An Association wishing to dissolve shall provide written notice to the National Association (with a copy to the State Association) along with a copy of the minutes from the General Membership Meeting where the dissolution was approved. The dissolution must be approved by a majority of the members present and qualified to vote at a General Membership Meeting called for such purpose at which a quorum is present, unless otherwise specified in the Association's Bylaws, or unless there are other requirements of state law. Associations should consult with Association legal counsel to determine the requirements of state law. This is especially important if the Association is dissolving to effect a merger with another Association. After all obligations of the Association are met, any remaining assets should be distributed in accordance with the Association's Bylaws. NAR’s legal staff has developed the attached checklist to assist associations in dissolving a corporation.
The NAR Board of Directors has authorized NAR Staff to administratively approve Association dissolutions upon receipt of all required documentation. The dissolving Association and State Association shall be notified in writing. Upon dissolution of the Association's charter by the National Association, the territorial jurisdiction of the Association shall revert to "unassigned" territory and NAR's jurisdiction records shall be updated accordingly. Reassignment of the territory (or a portion thereof) to another existing Association constitutes a change of jurisdiction and the jurisdiction requirements for "unassigned" territory shall apply. In the event the Association is dissolving to effect a merger with another Association, the requirements for "Merger of Member Associations" shall apply.
For questions or additional information, contact NAR's Member Policy Department at 312-329-8399.
Dissolving Corporation Checklist
Dissolution is the legal process where a corporation terminates its existence. If an association is merging or consolidating its assets with another REALTOR® association and will no longer be in existence, the association will need to go through the dissolution process. Although the general principles for dissolution are likely very similar in most jurisdictions, associations planning to dissolve will need to consult with an attorney licensed in their jurisdiction in order to properly dissolve the corporation under their state law.
Here is the process that an association should follow for dissolving a corporation:
1. Approval of dissolution
Before commencing the dissolution, the association needs to follow the formal process for seeking approval for the dissolution. The association should consult its bylaws on how to proceed with dissolution, and then confirm with their attorney that the dissolution process conforms with state law. In the model bylaws for REALTOR® associations, a majority of members qualified and present to vote at a membership meeting where there is a quorum present are needed to approve a dissolution.
2. Plan for distribution
Upon approval of the dissolution, the association will need to create a plan for dissolution. Optimally, the plan will be approved by a vote of the members at the same time the dissolution is approved. The plan will involve four steps: first, collection and disposal of all liquid assets; discharge of all liabilities; distribution of assets; and completing the administrative processes required for a dissolution. State law may impose certain requirements for distribution, including limiting the distribution of assets to other nonprofits. NAR’s model bylaws give the association the option of distributing any proceeds remaining after satisfaction of debts to either the state association or to another not-for-profit organization.
3. Collection and disposal of assets
Once a plan for distribution is approved, the association should cease all activity and gather all assets, tangible and nontangible, which are not being transferred to a merged association or new entity. This may also require the termination of all nonessential personnel. Examples of tangible assets that might be liquidated include office equipment and real estate; examples of intangible assets may include service contracts with vendors or leases that are assignable to third parties. The association should liquidate these assets and gather the proceeds.
4. Discharge of Liabilities
Once the association has collected and disposed of its liquid assets, the next step is to address all other outstanding liabilities. This will include non-assignable long-term contracts with service providers such as for MLS services or perhaps employment contracts. If these agreements do not contain an early termination provision, the association’s exit from the contract will need to be negotiated with the vendor or it is possible the association will have to pay the remaining balance on the agreement.
5. Distribution of Assets
Once all of the outstanding liabilities are addressed, the association will then follow its plan of dissolution and begin distributing assets according to that plan. Some states have provisions in their nonprofit corporation act that allow dissolving nonprofit corporations to bar known claims by providing notice to creditors and giving the creditors a period to file claims against the dissolving entity. If the creditors fail to file a claim within the specified time, they will be barred from making any claims against the dissolved entity.
6. Finalize Dissolution
The final step is to formalize the dissolution by filing the articles of dissolution with the secretary of state. This filing will identify the date the dissolution as well as an address where any process against the corporation can be sent following dissolution. Assuming these are accepted, the corporation will now be officially dissolved and cease to exist.
Under no circumstances should any business be conducted under the dissolved entities name following dissolution.