Winding Down

Winding down is the process of bringing a business, fund, product line or investment position to a gradual and orderly close. A company winding down stops taking new customers, completes or transfers existing contracts, sells assets, pays its bills and returns what is left to its owners. A fund winding down sells its holdings and hands back capital, and a trader winding down a large position reduces it in steps to avoid moving the price, unlike a sudden forced liquidation. Regulators often require payment firms and banks to keep a wind-down plan so that customers are protected if they exit the market. Winding down is a general description, not a legal procedure; it is distinct from winding up, the formal process that ends a company's legal existence. Also see liquidation and insolvency.