Charitable Allies, a nonprofit law firm, is launching its University Financial Crisis Project.
The project helps universities deal with a significant lack of funds, which, when coupled with the inability to pay bills when they come due, resulting in bankruptcy or insolvency. When a university enters into a zone of insolvency the institution has to begin the steps of closing down the university or improving its financial standing. Credible estimates are that out of 2,200 universities throughout the nation, 10% to 20% will become insolvent in the next five years.
One of the key aspects of the University Financial Crisis Project is the protection and preservation of endowment funds for future generations. Without proper legal advice, trustees, directors, and officers are in danger of exposing themselves to personal liability for impermissibly using the endowment. In the most extreme cases, university leadership could be responsible for personally paying back funds the university has misused. The legal team at Charitable Allies aids universities by highlighting the appropriate ways in which the endowment can be used in urgent situations. This helps keep the endowment protected from creditors.
Charitable Allies meet with the president, CFO, or other leaders to determine what level of service is needed and whether it is operating in the insolvency zone. The legal team at the firm works with the university to determine the risk profile presented by the current set of circumstances. The firm works out a plan for the best course of action for the university to either shut down operations or find a way out of the insolvency zone, which could include restructuring or merging.
Due to their extensive experience in nonprofit law, the attorneys at Charitable Allies understand university and board politics. When operating within a zone of insolvency the university, its trustees, directors, and officers have legal obligations that are different than when the university is otherwise healthy. Charitable allies attorneys guide the institution as it navigates stakeholder politics.
The nonprofit law firm charges less than half of a fair market value. Charitable Allies has such low fees because the team cares about the mission of the university they are partnering with and making sure the endowment is protected, so it can continue to be used for educational opportunities. With extensive experience in insolvency cases, the lawyers at the firm are able to advise their clients on who they should be talking to and what actions to take.
“We are not a typical law firm, we don't own bookshelves, we don't own filing cabinets, we use a lot of technology to serve our clients, and we're rigorous, high performing, disruptive, innovative and creative,” says Zachary Kester, CEO and Managing Attorney of Charitable Allies. “With the University Financial Crisis Project, we are trying to help universities across the country that are struggling with their finances and may face the possibility of shutting down, which is heartbreaking for students.”
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