Winding Up


DEFINITION of 'Winding Up'

The process of selling all the assets of a business, paying off creditors, distributing any remaining assets to the principals or parent company, and then dissolving the business. Winding up can refer to such a process either for a specific business line of a corporation or to the dissolution of a corporation itself.

Also known as liquidation.


The process of dissolving a corporation is much more involved than that of winding up one of its specific business lines, and generally only happens when it goes bankrupt. The negative impact to the local and regional economies of a corporation's wind up post-bankruptcy is likely to be more pronounced if the company is a large one. A large bankruptcy generally entails the layoffs of hundreds of employees, apart from having a detrimental impact on the finances and business of the company's suppliers and lenders.

A particular business line may occasionally be wound up by a company because of its diminishing prospects or minimal contribution to the parent company's bottom line. The parent company may decide to wind up such a business if efforts to find a buyer for it are unsuccessful. The winding up process in this case is likely to be more orderly, and have much less of a negative impact on the economy, than a corporate winding up.

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