Quick answer
In a liquidation, a licensed insolvency practitioner takes control of the company, sells its assets, investigates its affairs and pays creditors in a set order, with the liquidator's own fees and expenses paid first. The liquidator's duties run to creditors, not to the directors. Directors must help, including with a statement of the company's affairs. Personal guarantees survive, and the liquidator checks whether directors or shareholders owe the company money.
A note on who's writing this. We're a business lender, not an insolvency firm or liquidator, and we earn nothing from any appointment. Before you sign anything, read who to call first and check any practitioner on the Companies Office register.
Key points
- A liquidator must be a licensed insolvency practitioner and acts in the interests of creditors.
- Liquidator fees, expenses and remuneration are paid first, then court costs and certain employee claims.
- The liquidator investigates the company's failure, director conduct and money owed by directors or shareholders.
- First reports are due within 25 working days for court-ordered liquidations, then every six months.
- Who runs it
- Licensed insolvency practitioner
- Works for
- Creditors as a whole
- Paid first
- Liquidator's fees and expenses
- First report (court-ordered)
- Within 25 working days
Liquidation is often described in a single sentence: the company is wound up and its debts go with it. The reality has more moving parts, and several of them affect directors personally, sometimes for years afterwards. If you’re considering liquidation, or IRD has applied for it, this is what actually happens.
What is liquidation?
Liquidation is the formal process of ending a company. A liquidator is appointed, takes control of the company’s assets and affairs, sells what can be sold, investigates what happened, pays creditors in the order the law sets, and then removes the company from the register.
A company can enter liquidation in several ways, including by a shareholders’ resolution, by a creditors’ resolution after voluntary administration, or by a High Court order on an application such as IRD’s (Companies Register).
Who can be a liquidator, and who do they work for?
A liquidator must be a licensed insolvency practitioner. You can check the public register through the Companies Office (register). Since the licensing regime came fully into force in September 2021, insolvent liquidations, voluntary administrations and receiverships must be handled by licensed practitioners.
Importantly, a liquidator’s duties run to the creditors as a whole. That’s true even when the shareholders chose the liquidator. A liquidator you appointed isn’t your adviser once appointed.
What does the liquidator do?
According to the Companies Register and the Insolvency and Trustee Service, a liquidator:
- takes control of the company’s assets, records and bank accounts;
- investigates the company’s financial position, the causes of failure and possible offences by directors;
- checks whether directors or shareholders owe the company money, such as an overdrawn current account (insolvency.govt.nz);
- sells assets and recovers money owed to the company;
- pays creditors in priority order; and
- reports, including a first report within 25 working days of appointment for court-ordered liquidations (5 working days for others), then six-monthly reports.
What must directors do?
Directors must help the liquidator, including completing a statement of the company’s affairs that lists assets and liabilities. Destroying, hiding or removing company property, records or documents is an offence for a director, with penalties that can include fines and imprisonment (insolvency.govt.nz).
Not yet appointed anyone? Check whether IRD can simply be paid. Talk to a funder, with no credit check to enquire.
In what order are creditors paid?
| Priority | Who |
|---|---|
| Secured creditors | Keep their rights over the assets they hold security over |
| First (unsecured) | Liquidator’s fees, expenses and remuneration |
| Next | Court costs, then preferential claims such as employee wages for the four months before liquidation |
| Then | Other unsecured creditors, including IRD for most tax |
| Last | Shareholders, if anything is left |
(Summarised from insolvency.govt.nz.) Because the liquidator’s costs come first, they reduce what’s left for everyone else. See the cost of liquidation.
What doesn’t liquidation clear?
- Personal guarantees. If the company can’t pay a guaranteed debt, the guarantor must.
- Overdrawn current accounts. Money owed by shareholders to the company can be pursued by the liquidator.
- Director exposure for PAYE decisions, reckless trading or other breaches of duty.
- Restrictions on reusing the name. The phoenix rules limit involvement in a company with the same or similar name for five years.
Read personal guarantees and current accounts and director liability.
How is IRD involved?
IRD is now the most common applicant. Centrix data showed IRD started 69% of liquidation applications in January 2026. If IRD has applied, see IRD liquidation application for the 10 working day shareholder window and the option to pay in full before an order is made.
An illustrative example
Illustrative only. Not a real client and not an offer.
The two shareholders of an Auckland events company assumed a voluntary liquidation would end their worries about a $190,000 IRD debt. Before appointing anyone, they listed what would remain: a personal guarantee on the premises lease, an overdrawn current account of about $70,000, and three months of PAYE arrears. With their accountant, they concluded the business was viable with forward bookings. A property-secured loan cleared IRD, and the company kept trading.
What’s the difference between solvent and insolvent liquidation?
A solvent liquidation is used to close a company that can pay all its debts, for example when owners retire. Qualified statutory accountants and lawyers can still act in solvent liquidations. An insolvent liquidation is for a company that can’t pay its debts, and it must be handled by a licensed insolvency practitioner. If your company owes IRD money it can’t pay, you’re looking at an insolvent liquidation, with the investigation and reporting that comes with it.
Can directors choose the liquidator?
Shareholders can appoint a liquidator by resolution, and after a creditor’s liquidation application is served they have 10 working days to do so before the applying creditor’s consent is needed. Choosing who acts doesn’t change who the liquidator works for. Before you appoint anyone, ask about fees in writing, check the licence on the register, and read choosing an adviser.
Understand it fully before you choose it
If you’re considering liquidation because of IRD debt, talk to us before you decide. Asking doesn’t involve a credit check, your details aren’t shared around lenders, and a real person will tell you honestly whether funding is a realistic alternative. Please be open about guarantees, the current account and the amount owed, so we can give you a reliable answer.
Frequently asked questions
Who does a liquidator work for?
A liquidator's duties are to the company's creditors as a whole. The liquidator isn't there to protect the directors' interests, even if the directors chose them.
What does a liquidator investigate?
The company's financial position and the causes of its failure, possible offences by directors, and whether directors or shareholders owe the company money, such as through an overdrawn current account.
Who gets paid first in a liquidation?
The liquidator's fees, expenses and remuneration, then court costs and preferential claims such as employee wages for the four months before liquidation, then other unsecured creditors. Secured creditors keep their rights over secured assets.
How long does a liquidation take?
It varies with the size and complexity of the company. Liquidators file a first report and then six-monthly reports until the liquidation is completed.
Can I still be a director after liquidation?
Generally yes, unless you're banned or disqualified, but the phoenix rules restrict involvement in a company with the same or a similar name for five years, and the liquidator's report can raise conduct issues.
Official and reputable sources (checked October 2026)