Nobody opens an investment platform thinking about how it will close. You are worried about quality deal flow, having enough investors, building the team, having enough funding and making sure you comply with all the regulations. Wind-down planning can feel like a bit of a buzz kill.
Every AR we work with produces a wind-down plan that we review pre-application and as part of our ongoing monitoring. The reason to take it seriously is not for the FCA. It is that if a firm winds down badly, the people who pay the price are customers, staff and counterparties rather than the regulator. A plan that has been properly worked through is most of what separates an orderly exit from a chaotic one, and the people relying on you to do it well do not get a say on the day.
Opening capital is not the same as closing capital
When a firm wants to start doing regulated activities, the natural focus is having enough capital to start trading. The less-discussed number is having enough capital, and liquid enough resources, to stop trading in an orderly way at some future point when revenue is falling, costs are fixed, and some of your best people will reasonably want to leave.
Opening capital is the money to get going. Wind-down capital is the money to get out. They are different calculations, and the wind-down number can be the bigger of the two.
A plan that is a dusty document is mostly a document
A plan written two years ago, never looked at since, and hard to find is really a document rather than a plan. The FCA’s WDPG makes this point with the phrase "living document", which is fair enough.
In practice an annual refresh works on top of event-driven updates: new product line, new funding round, loss of a major deal, change of senior management. The list matters less than the habit of reopening the document and asking whether it still describes how the firm actually runs.
Early warning triggers belong in the monthly pack
Triggers are worth agreeing in calm weather rather than once the amber lights are flashing. They are not the decision to wind down. They are the point at which the Board agrees to pay closer attention.
What we expect to see:
- Cash runway at current burn.
- Regulatory capital headroom.
- Movement in a handful of operational metrics (complaints, incidents, team capacity).
Not rocket science, the kind of reporting a well-run firm already has, made explicit as wind-down trigger points so the Board knows what it is looking for.
The four sections, with the bits that slip through
The WDPG sets out the four-section structure. Most readers will know it. What follows is what we tend to find thin or missing when we read an AR's plan, not a walk-through of the basics.
1. Governance (WDPG App 6)
The plan is a Board document, so it needs to say what the Board actually does. The pieces that tend to be thin in first drafts:
- The scenarios. Different triggers need different responses.
- The escalation path and the information pack the Board will want in front of it, not just "the Board will decide".
- The reporting line once a wind-down is triggered: who talks to who.
2. Operational analysis (WDPG App 8)
This is where the plan earns its keep, it is a sequence rather than a list. Things that tend to get underdone:
- How investors keep receiving returns, statements and issuer updates through the run-off. If you rely on a platform (ours or anyone else's), the dependency needs to be named and costed. If the plan is to run off without a platform, describe how that actually works day to day.
- How issuers and borrowers keep being serviced: repayments, late payments, default management.
- The communications plan. Who hears what, in what order, with what holding statement. Investors, clients, counterparties and staff.
- People dependencies, and the single points of failure hiding inside them.
- The redundancy and retention plan. Retention payments to keep essential staff through to the end are not a luxury, they are what gets the job done.
- Which systems stay up, for how long, and at what cost. Obligations around client records do not disappear.
3. Estimated revenue and costs (WDPG App 9)
A month-by-month forecast of revenue and costs across the wind-down period is the usual approach. The bits people tend to miss or underestimate:
- Cash flow timing mismatches. A firm that is solvent on a full-year view can run out of cash in month three.
- Ongoing liabilities (rent, payroll, software) that do not pause because you have announced a wind-down.
- Platform costs.
- Redundancy, notice pay and retention premiums.
- Professional fees, which tend to rise in a wind-down rather than fall.
- PII run-off cover. Cover for the tail does not end when trading ends, and it is not cheap.
One sensitivity worth running: the wind-down starting from a cash-stressed position rather than a comfortable one.
4. Resource assessment (WDPG App 10)
Can the plan actually be done with the liquid resources you have and the revenue you are forecasting? If not, something has to give: either the plan or the capital.
Non-financial resources matter as much. People leave when the news is out, so the staffing plan needs to assume attrition and price in what it takes to keep the people you genuinely need.
ShareIn's expectation
If you are an Appointed Representative of ShareIn, we expect a plan covering the four sections, shared with us and reviewed together as part of our ongoing monitoring.
The counter-intuitive thing about a decent wind-down plan is that having one makes it less likely you will ever need to use it. The habit of thinking about cash, concentration and key-person risk tends to make a firm more durable, not less.