The four paths at a glance
When a company can’t pay its debts as they fall due, the Companies Act 1993 and ordinary commercial practice offer four broad paths. They differ most on three questions: who’s in control, who gets paid, and what it costs.
| Liquidation | Voluntary administration | Part 14 compromise | Informal arrangements | |
|---|---|---|---|---|
| Legal basis | Part 16, Companies Act | Part 15A, Companies Act | Part 14, Companies Act | Contract with each creditor |
| Who controls the company | Liquidator | Administrator | Directors, usually | Directors |
| Enforcement paused? | Yes, largely | Yes, by moratorium | Not automatically | Only by agreement |
| Creditors decide? | No vote on the outcome | Yes, at the watershed meeting | Yes, by vote | Each creditor individually |
| Practitioner fees | Paid from company assets first | Paid from company assets first | Adviser costs | Minimal |
| Business continues? | Rarely as-is | Sometimes | Usually | Usually |
| Public record | Yes | Yes | Yes | No |
Liquidation
What it is. The formal winding up of a company. A liquidator can be appointed by a special resolution of shareholders, by the board in some circumstances, or by the High Court on application, often by a creditor such as IRD.
Who’s in control. The liquidator. Directors’ powers end on appointment. The liquidator takes custody of the assets, sells them, collects debts owed to the company, investigates the company’s affairs and reports to creditors and the Registrar.
Who gets paid, and in what order. Secured creditors generally deal with their own security. From the remaining assets, the costs of the liquidation, including the liquidator’s fees, come first. Then preferential creditors, which include employees’ wages and holiday pay up to a cap and certain tax debts such as GST and PAYE. Unsecured creditors, usually trade suppliers, share whatever is left, often cents in the dollar.
Time. There’s no fixed length. Simple liquidations can close in months; complex ones take years.
What it means for directors. Personal guarantees can be called on. The liquidator investigates director conduct, including whether the company traded recklessly. Directorship of a liquidated company stays on the public record.
Voluntary administration
What it is. A process designed to give a company breathing space and maximise the chance of the company or its business surviving, or a better return to creditors than immediate liquidation.
Who’s in control. The administrator, a licensed insolvency practitioner, usually appointed by board resolution. Directors’ powers are suspended.
How it works. A moratorium stops most creditor enforcement. The administrator investigates and reports. At a watershed meeting, usually held within about 20 working days of appointment unless extended, creditors vote to return the company to the directors, approve a deed of company arrangement (DOCA), or put the company into liquidation. A DOCA approved by the required majority binds unsecured creditors, including those who voted against it.
Cost. Administrators’ fees are generally paid from company assets with priority.
How common. Rare in New Zealand. The Companies Office recorded one voluntary administration in August 2026, against 230 liquidations.
Part 14 compromise
What it is. A formal proposal to creditors to vary their rights, for example accepting a reduced amount, a longer timeframe, or conversion of debt to shares.
Who’s in control. Usually the directors. A Part 14 compromise doesn’t, by itself, require an external appointee, though an insolvency practitioner or lawyer often prepares it.
How it’s approved. Creditors vote in classes. Broadly, a compromise is approved when a majority in number representing 75 percent in value of the creditors in each class vote in favour. Once approved, it binds all creditors in those classes.
Cost and risk. There are adviser costs, and creditors who take a reduced payment may be less willing to supply on credit afterwards. If the compromise fails, liquidation is a likely next step.
Informal arrangements
What it is. Direct agreements with individual creditors: an instalment arrangement with IRD, a payment plan with a supplier, a rent deferral with a landlord.
Who’s in control. The directors.
Strengths. Cheap, private and flexible. Relationships are usually preserved.
Weaknesses. Each creditor decides individually. One hold-out can issue a statutory demand and start liquidation proceedings, even if everyone else has agreed.
Where refinancing fits
Refinancing isn’t an insolvency process at all. It’s a loan that pays creditors in full, typically secured on New Zealand property. Directors stay in control, suppliers are paid, and there’s no public insolvency record.
| Refinancing | |
|---|---|
| Control | Directors |
| Creditors | Paid in full at settlement |
| Cost | Loan costs, priced on the individual circumstances |
| Business continues | Yes |
| Requires | Equity in property (or steady turnover for smaller unsecured amounts), and a viable business |
It won’t suit every company. If the business is losing money with no prospect of change, more debt makes things worse. But if the business works and the problem is a pile of overdue debts, it’s worth checking before you agree to any formal process. If there’s equity in property, we can probably help; without property, unsecured loans and business lines of credit may still be possible.
Before you choose
Whatever path you’re considering, ask these three questions in writing:
- Who will control the company, and from when?
- What will it cost, who pays, and from what?
- What are creditors, and I personally, likely to be left with?
Our guide, questions to ask any insolvency practitioner before signing, has a fuller list. And if you haven’t yet, read don’t restructure until you’ve seen this.