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Business Orderly Wind-Down: A Complete Strategic Framework
- Julien Haye
- 5 days ago
- 31 min read
Executive Summary
An orderly wind-down is a strategic discipline that demonstrates foresight, resilience, and accountability. The reality is that around one in twelve businesses closes each year in the US, nearly 12% in the UK, and fewer than half of EU firms survive beyond five years. Shocks accelerate the risk, with 40% of businesses never reopening after a major disruption and a further 25% failing within the following year.
This article sets out a framework for wind-down readiness: defining what “orderly” means, aligning governance, embedding business-as-usual triggers, planning and execution steps, and testing credibility through scenarios. A well-executed wind-down protects clients, creditors, and employees while preserving trust and reputation — the ultimate signal of governance maturity.
TABLE OF CONTENTS
Introduction: What If an Orderly Wind-Down Was Treated as Strategy, Not Surrender?
Every organisation faces an inevitable question: how would we close responsibly if required?
Business failures are rarely sudden. They are preceded by capital erosion, regulatory strain, or the quiet loss of strategic momentum. Yet too many boards only consider closure at the point of crisis, rather than treating it as part of the governance cycle. The evidence is clear: in the United States, around one in twelve employer businesses closes each year, and over 65% of startups fail within a decade of launching. In the UK, the figure is even higher, with nearly 12% of businesses closing in 2022, more than the number of new firms created based on an House of Commons Research Briefing. Across the EU, the challenge is equally stark, with only 45% of enterprises surviving for five years, and survival rates in some markets dropping as low as 26% based on the European Business dashboard.
Shocks accelerate this reality. According to FEMA, 40% of businesses never reopen after a disaster, and a further 25% fail within the following year. Even among global leaders, preparedness is uneven: fewer than half of CEOs report confidence that their organisations are ready for a major crisis.
Preparedness is not only about continuity, but also about closure. Supervisors in the UK, EU, and US now expect firms to prepare credible wind-down plans that are both funded and feasible. Organisations that approach wind-down planning as a strategic discipline signal maturity to investors, regulators, and clients, turning potential vulnerability into a demonstration of resilience. In our experience, it also helps leaders run their business more effectively as a going concern. Nothing sharpens decision-making more than knowing what it would take to stay alive.
Orderly wind-down is not about failure. It is about foresight. It demonstrates that leaders understand their obligations to clients, creditors, employees, and communities, even at the point of exit. For boards and NEDs, it provides assurance of governance discipline and it protects them if the worse were to happen. For founders and CEOs, it proves credibility in the eyes of investors and regulators. For CROs and CFOs, it ensures that triggers, reserves, and repayment frameworks are grounded in reality.
This article makes a different case. Wind-down planning is not a compliance burden. It is a mark of resilience, reputation, and strategic discipline. It is about leadership that protects trust when it matters most. Whether you are a board director approving thresholds, a founder demonstrating maturity to investors, or a regulator testing credibility, this guide equips you to make wind-down visible, actionable, and strategically significant.
Defining an Orderly Wind-Down
An orderly wind-down is the process of closing a business in a solvent, controlled, and transparent manner. It ensures that obligations to clients, employees, creditors, and regulators are fulfilled without causing disruption to the market. This approach reflects foresight, discipline, and strong governance at the point of exit.
It is important to distinguish between recovery, restructuring, and wind-down:
Recovery aims to restore a firm to financial health following stress.
Restructuring adjusts business models, assets, or strategy to regain stability.
Insolvency involves an inability to meet obligations, resulting in external intervention.
Orderly wind-down is a deliberate cessation of operations while remaining solvent — a controlled exit designed to protect clients and preserve reputation.
From a prudential perspective, regulators require firms to demonstrate not only intent but capability. The Prudential Regulation Authority (PRA) of the Bank of England defines an orderly wind-down as:
“The capability to execute a full or partial wind-down of their trading activities in an orderly fashion… to promote firms’ safety and soundness by minimising the adverse effect firm failure could have on financial stability.”
This definition emphasises that wind-down must be funded, feasible, and systemically safe. It must enable regulated firms to exit without relying on public support and without threatening critical financial system functions.
Trigger events that may require a wind-down can vary by business model and regulatory context. Common scenarios include:
Sustained losses gradually eroding capital.
Loss of a core client or contract critical to revenue.
Regulatory constraints that make continued operations unviable.
Strategic decisions by the board to withdraw from certain markets or business lines.
All such triggers should be rooted in pre-defined thresholds, scenario planning, and a governance framework governing escalation.
A precise definition matters for boards, founders, and regulators. For boards and non-executive directors, it provides a reference point for oversight and ensures clarity on when action must be taken. For founders and executives, it signals maturity to investors and regulators, showing that the firm balances ambition with accountability. For regulators, it provides confidence that client interests will be safeguarded and that market integrity will be preserved even when a business exits.
An orderly wind-down is therefore not simply about closure. It is about demonstrating financial and operational resilience, transparency, and responsibility at every stage of the corporate lifecycle.
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Regulatory Expectations and Governance
Regulators expect firms not only to define what an orderly wind-down means but also to demonstrate that they can carry it out in practice. Across jurisdictions, the emphasis is consistent: a credible wind-down plan must be realistic, costed, and embedded in governance.
In the United Kingdom, the FCA and PRA require investment firms, payment institutions, and electronic money firms to maintain wind-down plans as part of their regulatory submissions. These plans must show how the firm would cease operations in a solvent manner, safeguard client assets, and meet outstanding obligations. Under the Senior Managers and Certification Regime (SMCR), ultimate responsibility sits with designated senior managers and the board. Accountability is therefore personal as well as collective.
Call to Action: Closing the Gap in FinTech Wind-Down Planning
Firms must prepare credible, costed wind-down plans that demonstrate solvency, define triggers, secure funding, and safeguard client assets. However, the FCA’s 2025 review of 14 e-money and payment firms revealed that “none of the firms we reviewed fully met our expectations, and in particular were not following the guidance in FG20/1.” This is more than a regulatory shortfall. It is a signal that many firms are exposed to reputational, operational, and investor risks because they treat wind-down as a box-ticking exercise.
