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 updated in July of 2024 by the Wex Definitions Team]
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