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How can nonprofit subsidiary defend against merger with parent?

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How can nonprofit subsidiary defend against merger with parent?

Is there anything a nonprofit subsidiary can do to ward off a forced merger/consolidation with its nonprofit parent where the parent is the sole member of the subsidiary?

You raise my favorite question for nonprofits: Whose organization is it? (See Ready Reference Page "The Key Question: Whose Organization Is It?") Although the directors of the subsidiary have a fiduciary duty to the subsidiary, and not to the parent (See the story on the Illinois Clean Energy Community Foundation, Nonprofit Issues, January 16-31, 2005), as a practical matter, the parent can always find directors who will decide that a merger or consolidation with the parent is in the best interests of the subsidiary. In short, if you can't persuade the parent that it is not a good idea, either directly or by outside pressure from donors, clients, politicians or other influentials, the answer is ultimately No. 

Tuesday, April 26, 2011

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