When a Nonprofit Corporation Is Insolvent…
Reno F.R. Fernandez and Lisa A. Runquist
Reno F.R. Fernandez III is a partner with Macdonald Fernandez LLP, focusing on commercial bankruptcy and litigation throughout California, and a member of the Insolvency Law Committee of the Business Law Section of the State Bar of California. Mr. Fernandez has been privileged to reorganize several nonprofits.
Lisa A. Runquist represents nonprofits, teaches at Trinity Law School and Shiloh University, is author/editor of Guide to Representing Religious Organizations and The ABC’s of Nonprofits, has won both the ABA BLS-NP Organizations Committee Outstanding Lawyer Award and the Vanguard Award for lifetime achievement, and is an Editorial Advisor for ChurchLawAndTax.com
Just as the formation and administration of a nonprofit corporation requires special considerations and planning, the disposition of an insolvent nonprofit is governed by special statutes and rules. Boards of directors need specific guidance when a nonprofit enters insolvency. This article discusses the choices a California nonprofit public benefit corporation faces when it can no longer meet its financial obligations.