To the Editor:
I am worried about nonprofit institutions, which make important contributions to our society. I have represented museums, opera companies, social-work agencies, hospitals, and domestic-violence organizations in bankruptcy or in out-of-court restructurings, mostly on a pro bono basis. In other words, I do not get paid to do so. My “compensation” is knowing that my client will continue fulfilling its mission.
Our economy is now shut down or close to it. Many nonprofits must suspend operations — which means that cash flow dries up. Many corporate donors will hold off on philanthropy. Potential philanthropists may hold back while the stock market (we hope) recovers. Smaller donors may hold back until they have a better idea about their personal cash flow.
So, now is the time for professional advisers (including me) to step up to assist the organizations that rely largely upon philanthropy for survival. It is more important to step up in bad times rather than in good times. Many of these organizations are safety nets for the people in our society who need them the most. For other organizations, the importance is to preserve the culture that we appreciate in daily life.
I make my living in the courts — including the Bankruptcy Court. In my opinion, the courts will not be very friendly to creditors, lenders, or landlords that declare defaults or seek to exercise remedies against customers or tenants whose business has been honestly stricken by the pandemic. That is particularly true for nonprofit organizations.
This is not to say that the creditors, landlords, or lenders should be taken advantage of, but that it is a time for bilateral cooperation, workouts, and restructurings out of court. That is what judges expect to occur. If they do not see it, their control over their calendars can make the goals of anyone seeking judicial relief become more difficult to achieve.
Many people expect that fundraising will become very difficult in a recessionary economy. So, organizations will need to buy time until finances improve.
I tend to look at the world in terms of “What is the worst that can happen?” After all, I am a bankruptcy and restructuring attorney.
Here is the good news: Nonprofits can expect a sympathetic reception in any court — whether it is a foreclosure, eviction, or collection proceeding. This should provide leverage in achieving settlements outside of the courthouse. My fellow professionals (legal and financial) need to step up to assist the nonprofit world, and we can make a difference.
Kenneth A. Rosen
Partner
Lowenstein Sandler
New York
The author serves on the boards of the RWJBarnabas Healthcare System, the New York City Opera, and the All Stars Project. These views are those of the author and are not necessarily shared by other people at Lowenstein Sandler.