Not a merger, but an acquisition
Inevitably an amalgamation of Churches will involve the winding up of one entity, and the continuation of the other.
Continuation of both churches is inherently problematic.
Thorough Due Diligence by both churches
A full due-diligence needs to be conducted, to ascertain all of the liabilities. Consideration needs to be given as to how the liabilities will be treated – i.e. transferred to the incoming church, paid out etc.
If there are disputed liabilities, this may prevent a timely winding up of the outgoing church.
Identification and Treatment of Assets
i. Assets include:
- Real property
- Hard Assets
- Intellectual Property
- Trading/Business Names
ii. Identify what assets are encumbered
iii. Are any assets leased or hired?
iv. What assets will be transferred?
- Stamp duty may be payable on the transfer, particularly if commercial enterprises are being run by one of the churches from the property (i.e., child care centre, commercial leasing arrangements).
- This may be cost-prohibitive, and a strategy needs to be considered at the outset.
Identification and Treatment of liabilities
i. Liabilities include:
- Employment contracts
- Other contracts
- Loan agreements
- Bad debts
- Contingent liabilities
- Potential Tax Liabilities
ii. Identify what known liabilities will be assigned to the incoming church
iii. Non-transferred liabilities will need to be dealt with before the outgoing church is wound up
What is the membership of each churches?
Will the members of the outgoing church be able to become members of the incoming church?
This needs to be part of the disclosure to members.
If you have queries regarding amalgamation of churches where you are involved, contact us
An extract from a paper given by Alistair Macpherson to the Australian Christian Churches Business Managers Forum in April 2010