winding up

Winding up refers to the ending of operations of a business by settling debts , the liquidation of assets, and distributing the remaining proceeds to the shareholders of the partnership or corporation . Winding up occurs just before the complete dissolution of a corporation .

There are two types of winding up, voluntary and compulsory.

  • Voluntary winding up occurs when the partners or stockholders of a corporation for a variety of reasons, such as the company’s insolvency , and thus to avoid impending bankruptcy , or simply because the partners/stockholders want to end business operations.
  • Compulsory winding up occurs through a court order which directs a company’s leaders to appoint a liquidator, usually because the company is insolvent.

For more information, please see: Winding Up a Corporation .

[Last reviewed in July of 2024 by the Wex Definitions Team ]

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