Article Archives >> To the Point
If a 501 (c)(3) is considering dissolution and it "owes" money to vendors, can it award severance or bonuses to staff?
When you say that the organization “owes” money to vendors, I assume that it owes more than the net assets available to pay all of the claims upon dissolution. In that case, a payment of severance or bonuses that is not based on a pre-existing contract would be improper.
Creditors cannot force a nonprofit into bankruptcy under federal law and in many cases it is not practical even to bring suit if the amounts in controversy are relatively small. But since there may be no practical remedy for the vendors, it may be possible to negotiate to give them a percentage of the amount due so that there is something left to compensate the staff.
June 1, 2009
What our readers say about Nonprofit Issues
Once again you've tackled a tricky question and explained it so we all can understand the issue.--M.V.
Thank you for your informative and keen advice on nonprofit matters. I believe it's a unique and concise place to get answers to this often wispy area called nonprofit. --R.T.
Have a question?
If you can't find your answer, submit a question and Don will pick one question a week to answer online and to include in our weekly e-mail notice.
Other ways to
find answers:
Talk to the Editor
Next Conference Call:
Tuesday, February 14, 2012
Participate
in this bi-monthly telephone seminar conference call and ask your questions directly to Editor
Don Kramer.
Access the entire site
($9.95/24 hours, $17.95/3 months).
Nonprofit Issues
Live
Full Day Program
A well-received full-day
program that covers the current hottest topics in nonprofit
law. Qualifies in Pennsylvania
for Continuing Education credits.
Speaking Engagements
Don is available for programs and speaking engagements ranging from
a one-hour presentation to a full-day primer on nonprofit law. Contact
us if you are interested in having him speak at your program.