When Is It Time to Close a Chapter?

Chapter Dissolution June 4, 2019 By: Jessica Irizarry

The decision to close a chapter can be extremely difficult to make. Association executives should look to chapter performance, value, and engagement to determine if a local chapter is no longer viable.

The decision to close a chapter is not one that should be taken lightly. After all, it will have a major impact on people and business operations. But if some of your association’s chapters are underperforming, it may be time to consider closing or merging struggling chapters to support the organization’s long-term survival.

There are numerous considerations to keep in mind before closing down a chapter, but a few key indicators might make the decision easier.

Finance, Governance, and Operations

Start by taking an inventory of the chapter’s financial assets. This list should include office equipment and collateral, financial investments, funds in endowments or trusts, and reserves. Alongside that inventory, consider the chapter’s debts and potential liabilities, which might include:

  • outstanding contracts, sponsorships, or subscriptions
  • taxes owed
  • pending litigation
  • insurance claim payouts not covered by the policy
  • employee severance or termination fees.

Next, calculate whether it is more beneficial to buy out any ongoing business contracts or to delay chapter liquidation until the contracts have run to term. If the chapter owes more than it has in reserves at the time of dissolution, you’ll need to decide who will foot the bill. Alternatively, if a chapter finishes in the black, you’ll need to determine what happens to those funds.

Check the affiliation agreement, bylaws, and policies. If there are no internal directives regarding dissolution, check for any applicable state laws that might affect the closure. If leftover funds remit to the parent organization, make a plan to allocate a portion of those funds to support local engagement opportunities for the dissolving chapter’s members.

Most people understand the realities of business and that sometimes, an organization is no longer viable. Be transparent with members about the reasons the chapter closure is necessary, and seek their input on the transition.

Business registrations. It may be necessary to deregister the chapter as an operable business entity within a state and/or local government. This requirement may depend on how the chapter is structured in relation to the parent organization. Regardless, it’s always a good idea to cover all your bases check for business registrations with the department of state and possibly the municipal government. And remember, even though the chapter is closing, an IRS Form 990-N will still need to be filed for the chapter come tax season.

Close down digital properties. Identify where the chapter has a digital presence, including all websites and social media accounts. Work with any business partners related to these properties to remove the organization online and, if applicable, start to close or phase out specific user accounts affiliated with the chapter.

Membership Considerations

Then, there’s the business of people: What will you do with the chapter’s members? While you should expect and plan for a loss in membership, it’s a good idea to also have a relevant and compelling engagement model, so that members who stay continue to find value in the merged chapter or parent organization.

Depending on scope and impact, it may be helpful to work with a communications or public relations firm to implement member and public-facing messaging about the closure. If this is not possible or desirable, work closely with your marketing and communications staff to develop a thorough communications plan. Include some members on that team.

Most people understand the realities of business and that sometimes, an organization is no longer viable. Be transparent with members about the reasons the chapter closure is necessary, and seek their input on the transition.

Recognize that there will probably be a significant amount of emotion tied to the closure. Many members will have invested a great deal of time and energy as chapter volunteers. For others, the chapter might represent their professional identity and legacy. Don’t overlook the gravity of the decision and its impact on members.

In your messages, be direct but sensitive with your language, invite feedback, and commit to acting transparently. Throughout the process, adhere to any legal requirements. And beware of the sympathy vortex, which could prolong the pain on the way to the inevitable closure.

Closing a chapter will be different for every association. Sometimes the process goes smoothly and sometimes it doesn’t. It will almost never go according to plan, but when you have a plan, you’ll be better equipped to handle whatever happens.

Jessica Irizarry

Jessica Irizarry is an associate of chapter program development at the American Society of Interior Designers in Washington, DC.