How IRD gets to a liquidation application
Inland Revenue doesn’t usually go to court as a first step. By the time a liquidation application is filed, a company will typically have had months of letters, calls and texts about overdue tax, may have had an instalment arrangement that failed, and may have had deduction notices issued to its bank or customers.
IRD has become noticeably more willing to take that final step. In its 2025 annual report, IRD recorded 650 cases referred to court for liquidation orders in the year to 30 June 2025, a 49 percent increase on the year before, alongside 124 people made bankrupt. Company liquidations across New Zealand in 2025 were at their highest level in roughly fifteen years, and the Companies Office recorded 889 liquidator appointments in the final quarter of 2025 alone.
The steps in a liquidation proceeding
- Application filed. IRD, through its lawyers, files an application in the High Court to put the company into liquidation, usually on the ground that it’s unable to pay its debts.
- Service on the company. The application is served at the company’s registered office.
- Advertising. Notice of the application is publicly advertised before the hearing, so other creditors and the market can see it.
- Opposition period. The company can file a statement of defence or notice of opposition within the time allowed, if there are proper grounds.
- Other creditors. Other creditors can support the application or apply to be substituted as the applicant, which matters if IRD is paid but others aren’t.
- Hearing. The court considers the application. If satisfied the company is unable to pay its debts, it can appoint a liquidator, often the Official Assignee’s team or a licensed practitioner.
Timeframes vary, but the period between filing and a hearing is often a matter of weeks. Advertising alone can prompt suppliers and lenders to tighten terms, so the commercial damage starts before the hearing.
What directors can still do
Until the court makes an order, the directors still run the company, although payments made while an application is pending can later be reviewed by a liquidator. The main options are:
| Option | What it involves | Things to know |
|---|---|---|
| Pay IRD in full | Funds from cash, a loan or an asset sale | Strongest position; court steps and costs may still apply |
| Settle with IRD | An agreed arrangement IRD accepts | IRD is less flexible once it’s gone to court |
| Oppose the application | Filing grounds, such as a genuine dispute about the debt | Needs a lawyer; not a delaying tactic |
| Appoint a liquidator yourselves | Shareholders resolve to liquidate | Limited once an application is filed; still ends in liquidation |
| Do nothing | The hearing proceeds | Liquidator likely appointed |
Where funding fits
If the business is viable and the problem is the tax debt, paying IRD out is often the most direct way to change the outcome. The catch is time. A property-secured business loan can move quickly because the lender relies mainly on the property rather than financials:
- $20,000 to $1m secured on New Zealand property, first or second mortgage;
- IRD paid directly at settlement;
- no financials or tax returns for the initial assessment;
- funding within 24 hours of approval in some cases.
The lender will want to see how the court proceeding is being handled, so involve your lawyer and your lending specialist together. Our page on refinancing IRD debt explains the process.
Personal consequences for directors
Company tax debt is generally the company’s debt, not the directors’ personally. But liquidation can have personal consequences:
- Personal guarantees given to banks, landlords or suppliers can be called on.
- Liquidators investigate the company’s affairs, including directors’ conduct, and can pursue directors for breaches of duty in some circumstances.
- Your record will show a directorship of a liquidated company, which affects future borrowing.
That’s why the weeks before a hearing matter so much, for the business and for you.
Practical steps if you’ve received IRD court papers
- Read the papers today and note the hearing date and any deadlines for filing.
- Instruct a lawyer experienced in insolvency proceedings.
- Get IRD’s current payout figure, including penalties and interest.
- List all other creditors likely to seek substitution, and what they’re owed.
- Check funding immediately. Start an enquiry and tell us the hearing date.
- Keep trading carefully and take advice before making significant payments.
Before you appoint a liquidator yourself
Faced with IRD court papers, some directors are advised to put the company into voluntary liquidation. Before you do, read before you talk to a liquidator or insolvency practitioner. If there’s equity in property or steady turnover, paying your way out may still be possible.