FinTechs that invest in credible, costed, and regulator-ready wind-down plans not only satisfy compliance expectations but also demonstrate maturity to investors and clients. At Aevitium, we help FinTechs build wind-down plans that are practical, proportionate, and aligned with both regulatory guidance and board strategy.
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The European Banking Authority (EBA) has set similar expectations for investment firms and banks under its prudential framework. Wind-down planning is treated as a prudential safeguard that reduces the risk of disorderly exits. The EBA highlights the need for firms to demonstrate that wind-down can be achieved without public support and with minimal disruption to financial markets or clients.
At a global level, the Basel Committee’s principles for recovery and resolution planning reinforce the expectation that firms of all sizes should prepare for orderly exit. While systemically important institutions face more stringent requirements, the underlying principle is universal: firms must be able to fail safely.
For boards and non-executive directors, these expectations mean that oversight of wind-down planning is not optional. It is a recognised part of fiduciary duty and risk governance. For founders and executives, particularly in fintechs and high-growth firms, credible wind-down planning is often a condition of licensing and ongoing supervision. Demonstrating that the business can exit responsibly reassures regulators, investors, and clients alike.
A well-governed wind-down plan is therefore both a regulatory requirement and a strategic enabler. It protects clients and markets, and it also signals to stakeholders that the firm approaches risk with maturity and foresight.
Minimum Regulatory Requirements: UK, EU, US, Basel
Jurisdiction | Core expectations | What supervisors look for |
UK (FCA, PRA) | • A credible wind-down plan for solo-regulated firms that enables cessation of regulated activities with minimal adverse impact • Clear triggers, funding for wind-down costs, CASS protection, governance and communications plan • Trading Activity Wind-Down expectations for firms with trading books | • Plan is costed, feasible, and reviewed by the board • SMCR ownership and escalation pathways are clear • Ability to wind down trading safely where relevant |
EU (EBA, national competent authorities) | • IFR/IFD require proportionate wind-down planning for investment firms • Identify triggers, timeframe, resources, and client-asset safeguards • Integration with recovery and resolution for banks under BRRD | • Evidence that wind-down can be achieved without public support • Proportionality based on firm class and systemic footprint |
US (Federal Reserve, FDIC, OCC; SEC/FINRA for securities) | • Resolution plans “living wills” for large firms under Dodd-Frank 165(d) • Sector rules expect orderly wind-down for broker-dealers and advisers • Heightened expectations for large insured banks under updated FDIC rules | • Credible strategies to resolve rapidly under stress • Operational capability to return client assets and settle obligations • Enhanced submissions and testing for larger insured banks |
Basel standards (FSB, BCBS principles) | • Jurisdictions should require recovery and resolution planning • Continuity of critical functions and minimal disruption to the system • Avoidance of taxpayer exposure | • Local regimes aligned to Key Attributes and supervisory guidance • Firms show they can fail safely within the local framework |
Notes for boards and founders
Treat these as minimums and calibrate depth to your systemic importance and business model.
Keep plans funded, feasible, and governed. Supervisors repeatedly test credibility through reviews, data requests, and scenario work.
Systemic Importance and Supervisory Treatment
Regulators do not treat all firms the same. Supervisory expectations and interventions are tiered according to a firm’s criticality to the financial system and the wider economy.
Systemically important firms (G-SIBs and D-SIBs): These institutions are required to hold additional capital, develop recovery and resolution plans, and demonstrate TLAC capacity. In practice, they are rarely closed outright. Historical evidence shows that governments and regulators often engineer rescues or mergers to prevent contagion. Examples include RBS and Citi in 2008, and Credit Suisse in 2023, which was absorbed by UBS through regulator intervention.
Mid-tier firms: Regulators expect credible wind-down plans that demonstrate how they can exit the market without public support. This group includes banks below systemic thresholds, investment firms, and many insurers. The focus is on proving that failure can be managed safely through a funded and feasible wind-down.
Smaller firms and non-systemic players: For payment institutions, EMIs, and smaller investment firms, the regulatory emphasis is on protecting client money through CASS or safeguarding regimes. Where these firms become non-viable, regulators often require swift closure or administration, as seen in the case of Ipagoo and other smaller payment firms.
The supervisory logic is straightforward:
The largest firms are stabilised to avoid systemic collapse.
The middle tier must demonstrate they can fail safely.
The smallest firms are wound down quickly, since their systemic impact is limited.
For boards and founders, understanding where the firm sits in this regulatory pyramid is crucial. It determines the level of planning required, the intensity of supervisory engagement, and the tools regulators are likely to use in the event of stress. The trade-off of remaining under the regulatory radar is that, if stress arises, closure may be swift and non-negotiable.
Governance and Oversight in Practice
Strong governance is central to an orderly wind-down. Even the most detailed plan will fail if decision-making is unclear, if accountability is diluted, or if escalation is delayed. Boards, non-executive directors, and founders all have distinct roles in ensuring that closure, if required, can be managed with control and credibility.
The Board of Directors holds ultimate responsibility for approving the wind-down plan, testing its assumptions, and ensuring it is aligned with the firm’s strategy and risk appetite. When a trigger event occurs, the board must be ready to act decisively. Indecision or delay can quickly erode solvency and turn an orderly exit into a disorderly one. The board’s oversight role also extends to ensuring that wind-down planning is reviewed regularly and updated as the business evolves.
Non-Executive Directors (NEDs) play a critical role by bringing independent challenge and external perspective. Their experience across different industries and market cycles helps identify blind spots and test overly optimistic assumptions. NEDs provide assurance that management is not simply designing a plan to satisfy regulators, but one that is workable under stress.
Founders and Executives are equally central. In younger or fast-growing firms, founders often remain the public face of the business and a key source of credibility with investors, regulators, and clients. Their role is to set the tone, signal seriousness about governance, and balance growth ambitions with responsible planning. In the event of a wind-down, founders and executives must lead communications with stakeholders, protecting reputation and trust at a time when confidence is most fragile.
