By Rebecca Lambert-Smith and Stacey Elliott, Moores
As the not-for-profit (NFP) sector continues to evolve, more organisations are exploring mergers as a way to strengthen their impact, streamline operations or navigate financial and regulatory pressures. But choosing the right merger structure isn’t a one-size-fits-all decision.
Below, we outline five of the most common types of NFP mergers, along with their high level strategic pros and cons. Understanding these early in the process can help your board or advisory committee make confident, informed decisions.
- Transfer from NFP B to NFP A
In this model, NFP B transfers all assets and operations to NFP A and is then wound up. This is often suitable when one organisation has a larger footprint or more complex structure.
✔ Pros:
- A single surviving entity reduces admin complexity.
- Unknown liabilities may be quarantined in the closed entity.
- Works across most legal structures where purposes are aligned.
✘ Cons:
- Bequest claims to NFP B may be more challenging.
- Requires redundancy or transition planning for staff.
- Contracts must be novated or reassigned to NFP A.
- Assets and operations must be manually transferred.
- May create an imbalance in perceived status between entities.
- NFP A Becomes Parent of NFP B
Here, NFP A becomes the sole member of NFP B—gaining control, but keeping both entities legally distinct. It’s ideal when maintaining separation is necessary or risks need to be contained.
✔ Pros:
- Almost all risks remain quarantined in separate legal entities.
- Maintains donor and bequest continuity for NFP B and NFP A.
- Suitable even when purposes aren't fully aligned.
- Allows gradual integration over time.
- Supports brand continuity for both entities.
✘ Cons:
- Ongoing need to manage conflicts of interest and related party transactions between entities.
- Two separate entities must be maintained.
- Only suitable where sole membership of NFP B is allowed (such as if NFP B is a company limited by guarantee).
- Requires NFP B members to resign.
- Establish a New Entity (NFP C) and Close NFP A and B
This structure creates a brand-new organisation to receive the assets and operations of both merging entities. Both NFP A and B are closed after the transition.
✔ Pros:
- Symbolises a fresh, equal partnership.
- Governance and structure of NFP C can be built from the ground up.
- Legacy risks can be quarantined in the wound-up entities.
✘ Cons:
- Bequest and legacy recognition challenges post-merger.
- Significant work to manually transfer all contracts and assets.
- Requires dual winding-up approvals.
- Requires redundancy or transition planning for staff.
- New Parent Entity for Both NFP A and B
NFP C is established as a new parent entity with control over both NFP A and B, which continue to exist as subsidiaries. This is useful where operational or strategic separation must be retained.
✔ Pros:
- Offers structural equality for both merging entities.
- Allows distinct purposes and operations to continue.
- Supports brand continuity for both entities.
- No need for novation or assignment of contracts.
- Maintains legacy structures while enabling oversight.
✘ Cons:
- Maintaining three entities increases complexity and cost.
- Requires tight governance to manage inter-entity relationships.
- More policies, procedures and documents to coordinate.
- Requires NFP A and B members to resign.
- Amalgamation into a Single New Entity (NFP AB)
This is available to incorporated associations in the same state or territory (except NT). The two associations formally amalgamate into one new organisation, NFP AB, which assumes all assets and liabilities.
✔ Pros:
- Equal status for both merging entities.
- Streamlined transition without the need to transfer assets or contracts.
- Continuity of legal identity simplifies legacy and compliance matters.
✘ Cons:
- Limited to incorporated associations within the same jurisdiction.
- All liabilities are transferred into the new entity.
- Winding-up approvals are required for both original organisations.
Final Thoughts
Choosing the right structure involves weighing regulatory, operational and cultural factors. Early clarity on your merger model will make the legal, financial, and stakeholder journey smoother.
This article is part of a broader series offering strategic and legal insights for NFPs considering mergers. Stay tuned for future instalments or reach out to Moores for tailored advice.
If you would like to hear more from Rebecca Lambert-Smith, please register for our upcoming seminar, where she will present: Not-For-Profits and Charities: Compliance, Governance, and Structural Reform in 2025.
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