprofits that haven’t yet begun operating).

Advantages of Formal Dissolution

The State of Maine has recognized your nonprofit company. You will formally cancel that registration and, by consequence, the corporation’s existence via the dissolution procedure. A well managed dissolution accomplishes at least two essential objectives for a nonprofit that is winding down. For starters, it will eventually place your company beyond of reach of creditors and other claims. Second, it will enable you to meet your legal requirements for the correct disposition of any surviving corporate assets.

Dissolution Authorization

The method for sanctioning dissolution will differ based on whether your nonprofit company comprises members with voting rights in addition to a board of directors. You’re undoubtedly aware whether your charity has such members. If you’re unclear, consult your articles of incorporation, bylaws, or other comparable organizational papers.

Maine’s Nonprofit Corporation Act (“NCA”) allows for voluntary dissolution through one of two methods:

a vote of the members entitled to vote on dissolution; or, if no such members exist, a vote of the directors.

If your organization includes voting members, the board must first approve and present a resolution to dissolve the company to those members. The members must then convene to vote on the resolution. Each member eligible to vote must be given ten days’ notice of the scheduled member meeting. Unless your articles of incorporation or board of directors mandate a larger vote or a vote by voting groups, the dissolution must be approved by a majority of all member votes eligible to be cast at the meeting. (If all members grant written approval to dissolve, you may be allowed to bypass a formal meeting of the members.)

If your organization does not have voting members, the proposed dissolution must be approved by the board. Unless your articles of incorporation need a higher vote, approval requires a majority vote of the directors in this situation.

If you disband by vote, be sure to correctly record both the board’s resolution and the votes of the members or directors. This information will be required for filings with the state and the IRS.

Provided a nonprofit company includes voting members, the NCA enables you to forgo a vote at a formal meeting if all voting members submit written authorization to disband. No action by the board is required if dissolution is permitted by unanimous written permission of the voting members. To be effective, dissolution by written permission requires all voting members to sign and date a written consent document.

Intention to Dissolve Statement

You must submit a declaration of intent to dissolve with the Secretary of State once your members or board has authorized the dissolution (“SOS”). The SOS website has blank forms of the declaration of intent to dissolve accessible for download. There are two forms available: Form No. MnonprofitA-11 for unanimous written consent dissolutions and Form No. MnonprofitA-11A for member or director vote dissolutions.

The needed material differs significantly between the two SOS types. Attach a copy of the signed written permission agreement to Form No. MnonprofitA-11, and include the following information:

the name of your organization, as well as the names and addresses of its executives and directors
a statement stating that the attached written consent has been signed by all members of the organization who are eligible to vote, or that there are no members who are eligible to vote and the written consent has been signed by all nonprofit directors
a declaration that all mandatory reports have been submitted to the SOS
a declaration indicating the individual signing the statement of intent to dissolve knows that completing the form does not complete the dissolution procedure and that articles of dissolution must also be filed; and the registered office address of the organization.

Attach a copy of the resolution approved by the voting members or, if there are no voting members, by the board of directors to Form No. MnonprofitA-11A, and include the following information:

the name of your charitable organization
the names and addresses of the officers and directors of your nonprofit
a declaration stating either the attached copy of the resolution to dissolve was approved by the members of the nonprofit eligible to vote, or that there are no members entitled to vote and the resolution was adopted by the nonprofit’s directors the number of members or directors entitled to vote.
the number of members or directors that voted in favor of the motion and against it
a declaration that all mandatory reports have been submitted to the SOS
a declaration indicating the individual signing the statement of intent to dissolve knows that completing the form does not complete the dissolution procedure and that articles of dissolution must also be filed; and the registered office address of the organization.

The filing cost for each form is $10. For an extra cost, expedited processing is possible.

“Rising Winds”

Following member or board consent of dissolution, your corporation continues to exist merely for the purpose of completing certain last tasks known as “winding up” the business. It may be necessary to appoint one or more officers and/or directors to manage these issues.

The major winding up duties under the NCA are:

collecting the nonprofit’s assets; paying or discharging, or making reasonable preparation to pay or discharge, all of the nonprofit’s debts, liabilities, and obligations; and distributing the nonprofit’s remaining property correctly.

In terms of the final two things on the list, your nonprofit’s first job is to discharge debts, liabilities, and commitments. Your organization may then disperse any residual assets. In addition, a 501(c)(3) organization that is dissolving must disperse its assets for tax-exempt reasons. In reality, this usually entails transferring the assets to another 501(c)(3) organization. (According to the NCA, “the property and assets of a public benefit company [shall be] transferred to a public benefit corporation engaged in substantially comparable activities to those of the dissolving… business.”) If you are unsure if this rule applies to your organization, you should consult with a lawyer.

The NCA notes that, effective of 1995, a Maine nonprofit organization submitting annual reports—which includes the vast majority of operating nonprofits—must contain procedures in its bylaws for disposing of the business’s assets. Check your bylaws for a section specifying that any residual assets after debts, commitments, and liabilities have been paid and discharged are to be distributed to another nonprofit.

Creditors and Other Claimants Should Be Warned

You must notify any known creditors of your nonprofit of the anticipated dissolution immediately after adopting the resolution to dissolve. You might think about hiring an attorney to help you prepare and submit this notification.

Dissolution Articles

You must submit articles of dissolution with the SOS after you have finished winding up your organization. Aside from the name of your organization, the articles must state:

The SOS received a declaration of intent to dissolve the NGO (including the filing date)
All of the corporation’s debts, obligations, and liabilities have been paid and discharged, or adequate provision has been made for them, and all remaining nonprofit property and assets have been properly distributed. There are no suits pending against the corporation in any court, or adequate provision has been made for the satisfaction of any judgment, order, or decree which may be entered against it in any pending suit.

The SOS website has a form for articles of dissolution that may be downloaded. Take note that the form contains a statement stating that your nonprofit’s annual reports are current. Your submission may be delayed if you are late in submitting such reports. You do not have to submit an annual report for the preceding calendar year if you finalize your dissolution before June 1st.

The filing of the articles costs $10. For an extra cost, expedited processing is possible.

Note on Federal Taxation

You must submit IRS Form 990 or IRS Form 990-EZ for federal tax reasons. You must submit a completed Schedule N (Liquidation, Termination, Dissolution, or Significant Disposition of Assets) as well as copies of your articles of dissolution, resolution to dissolve, and any documented dissolution plans, if applicable. When completing Form 990 or Form 990-EZ, tick the “Terminated” box in the header section on Page 1 of the return.