Escalation Pathways must also be defined in advance. Boards and executives need clear criteria for when wind-down should be considered, who has the authority to activate it, and how information flows will be managed. Without this clarity, decision-making under pressure risks becoming fragmented, and opportunities to preserve solvency or reputation may be lost.
Governance in wind-down is about foresight as well as control. Boards, NEDs, and founders must show that the organisation is prepared, that decisions will be taken promptly, and that responsibility for execution is clear. The most effective mitigation may be the thorough preparation that ensures an orderly wind-down plan never needs to be used. This level of readiness gives regulators confidence, clients reassurance, and investors trust that even at the point of exit the firm remains well managed.
The Lifecycle of Wind-Down Readiness
Wind-down readiness follows a clear lifecycle that strengthens governance, resilience, and trust. Firms that approach it as a structured discipline create the capacity to protect clients, safeguard financial soundness, and demonstrate accountability even at the point of exit.
The lifecycle rests on four connected stages. Business-as-Usual (Preparedness) builds the foundation by embedding monitoring, governance, and cultural alignment. Recognising the drivers of disorder ensures that leadership understands the conditions that could challenge an orderly process. Planning converts readiness into a detailed wind-down scenario playbook, with roles, resources, and communication strategies defined. Execution applies the plan in practice, ensuring delivery with transparency and control.
Phase 1: Business-as-Usual (Preparedness)
Wind-down readiness is most effective when treated as a continuous cycle within business-as-usual. Rather than being a one-off exercise, it is embedded in the way the organisation monitors risk, governs decisions, and engages with stakeholders.
A key part of this integration is aligning wind-down readiness with the firm’s risk appetite, tolerance, and capacity:
Risk appetite sets the strategic ambition and defines what level of risk the firm is prepared to pursue.
Risk tolerance establishes the thresholds that must not be breached, forming the measurable triggers for monitoring.
Risk capacity defines the ultimate limits of what the organisation can bear without endangering solvency or client protection.
Together, these provide the reference points for the monitoring and escalation cycle that underpins readiness.
The cycle has four connected elements:
Cycle Element | Purpose | Link to Appetite, Tolerance, Capacity | Practical Application for Risk Professionals | Example Metrics |
Monitor and Detect | Track early signals and indicators | Monitor breaches of tolerance aligned to appetite and capacity | • Build dashboards with clear thresholds • Link monitoring to pre-defined trigger events • Integrate capital, liquidity, and client concentration metrics into BAU reporting | Financial Services (FS): • Capital adequacy ratio • Liquidity Coverage Ratio (LCR) / Net Stable Funding Ratio (NSFR) • CASS reconciliations • Client concentration %
Non-FS: • Cash runway (months) • Debt service coverage ratio • Customer concentration % • Contract renewals |
Review and Challenge | Ensure assumptions remain realistic | Test whether appetite, tolerance, and capacity thresholds still reflect strategy and wider market | • Facilitate regular board and executive reviews • Enable NEDs to provide independent challenge • Update management information (MI) with current thresholds | FS: • ICAAP / ICARA assumptions • Liquidity stress tests
Non-FS: • Working capital sufficiency • Pipeline vs secured revenue |
Align and Communicate | Support open escalation and shared understanding | Translate board appetite into clear signals for management | • Embed thresholds into escalation pathways • Rehearse escalation scenarios with senior management • Communicate readiness to regulators, investors, and staff | FS: • Critical service continuity mapping • Outsourcing / vendor dependency
Non-FS: • Supply chain dependency ratios • Critical staff retention rates |
Refresh and Improve | Keep readiness dynamic and current | Update thresholds and scenarios as business evolves | • Run stress and reverse stress tests to confirm capacity • Refresh triggers annually or after significant market/regulatory changes • Feed lessons learned into governance loops | FS: • Reverse stress testing of solvency and liquidity
Non-FS: • Scenario analysis of supply chain disruption • Contractual exit cost modelling |
When this cycle is consistently applied, the organisation builds confidence that it can recognise emerging risks, act decisively at the right thresholds, and demonstrate governance maturity. By anchoring readiness to appetite, tolerance, and capacity, firms ensure that wind-down becomes part of their strategic discipline, not just a compliance exercise.
What Turns an Orderly Wind-Down into a Disorderly One
Even firms with detailed plans can face challenges if key drivers of disorder are not anticipated. The main tipping points are predictable, and they can be mitigated through effective business-as-usual readiness and careful planning.
Tipping Point | Why It Matters | How to Mitigate in BAU & Planning |
Late activation or unclear triggers | • Delays drain capital and liquidity • Opportunity to exit while solvent is lost | • Define clear thresholds tied to appetite, tolerance, and capacity • Link BAU monitoring dashboards to escalation pathways • Rehearse activation scenarios at board level |
Underfunded wind-down costs | • Shortfalls prevent client obligations being met • Creates reputational and regulatory risk | • Model realistic costs of closure (legal, IT, redundancy) • Maintain wind-down reserves in capital planning • Validate assumptions through stress testing |
Operational breakdowns | • Critical services disrupted (payments, data, client money) • Vendors may withdraw support under stress | • Map critical services and third-party dependencies supporting broader operating model • Build continuity and decommissioning playbooks • Test operational resilience through scenarios |
Weak governance and accountability | • Board paralysis or denial slows decision-making • Responsibility unclear in execution | • Assign ownership to specific roles (CRO, CFO, COO, etc.) • Define escalation pathways with authority levels • Incorporate independent NED challenge |
Poor stakeholder communication | • Regulators lose confidence • Clients panic, accelerating outflows • Media narratives drive reputational damage | • Develop pre-approved communication strategies • Tailor messaging for regulators, clients, employees, and investors • Train executives and founders as spokespersons |
Legal and compliance risks | • Mishandled client money or contracts create litigation • Breaches of CASS, data, or employment laws trigger penalties | • Embed legal review into wind-down planning • Build compliance sign-offs into execution playbooks • Test obligations through scenario rehearsals |
Phase 2: Planning (Designing the Playbook)
A credible wind-down plan translates readiness into a funded, tested, and actionable playbook. It sets out how the organisation will close in a solvent, controlled, and transparent manner. Each element of the plan directly addresses the risks that can turn a wind-down into disorder, ensuring the organisation can act with clarity and control.
