Hello. We see you. You are looking at numbers that will not work and trying to figure out what happens next. This article does not pretend to be neutral; we want you to feel less alone, and we want you to call someone tomorrow. Here is the plain version.
First, take a breath
You are not the first person to be here. Thousands of New Zealanders go through some form of business failure every year. Most rebuild.
The legal process for closing a business is well-trodden. It is paperwork-heavy but it is not designed to punish you. The worst outcomes are reserved for people who freeze and wait. The earlier you act, the more options you have.
The four words you will keep seeing
- Insolvency. You cannot pay debts as they fall due. This is a state, not a process.
- Liquidation. Closing down a company. A liquidator takes control, sells assets, pays creditors in priority order.
- Voluntary Administration. A company-only option where an administrator helps decide whether the company can be saved or should be liquidated.
- Bankruptcy. A personal (not company) process. Applies to sole traders, personal guarantees, and individual debt. Three years typically.
If you are a sole trader or self-employed
There is no separate legal entity. Your business debts are personal debts.
Your three main options:
- Pay your way out (extended IRD arrangement plus a compromise with private creditors)
- No Asset Procedure (NAP) if total unsecured debts are between $1,000 and $50,000, you cannot pay them, and you have not been bankrupt or used NAP before. Lasts 12 months.
- Bankruptcy. Lasts three years typically. Free to file. Some restrictions on directing companies and on travel.
NAP is the gentler option for the lower debt range. If you qualify, it is usually the right call.
If you are a company director
Your company is a separate legal person. Its debts are not automatically yours.
The exceptions are the ones that hurt:
- Personal guarantees you have signed (most commercial leases, often bank overdrafts and supplier accounts)
- Unpaid PAYE that you deducted from staff and did not pay across to IRD
- Reckless trading (continuing to incur debt when you knew or should have known you could not pay it)
Liquidation closes the company. You can usually start a new company afterwards, with some restrictions in cases involving phoenixing or director misconduct.
The first three calls to make
- Call your accountant. Yes, we know that feels embarrassing. It is not. We have done this with clients before; we know the steps. We may also be able to identify a path that avoids formal insolvency.
- Call an insolvency practitioner for a free initial chat. They will be honest about whether voluntary action is worth attempting before going formal.
- Call IRD if you owe them. Yes, before you have a plan. Telling them you are working on it stops the formal action escalating.
What it actually costs
- Bankruptcy: free to file. Three years. Restrictions on directing companies and on overseas travel.
- No Asset Procedure: free. Twelve months. Fewer restrictions.
- Liquidation: simple cases run $5,000 to $10,000 in liquidator fees. If there are assets to realise, fees come out of the realisation, not your pocket.
- Compromise with creditors: free if you can negotiate it yourself, but practically you will need professional help drafting the proposal.
What it does not cost you
- Your KiwiSaver is protected from creditors in bankruptcy (under current NZ rules)
- Your essential household goods (furniture, basic motor vehicle, tools of trade up to a value) are protected
- Future income earned during bankruptcy is largely protected once you have been through the means assessment
The TACA position
We are not insolvency practitioners; we will not pretend to be.
We help you assess whether you really are insolvent (sometimes you are not, you are just illiquid). We help you talk to IRD. We refer you to good insolvency people for the formal stuff. If you call us at the start of this process, we can save you thousands in unnecessary fees and stress.
If you call us at the end, we can still help with the year-end tax work and the rebuild. There is a rebuild. Most of our clients who have been through this are back trading, sometimes in a different form, within two years.