How to draft a solvent wind-down plan

A solvent wind-down plan (SWP) is essentially a formal 'exit strategy' that proves to regulators and stakeholders that you can close your business responsibly while you still have enough cash to pay your debts. The most critical part of this task is identifying the specific 'triggers'—such as your capital falling below a certain level—that would force you to start the closure process to avoid an insolvent (bankrupt) collapse.

Why this plan is essential

In the fintech world, the Financial Conduct Authority (FCA) wants to know that if your startup fails, it won't cause 'contagion' in the market or leave customers unable to access their money. Even if you are not yet fully regulated, drafting this now demonstrates a high level of professional maturity and is a common requirement during the authorisation process. It protects your reputation and ensures that your final act as a business owner is handled with integrity.

Step 1: Define your wind-down triggers

You need to decide, in advance, exactly when you will stop fighting for the business and start the wind-down. This prevents the 'sunk cost fallacy' where founders spend every last penny trying to save a failing venture. Typical triggers include:

• Capital levels: Your cash reserves drop below a specific threshold (e.g., three months of operating costs).
• Strategic failure: A failed funding round or the loss of a critical banking partner that cannot be replaced.
• Regulatory breach: An inability to meet FCA threshold conditions that cannot be rectified quickly.

Step 2: Estimate the costs of closing

Closing a business isn't free. You must calculate the 'wind-down costs' to ensure you always keep enough cash in the bank to cover them. Use a table like the one below to categorise these costs:

Step 3: Create a communication strategy

How you tell the world you are closing is vital. Your plan must include a timeline and templates for communicating with different groups:

• Customers: Clear instructions on how to withdraw their funds and when the service will officially end.
• Regulators (FCA): A formal notification strategy to keep them updated on the progress of the wind-down.
• Suppliers: Notice periods for terminating contracts to avoid legal disputes.

Step 4: Operational execution

List the step-by-step actions required to physically stop operations. This includes things like 'switching off' the ability for new customers to sign up, disabling deposit features, and eventually archiving data in line with GDPR requirements. You should also appoint a 'Wind-down Lead'—someone responsible for overseeing the entire process if it is ever triggered.

Tip: Review your wind-down plan at least once a year. As your business grows and your tech stack becomes more complex, the cost and time required to wind down will likely increase.

Best practices for a robust plan

Be realistic, not optimistic. When estimating how long a wind-down will take, most fintechs find it takes between 3 to 9 months to fully exit the market and return all customer assets. Ensure your financial projections always set aside enough 'restricted' cash to cover this period, so you never accidentally dip into the money needed for an orderly exit.