Planning Step | Purpose | Connection to Disorder Risks | Practical Actions |
1. Define objectives and scope | Clarify what “orderly” means for the firm, and which entities, products, and geographies are covered | Prevents ambiguity and misalignment across leadership | • Document plan objectives and boundaries • Identify in/out of scope services and jurisdictions • Align with board-approved risk appetite |
2. Identify triggers and scenarios | Establish quantitative and qualitative thresholds for activation | Avoids delay, denial, or late activation | • Link thresholds to BAU monitoring (capital erosion, client loss, regulatory constraints, strategic withdrawal) • Use reverse stress testing to validate |
3. Assess financial feasibility | Model and provision for wind-down costs | Prevents underfunding shortfalls | • Cost scenarios for legal, IT, HR, communications, redundancy, and decommissioning • Set aside or ring-fence wind-down reserves • Validate with independent finance review |
4. Map critical services and dependencies | Identify client-facing and operational services that must be maintained | Reduces risk of operational breakdowns | • Map critical functions end-to-end and perform resource assessment • Document vendor/outsourcing dependencies • Build continuity and exit playbooks |
5. Protect client assets and obligations | Ensure safeguarding and repayment integrity | Avoids legal, compliance, and reputational risks | • Review CASS/client money arrangements • Define repayment sequencing for creditors and investors • Build legal sign-offs into plan |
6. Assign governance and accountabilities | Define who owns each part of the plan | Prevents governance paralysis | • Allocate roles (Board, CRO, CFO, COO, Legal, Comms) • Document escalation pathways and authority levels • Rehearse decision-making through scenarios |
7. Develop communication strategy | Tailor messages for all stakeholders | Prevents regulatory or reputational crises | • Draft pre-approved messages for regulators, clients, staff, investors • Prepare FAQs and media lines • Train founders/execs as crisis communicators |
8. Test and validate the plan | Ensure assumptions are realistic and the plan is workable | Surfaces weaknesses before execution | • Run wind-down stress tests • Review and challenge at Board/NED level • Update regularly as business evolves |
A plan built on these steps provides regulators with assurance, investors with confidence, and employees with clarity. More importantly, it allows boards and founders to act decisively when required, knowing the organisation has prepared a roadmap for closure that is credible, feasible, and responsible.
Phase 3: Execution (Delivering with Control)
Execution is the point where plans are tested under real pressure. An effective wind-down requires clear governance, disciplined delivery, and transparent communication. Each step ensures that obligations are met, stakeholders remain informed, and the business exits the market responsibly.
Execution Step | Purpose | Key Focus Areas | Practical Actions |
1. Activate the plan | Ensure timely, controlled initiation | • Board decision and formal trigger event • Regulator notification and engagement | • Document activation in board minutes • Notify regulators and key stakeholders immediately • Convene crisis governance forum |
2. Secure financial resources | Ring-fence funds for wind-down costs | • Capital and liquidity buffers • Wind-down reserve utilisation | • Segregate wind-down accounts • Monitor daily liquidity and capital positions • Engage auditors or external assurance if needed |
3. Communicate with stakeholders | Preserve trust and prevent disorder | • Regulators, clients, investors, employees, media | • Issue pre-approved communications • Hold staff briefings and investor calls • Activate media management protocols |
4. Maintain continuity of critical services | Protect clients until obligations are met | • Payment services, client money, asset safeguarding • Outsourced/vendor dependencies | • Operate critical functions to agreed timelines • Monitor vendors daily • Use exit playbooks for decommissioning |
5. Manage people and culture | Retain capability and support employees | • Critical staff retention • Responsible redundancy handling | • Offer retention packages where needed • Support staff through transparent HR processes • Communicate career transition support |
6. Control data and systems | Secure closure of technology and records | • Data protection • System decommissioning • Recordkeeping obligations | • Archive and safeguard client data • Decommission IT systems systematically • Ensure regulatory retention periods are met |
7. Repay and close out obligations | Honour all commitments | • Client money/assets • Creditors • Contractual exits | • Return safeguarded assets • Repay creditors per sequencing • Negotiate contract terminations responsibly |
8. Monitor and escalate risks | Maintain oversight through closure | • Operational risks • Legal/compliance issues • Reputational risks | • Use live risk dashboards • Escalate emerging risks to the board and regulators • Adjust execution steps as needed |
9. Finalise and document closure | Provide closure and accountability | • Regulatory filings • Lessons learned • Board accountability | • Complete filings with regulators • Conduct post-mortem lessons-learned review • Publish final report to board and key stakeholders |
A wind-down executed with control provides confidence to regulators, reassurance to clients, and trust to investors and employees. It demonstrates that leadership can act responsibly under stress and that the organisation remains accountable to its purpose even at the point of exit.
Financial and Capital Considerations
Financial strength is the foundation of any orderly wind-down. Without adequate capital, liquidity, and reserves, even the most detailed closure strategy cannot be delivered. Wind-down planning must therefore address solvency, funding, balance sheet run-off, creditor repayment, and board duties with precision. Regulators in the UK, EU, US, and globally now expect firms to demonstrate that these financial safeguards are in place before stress emerges.
Capital adequacy and liquidity buffers
Boards must ensure solvency and cash availability throughout the wind-down. Supervisors require firms to quantify and hold buffers above regulatory minima.
How to:
Integrate wind-down assumptions into ICAAP, ICARA, or equivalent.
Monitor daily liquidity against board-approved thresholds.
Stress-test rapid outflow scenarios to capture wind-down costs.
Regulatory lens: FCA WDPG, PRA SS3/19, EBA IFR/IFD, US Dodd-Frank 165(d), Basel Key Attributes.
Funding wind-down costs and reserves
The costs of closure—redundancies, IT decommissioning, legal and advisory fees, contract exits—must be identified and funded in advance.
How to:
Build a bottom-up cost model with input from each function.
