Wind down is the controlled process of closing a company — converting remaining assets to cash, settling obligations, and dissolving the corporation.

How it works

Typical steps:

1. Board decision — declare insolvency or strategic shutdown
2. Employee matters — WARN notices where required, final pay, COBRA, option expiration windows
3. Asset sale — IP, customer contracts, equipment via acqui-hire, auction, or assignment
4. Creditor payments — secured debt, unsecured vendors, taxes per legal priority
5. Distribution to shareholders — usually nothing remains after debt if venture-backed
6. Dissolution — Delaware certificate of dissolution, final tax filings

Alternatives include Assignment for Benefit of Creditors (ABC) or bankruptcy Chapter 7/11 — legal counsel chooses path based on liability exposure.

Venture debt and SAFEs/notes complicate timing — lenders may block asset transfers until negotiated. Investors may fund minimal wind down if acqui-hire salvage remains.

Why it matters

• Founders: Transparent communication preserves relationships for your next company. Do not strip IP improperly — fraud triggers personal liability.
• Investors: Portfolio write-offs finalize; reserves reallocate. Clean wind downs reduce litigation drag.

Common mistake

Delaying wind down while burning last cash on low-probability saves — turning an acqui-hire opportunity into zero recovery and angry creditors.

Related ideas

See also write-off, zombie company, and ABC assignment.