Cy Pres

In almost all states, when a nonprofit proposes to cease operating or to transform itself into a for-profit, the change automatically triggers procedures to ensure that the public’s interests and assets are protected. When the particular purpose for which a nonprofit was created becomes impossible, impracticable, or is frustrated, for whatever reason, the legal doctrine of cy pres directs how the assets of the nonprofit can be used. “Cy pres” is a common law rule meaning, “as nearly as may be” in French. When a nonprofit becomes a for-profit, the board of directors needs to ensure that another nonprofit corporation or foundation receives the full value of the converting nonprofit so that the nonprofit purpose is fulfilled in the same, or substantially the same, way.

Ordinarily, a major change in the purpose of a trust or other nonprofit requires that the Attorney General and the court approve the change, with the court having final authority to determine whether the assets are being properly used. Communities interested in how the assets will be used can influence the Attorney General and the court’s decision.