Ring-fence reserves for wind-down execution.
Validate assumptions independently (finance, internal audit).
Regulatory lens: FCA requires costed wind-down plans; EBA mandates “credible estimates of costs”; Fed/FDIC require funding sources in resolution plans.
Balance sheet run-off
Wind-down requires orderly asset realisation and liability management. Supervisors expect firms to map and sequence disposals to avoid disorderly markets.
How to:
Categorise assets by ease of disposal and expected valuation.
Develop an asset realisation plan with timelines and fallback options.
Identify and provision for contingent liabilities.
Regulatory lens: PRA and EBA require asset/liability mapping; FDIC mandates detailed asset disposition strategies.
Repayment sequencing for creditors and investors
Trust is preserved through clear repayment waterfalls that prioritise clients, then creditors, and only lastly shareholders.
How to:
Document repayment sequencing in the wind-down plan.
Pre-agree key elements with regulators where possible.
Independently verify reconciliations of client or safeguarded money.
Regulatory lens: UK CASS rules, EU BRRD creditor hierarchy, US Bankruptcy Code and OLA, Basel emphasis on protecting client assets.
Directors’ responsibility to preserve solvency
Fiduciary duties extend into wind-down. Boards must evidence that solvency is preserved and creditor interests safeguarded.
How to:
Record solvency and liquidity judgments in board minutes.
Make solvency a standing agenda item during execution.
Engage auditors and regulators with full transparency.
Regulatory lens: UK Companies Act and SMCR, EU BRRD duties, US fiduciary duties, Basel principles on governance roles.
Residual Value and Shareholder Considerations
While the primary objective of a wind-down is to protect clients, creditors, and the financial system, firms must also consider whether residual value can be returned to shareholders once all obligations are met. Regulators expect this to be approached conservatively and only after compliance with legal and fiduciary duties.
When shareholders may retain value
Residual distributions are possible if the firm remains solvent, obligations are fully discharged, and wind-down costs are covered.
How to:
Assess solvency under multiple closure scenarios.
Verify all creditor and client obligations are settled.
Commission independent confirmation before authorising distributions.
Regulatory lens: UK Companies Act requires directors to prioritise creditors once solvency is uncertain; EU BRRD and national insolvency laws set creditor-first hierarchies; US Bankruptcy Code and fiduciary standards prohibit premature shareholder returns.
Strategies to reduce wind-down costs
Lower costs increase the likelihood of residual value. Early planning and lean execution can make a significant difference.
How to:
Negotiate exit clauses in key contracts to reduce penalties.
Plan early asset disposals to maximise value and liquidity.
Streamline IT and operational decommissioning to avoid duplication.
Regulatory lens: FCA and EBA both expect realistic cost modelling; supervisors may challenge overly optimistic assumptions that inflate potential distributions.
Tax considerations and structuring
Tax-efficient structuring of asset disposals or distributions can protect value during wind-down.
How to:
Seek early tax advice on asset disposals and final distributions.
Optimise sequencing of disposals to reduce tax leakage.
Document tax assumptions transparently for board and regulator review.
Regulatory lens: While regulators do not prescribe tax approaches, they require transparent disclosure of methodologies to ensure assumptions are credible.
Guardrails for directors
Directors must balance shareholder interests with fiduciary duties to creditors and regulators. Distributions made too early can create personal liability risks.
How to:
Ensure distributions are only authorised once independent assurance confirms obligations are satisfied.
Record rationale and evidence in board minutes.
Maintain transparent dialogue with regulators throughout.
Regulatory lens: UK SMCR, EU company law, and US fiduciary duties all make directors personally accountable if solvency or creditor rights are compromised.
Financial & Shareholder Considerations: Board Reference Summary
Area | Objective | How to (Methodology) | Regulatory Lens |
Capital adequacy & liquidity buffers | Maintain solvency and cash through wind-down | • Integrate wind-down assumptions into ICAAP/ICARA • Monitor daily liquidity vs thresholds • Run outflow stress scenarios | FCA WDPG, PRA SS3/19, EBA IFR/IFD, US Dodd-Frank 165(d), Basel Key Attributes |
Funding wind-down costs & reserves | Pre-fund closure costs (HR, IT, legal, contracts) | • Build bottom-up cost model per function • Ring-fence wind-down reserves • Validate assumptions independently | FCA requires cost estimates; EBA mandates “credible cost modelling”; Fed/FDIC require funding sources in resolution plans |
Balance sheet run-off | Dispose of assets and manage liabilities responsibly | • Categorise assets by ease of disposal • Develop asset realisation plan with fallback • Identify/provision contingent liabilities | PRA expects exit without disorderly impact; EBA requires asset/liability mapping; FDIC mandates asset disposition strategies |
Repayment sequencing | Prioritise clients and creditors before shareholders | • Document repayment waterfall • Pre-agree elements with regulators • Verify client money reconciliations independently | UK CASS, EU BRRD, US Bankruptcy Code & OLA; Basel protects client assets first |
Directors’ responsibility | Preserve solvency & fiduciary duties throughout | • Record solvency judgments in minutes • Make solvency a standing agenda item • Engage transparently with regulators & auditors | UK Companies Act & SMCR; EU company law & BRRD; US fiduciary duties; Basel on governance clarity |
Residual value for shareholders | Distribute value only after obligations met | • Verify solvency across closure scenarios • Commission independent assurance • Document board rationale | Company law in UK/EU/US prioritises creditors; distributions before obligations = director liability |
Strategies to reduce costs | Increase chance of residual distributions | • Negotiate exit clauses • Plan early asset disposals • Streamline IT/ops decommissioning | Regulators expect realistic, conservative assumptions |
Tax optimisation | Protect value during disposals/distribution | • Obtain early tax advice • Sequence disposals tax-efficiently • Disclose assumptions transparently | Regulators don’t prescribe tax, but expect transparent disclosure |
Guardrails for directors | Avoid premature distributions & liability risk | • Authorise only after independent confirmation • Record rationale in minutes • Maintain dialogue with regulators | UK SMCR, EU duties, US fiduciary law — directors personally liable for breaches |
Operational Execution and Continuity
Executing an orderly wind-down requires more than financial readiness. Operational continuity is critical to protect clients, employees, and counterparties until obligations are fully discharged. Boards and executives must ensure that critical services, third-party dependencies, staff, systems, and legal obligations are mapped and managed through closure. Strong execution planning demonstrates that business closure can be carried out with control, transparency, and resilience.
