How much does liquidation cost? What we can say, and what to ask

“How much does liquidation cost?” is one of the most common questions directors ask, and one of the hardest to get a straight answer to. We looked. No official or reputable source publishes average liquidation costs in New Zealand, and many firm pages with that exact heading don’t give a number either. So we won’t invent one. What we can do is explain how the costs work, who bears them, and how to protect yourself.

How are liquidation costs paid?

Usually from the company’s own assets. When assets are sold or money recovered, the law sets the order of payment. According to the Insolvency and Trustee Service, the liquidator’s fees, expenses and remuneration come first, followed by court costs and preferential claims such as employee wages for the four months before liquidation, and then other unsecured creditors (insolvency.govt.nz).

Two consequences follow:

• Every dollar of cost reduces what other creditors receive, including IRD and your suppliers.
• If there are few assets, some practitioners ask directors or shareholders to fund the process upfront, or the liquidator may recover costs from money owed to the company, such as an overdrawn current account.

What drives the cost?

Factor	Why it matters
Size and complexity	More assets, contracts and creditors mean more work
Records	Poor or missing records take longer to reconstruct
Investigations	Director conduct, related-party transactions and current accounts
Asset sales	Valuations, agents and legal work
Disputes and litigation	Recovery actions against directors or third parties
Court involvement	Court-ordered liquidations involve legal steps and reporting

In general terms, formal insolvency processes can run into tens or even hundreds of thousands of dollars in professional fees for larger or more complex companies. The actual figure for your company depends on these factors, which is why a written estimate matters.

Who keeps an eye on liquidator fees?

Several layers of oversight exist:

• The courts. Courts can review and reduce liquidator remuneration. A licensed firm’s summary of one 2020 case describes reductions of 25% and 67% (McDonald Vague, secondary).
• NZICA, the accredited body that licenses insolvency practitioners, handles complaints including about overcharging (Companies Office).
• The Companies Office. Its oversight plan for July 2024 to June 2028 includes analysing liquidation reports on recoveries, fees and creditor distributions (plan).
• Professional standards. The NZ Insolvency Services Standard strengthens fee-transparency rules and bans commissions and referral fees.

Before you pay for a liquidation, check whether paying IRD is possible instead. Talk to a funder, with no credit check to enquire.

What should you ask before appointing anyone?

Get answers in writing:

1. Are you a licensed insolvency practitioner? What’s your name on the register?
2. How will your fees be calculated? Hourly rates, fixed fees, or a mix?
3. What’s your written estimate for a company like ours, and what could push it higher?
4. Who pays if company assets don’t cover your fees?
5. Will you pursue our current accounts or guarantees as part of recovering costs?
6. How often will you report and update the estimate?
7. Where can we complain if we’re unhappy with fees? (NZICA, through CA ANZ.)

Our printable questions to ask any adviser checklist covers these and more.

What are the hidden costs for directors?

The practitioner’s invoice isn’t the only cost of liquidation. Directors often also face:

• personal guarantees called up by banks, landlords and suppliers;
• current account recovery, if they’ve drawn more than they put in;
• lost value, because assets sold in a liquidation often fetch less than in a going concern;
• lost income, as the business stops; and
• time and stress through investigations and reports.

See personal guarantees and current accounts.

How does that compare with clearing the debt?

A loan to pay IRD has a known total cost, set out in writing before you sign. It keeps the business trading and leaves guarantees and current accounts untouched. It isn’t right for every business, but where the business is viable, comparing the full cost of liquidation with the total cost of finance is worth doing. Our alternatives to liquidation page sets out every option.

An illustrative example

Illustrative only. Not a real client and not an offer.

The director of a Whangārei retail company owing IRD about $95,000 was told a liquidation would be “affordable”. He asked for a written estimate and learned it depended on what the liquidator recovered, including his overdrawn current account of $60,000. Adding his landlord’s personal guarantee, liquidation looked far more expensive than it first appeared. The business had steady sales, so he used a cash-flow loan to clear IRD instead.

Why are “no upfront fee” offers worth questioning?

Some firms advertise free consultations or no upfront fees. That can be genuine and helpful, but it doesn’t mean the process is free. Fees are usually recovered from the company’s assets later, ahead of other creditors, which can include money recovered from directors’ current accounts. Ask how the practitioner will be paid, from what, and roughly how much. A clear answer is a good sign. Our warning signs checklist lists the answers that should make you pause.

Get the full picture first

If you’re being quoted for a liquidation, talk to us before you sign. Enquiring doesn’t involve a credit check, your details aren’t sold or shared with other lenders, and a real person will give you an honest comparison. Be accurate about the IRD debt, guarantees and the current account, so we can tell you whether funding is a realistic alternative.