Critical service continuity
The priority is to sustain services essential to clients and market integrity throughout the wind-down period.
How to:
Map critical services end-to-end, including client-facing and infrastructure functions.
Develop continuity playbooks with timelines for service delivery and decommissioning.
Identify minimum staffing and resource levels for each critical service.
Regulatory lens: PRA and FCA require mapping of “important business services”; EBA and Basel emphasise continuity of critical functions in recovery and resolution.
Wind-Down and Operational Resilience: Connected Disciplines
Operational resilience and orderly wind-down are two sides of the same coin. Both require firms to identify critical services, map dependencies, and test delivery under stress.
Operational resilience ensures the firm can continue to operate within defined impact tolerances during disruption.
Wind-down planning ensures the firm can close responsibly while still protecting clients and preserving market integrity.
Both frameworks share four core components:
Service and dependency mapping
Stress and scenario testing
Minimum resource and staffing analysis
Third-party oversight
When designing these frameworks, risk functions can avoid duplication, strengthen governance, and show regulators that continuity and closure are managed as part of one integrated strategy.
Third-party and outsourcing dependencies
Vendors and service providers can accelerate disorder if contracts lapse or support is withdrawn under stress.
How to:
Maintain a register of critical third-party dependencies.
Build contingency arrangements (back-up providers or internal alternatives).
Regulatory lens: FCA Operational Resilience rules, EBA outsourcing guidelines, and US OCC/FDIC vendor management guidance all require oversight of third-party risk.
People and culture
Staff retention and engagement are vital to deliver the plan. Poor handling of people risks can disrupt execution and damage reputation.
How to:
Identify critical staff and prepare retention or incentive packages.
Communicate transparently with employees on timelines and support.
Plan for redundancies with full compliance to labour law.
Regulatory lens: Regulators expect firms to evidence how critical staff will be retained; employment law governs redundancy obligations.
Technology and data
IT systems and data management are often underestimated in wind-down. Failure here can compromise client protection and regulatory compliance.
How to:
Maintain an inventory of core systems and their decommissioning requirements.
Archive client and transaction data securely in line with retention rules.
Plan system shut-downs to avoid interrupting critical services prematurely.
Regulatory lens: FCA and PRA require compliance with data retention and CASS rules; GDPR in the EU and equivalent laws globally impose obligations for data handling.
Legal and compliance oversight
Legal and compliance teams must ensure obligations are met and risks managed during execution.
How to:
Map statutory and contractual obligations during closure.
Build compliance checkpoints into execution playbooks.
Engage regulators proactively on progress and emerging issues.
Regulatory lens: FCA/PRA require legal sign-offs on CASS and safeguarding compliance; US SEC/FINRA require procedures for client asset return; EU BRRD requires adherence to insolvency and resolution frameworks.
Risk and Scenario Testing
Testing validates that a wind-down plan is workable in practice. It should cover impact assessment, financial and non financial resources, operational resilience, client obligations, reputational impact, and stakeholder confidence. We invite you to read our Scenario Testing & Impact Tolerance tutorial for more details.
Sector Applications and Strategic Options
The practical challenges of an orderly wind-down vary by sector. FinTechs face scrutiny from investors and supervisors on governance maturity. Payment institutions and EMIs must prioritise safeguarding client funds. Asset managers must ensure investor redemptions are managed responsibly. Cross-border firms need to navigate multiple legal and regulatory regimes. Boards should also consider strategic alternatives such as M&A or partial exits alongside full wind-down planning.
Fintechs
For fintechs, especially founder-led firms, regulators and investors scrutinise governance maturity as closely as financial performance. A poorly managed wind-down can damage investor trust and the wider sector’s reputation.
How to:
Build wind-down into investor communications and funding rounds.
Demonstrate credible safeguarding and client protection mechanisms.
Avoid over-optimistic assumptions on exit valuations or buyer appetite.
Common pitfall: treating wind-down as a compliance checkbox rather than a signal of governance credibility.
Payment Institutions and Electronic Money Institutions (EMIs)
The central challenge is safeguarding client funds. Regulators expect wind-down plans to show how client money will be protected, reconciled, and returned swiftly.
How to:
Maintain robust CASS compliance or equivalent safeguarding arrangements.
Ensure reconciliations are up to date and independently verified.
Prepare communication templates to reassure clients during repayment.
Common pitfall: underestimating the operational burden of large-scale client repayments.
Asset Managers
For asset managers, wind-down typically means fund closure and investor redemptions. The priority is ensuring orderly liquidation of portfolios and fair treatment of investors.
How to:
Develop fund closure playbooks aligned to liquidity and redemption profiles.
Stress-test redemption scenarios under market stress conditions.
Engage proactively with depositaries, custodians, and regulators.
Common pitfall: assuming market liquidity will remain available for asset disposals.
Cross-Border Firms
Firms operating across jurisdictions face additional complexity in wind-down planning. Conflicting regulatory regimes, insolvency laws, and client protection rules can create fragmentation risks.
How to:
Map regulatory requirements across jurisdictions (licensing, insolvency, client money).
Establish a lead entity and governance forum for wind-down coordination.
Engage supervisors in each jurisdiction early to align expectations.
Common pitfall: failing to account for time and cost of multi-jurisdiction compliance.
SMEs and Mid-Market Enterprises (MMEs)
For SMEs and MMEs, wind-down planning is often overlooked until crisis, even though these firms face the highest closure rates. A proportionate, structured plan can make the difference between disorderly collapse and controlled exit.
How to:
Monitor cash runway and covenant compliance closely.
Map exit costs such as leases, supplier contracts, and debt obligations.
Create simple playbooks for creditor communication and staff redundancy.
Common pitfall: neglecting planning on the basis of size, which leaves boards unprepared when liquidity shortfalls hit.
Banks
Banks face the most stringent requirements, given their systemic importance. Even non-systemic banks must align wind-down planning with recovery and resolution regimes.
How to:
Integrate wind-down with recovery and resolution planning frameworks.
Demonstrate continuity of critical functions and client protection.
Prepare detailed creditor repayment and bail-in sequencing where required.
Common pitfall: assuming regulatory resolution frameworks will solve everything, leading to underdeveloped internal wind-down plans.
Non-Profits and Charities
For charities, the challenge lies in safeguarding donor funds, protecting beneficiaries, and maintaining reputation. Closure planning must balance fiduciary duties with mission continuity.
How to:
Map funding commitments and obligations to donors and beneficiaries.
Plan for orderly transfer of programmes or services to alternative providers.
Ensure compliance with Charity Commission or equivalent oversight.
Common pitfall: failing to communicate transparently with beneficiaries and stakeholders, creating reputational harm beyond the closure itself.
Strategic Options: Alternatives to Full Wind-Down
An orderly wind-down is not the only exit path. Boards and founders should also consider alternatives that preserve value.
Options include:
Mergers & Acquisitions (M&A): selling the business or key assets to a strategic buyer.
Partial wind-downs: exiting certain business lines while retaining core activities.
Strategic exits: transferring client contracts or portfolios to third parties.
How to:
Run options analysis in parallel with wind-down planning.
Maintain data rooms and due diligence readiness for potential buyers.
Build decision criteria for when to pursue M&A vs wind-down.
Stakeholder and Communication Strategy
Communication is one of the most decisive factors in determining whether a wind-down remains orderly. Confidence must be maintained across multiple audiences, each with distinct expectations. Boards and executives should prepare a structured communication plan that ensures consistency, timeliness, and credibility.
Stakeholder | What They Need | Communication Approach | Practical Tips |
Regulators | • Confidence that the process is solvent and controlled • Assurance that clients are protected and obligations are met | • Transparent, early, and ongoing engagement • Formal notifications supported by data | • Share plan activation promptly • Provide regular progress updates • Offer evidence of client protection and liquidity monitoring |
Clients & Investors | • Clarity on timelines • Reassurance about return of funds/assets • Fair treatment vs other stakeholders | • Direct and proactive communication • FAQs and dedicated helpdesks | • Issue clear repayment/redemption schedules • Provide regular updates on progress • Monitor sentiment and adjust messaging |
Creditors | • Certainty on repayment sequencing • Opportunity to negotiate where needed | • Structured, factual updates • Negotiation through formal channels | • Share repayment waterfall early • Document and confirm settlements • Avoid overpromising |
Employees | • Transparency on job security and timelines • Fair redundancy processes and support | • Early, honest, and responsible communication • Mixture of group briefings and 1:1 discussions | • Identify and retain critical staff • Offer retention packages where required • Provide career transition and wellbeing support |
Media & Public | • A consistent narrative that prevents reputational damage | • Coordinated press releases and media briefings • Alignment across leadership team | • Prepare Q&A packs • Avoid speculation or mixed messages • Monitor public sentiment |
Founders / CEOs | • Often the public face of the wind-down | • Lead spokesperson role for regulators, investors, and media | • Be visible and consistent • Balance transparency with reassurance • Signal responsibility and accountability |
Why this matters
For regulators, timely communication signals competence and reduces supervisory intervention.
For clients, investors, and creditors, clear messaging preserves trust and minimises panic.
For employees, responsible handling protects culture and supports execution.
For the media and public, a consistent narrative prevents reputational collapse.
For founders and CEOs, credibility in communication reinforces personal leadership and demonstrates maturity.
Emerging Practices and Future Outlook
Wind-down planning is evolving beyond compliance into a discipline that reflects innovation, culture, and stakeholder expectations. The next generation of practices combines digital tools, sustainability considerations, and cultural accountability to create more credible and resilient exit strategies.
AI-enabled simulations
Artificial intelligence is being used to test wind-down plans under a wide range of market, liquidity, and operational scenarios. Machine learning can model interdependencies, identify weak points, and generate early-warning signals that traditional stress testing might overlook. For boards, this provides richer assurance that plans are realistic and adaptive.
Digital tools for scenario modelling and cost control
Specialised platforms now allow firms to model wind-down costs dynamically, track reserves, and simulate different exit strategies. These tools create transparency by linking operational assumptions to financial outcomes, giving executives and regulators a shared view of feasibility.
ESG considerations in closure
Wind-down planning is increasingly linked to environmental, social, and governance (ESG) expectations. Responsible treatment of clients, staff, and communities is now a factor in regulatory and investor confidence. Firms that demonstrate social responsibility in closure — fair redundancy practices, timely client repayment, community engagement — protect reputation and differentiate themselves in future ventures.
Culture and conduct as differentiators
Culture remains a decisive factor in whether wind-down is managed responsibly. Boards and founders who embed accountability, transparency, and fair dealing into the process not only meet regulatory expectations but also signal integrity to stakeholders. Over time, cultural maturity in closure will become a competitive differentiator, especially for founder-led and investor-backed firms.
Looking ahead
The future of wind-down planning lies in making it dynamic, technology-enabled, and culturally aligned. Firms that embrace AI simulations, digital modelling, ESG accountability, and strong conduct standards will be better equipped to manage closure as a demonstration of resilience rather than a failure of governance.
Interfaces with Insolvency and Restructuring
Even the best-prepared wind-down plans may intersect with insolvency law or restructuring processes. Boards and founders must understand where voluntary control ends and statutory obligations begin, as this determines how much flexibility they retain and how stakeholders are treated.
Early warning systems
Turnaround specialists emphasise the importance of spotting distress signals early, when more options are available.
How to:
Monitor liquidity squeezes, covenant breaches, arrears with suppliers, and payroll strain.
Establish escalation triggers for when external advisors should be engaged.
Use scenario testing to anticipate when wind-down becomes unavoidable.
Why it matters: Early identification creates room for consensual solutions before insolvency law dictates outcomes.
Legal pathways and statutory processes
Voluntary wind-down may overlap with formal insolvency frameworks once solvency is at risk.
How to:
Map the relevant legal regimes: administration or liquidation (UK), Chapter 7/11 (US), special resolution (FS), BRRD/SRB (EU).
Define board duties under company law: once insolvency risk arises, directors must prioritise creditors’ interests.
Plan for handover to insolvency practitioners if required.
Why it matters: Boards must know when discretion ends and statutory processes begin to avoid personal liability.
Creditor management and negotiation
Managing creditors effectively can preserve value and prevent disorder.
How to:
Explore standstill agreements to buy time for wind-down or restructuring.
Negotiate consensual settlements or debt-for-equity swaps where viable.
Stage communications to maintain trust and prevent creditor “runs.”
Why it matters: Well-managed creditor relations reduce litigation and increase the chance of preserving residual value.
Contingent liabilities
Hidden obligations often undermine wind-down feasibility.
How to:
Identify pensions, tax exposures, environmental liabilities, and litigation risks early.
Build provisions into the financial model.
Engage specialist advisors to structure settlements or insurance solutions.
Why it matters: Transparent handling of contingent liabilities prevents surprises that derail closure.
Role of external advisors
Independent advisors bring credibility, experience, and technical expertise.
How to:
Define clear points at which restructuring advisors, insolvency practitioners, or legal counsel are engaged.
Balance cost against the value of preserving solvency and credibility.
Use external assurance to strengthen regulator and investor confidence.
Why it matters: Bringing advisors in at the right time signals maturity and may open strategic options beyond full wind-down.
Sector-specific regimes
Some industries have special frameworks that alter the wind-down process.
Examples include:
Financial services: special resolution regimes (Bank of England, SRB, FDIC/OLA).
Critical national infrastructure: utilities, healthcare, airlines often face continuity requirements.
Non-profit/charities: additional fiduciary duties and community obligations.
Why it matters: Sector overlays shape both regulatory expectations and reputational outcomes.
Key message for boards and founders
Wind-down is rarely a self-contained exercise. It often intersects with insolvency law, creditor negotiations, and special regimes. Anticipating these interfaces ensures boards remain in control, directors meet fiduciary obligations, and value is preserved where possible.
Roles and Responsibilities in an Orderly Wind-Down
Clear roles are essential for credibility. A wind-down requires coordination across governance, risk, finance, operations, and communications. Mapping responsibilities across business-as-usual, planning, and execution ensures that all leaders understand their accountabilities and that regulators see a cohesive approach.
Role | BAU (Preparedness) | Planning (Designing Playbooks) | Execution (Delivering with Control) |
Board of Directors | • Approve risk appetite, tolerance, and capacity • Oversee readiness cycle • Receive regular reporting | • Approve the wind-down plan and funding model • Set activation thresholds and escalation rules | • Activate plan at trigger • Maintain governance and solvency oversight • Ensure stakeholder interests protected |
NEDs | • Provide independent challenge to BAU monitoring • Ensure culture of escalation | • Test assumptions and stress scenarios • Assure proportionality and credibility of plan | • Hold management accountable • Challenge execution pace and transparency |
Founders | • Demonstrate maturity to investors and regulators • Set governance tone | • Engage investors and regulators in planning • Signal balance of ambition with accountability | • Act as public face of closure • Lead communication with investors, regulators, and clients |
CEO | • Integrate wind-down readiness into strategy • Maintain external confidence | • Ensure alignment between strategy, risk, and wind-down plans • Allocate resources | • Lead execution and external stakeholder engagement • Maintain overall credibility |
CRO | • Monitor triggers, risk metrics, and scenarios • Report breaches to board | • Define wind-down triggers and scenarios • Liaise with regulators on risk feasibility | • Monitor risk exposures during execution • Maintain regulator engagement |
CFO | • Oversee financial buffers and liquidity monitoring • Report solvency to board | • Build funding model and cost estimates • Define repayment waterfall | • Manage liquidity daily • Execute creditor repayment and financial reporting |
COO | • Ensure operational resilience and service mapping • Maintain vendor oversight | • Develop operational playbooks • Plan vendor exits and decommissioning | • Deliver continuity of critical services • Manage vendor transitions and shutdowns |
Legal / Compliance | • Track regulatory obligations • Maintain SMCR clarity | • Prepare regulatory filings and approvals • Map statutory and contractual obligations | • Execute filings and notifications • Ensure compliance with laws and regulatory conditions |
HR | • Monitor cultural indicators and retention risks • Support preparedness training | • Develop staff retention and redundancy plans • Build employee communication strategy | • Deliver redundancies and retention incentives • Provide career transition support |
Communications / PR | • Maintain reputational monitoring • Prepare draft comms protocols | • Develop stakeholder messaging (regulators, clients, employees, media) • Build Q&A and media packs | • Execute communications consistently • Manage media and stakeholder queries |
Conclusion: From Obligation to Strategic Discipline
Wind-down is often framed as a regulatory obligation. In reality, it is a demonstration of strategic discipline. Firms that approach wind-down as a living capability — integrated into governance, financial planning, operations, and culture — show resilience and foresight, not weakness.
For boards and NEDs, serious engagement with wind-down planning strengthens oversight and reinforces accountability. For founders and CEOs, it is a mark of credibility with investors, regulators, and clients. For the organisation as a whole, it is an assurance that obligations will be met responsibly, even under stress.
A well-executed wind-down is not a sign of failure. It is the ultimate test of governance maturity. Leaders who treat wind-down as a strategic discipline protect resilience, preserve trust, and leave behind a reputation for responsibility and integrity.
About the Author: Julien Haye
Managing Director of Aevitium LTD and former Chief Risk Officer with over 26 years of experience in global financial services and non-profit organisations. Known for his pragmatic, people-first approach, Julien specialises in transforming risk and compliance into strategic enablers. He is the author of The Risk Within: Cultivating Psychological Safety for Strategic Decision-Making and hosts the RiskMasters podcast, where he shares insights from risk leaders and change makers.
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