When your own business fails: liquidation, personal guarantees, IRD debt and what you can claim

Your main options

Your duties as a director

• Do not trade recklessly, and do not incur debts you do not believe the company can pay when due.
• Keep proper records. After liquidation you must cooperate with the liquidator, supply your accounts and complete a Statement of Affairs.
• Destroying, hiding or removing company property or records is an offence.
• A liquidator checks for wrongdoing and reports serious problems to the Registrar.
• You stay in office but your powers are limited once a liquidator is appointed.

Personal guarantees and personal liability

Even when a company is liquidated, a personal guarantee is a separate obligation: a creditor can pursue you. Landlords, banks, suppliers and leasing companies commonly ask for guarantees.

1. Gather every guarantee you signed (bank, lease, trade accounts, vehicle finance).
2. Do not sign new guarantees to prop up a failing business without advice.
3. If you own a home, check how it is held (trust, joint names) and talk to a lawyer before transferring anything. Transfers to avoid creditors can be reversed.
4. Ask creditors early for a repayment arrangement. Many prefer a deal to a long liquidation.

IRD debt: GST, PAYE and income tax

Tax debts rank ahead of many creditors, and IRD is active on overdue debt: it began calling customers on 9 October 2025 about debt of more than $1,000 that is between six months and five years old. The best approach is to contact IRD before you miss a payment.

• Instalment arrangements: IRD can agree a payment plan. Late payment penalties can stop while you keep to the plan, though interest may still apply. Ask through myIR or call IRD.
• Relief: IRD can in some cases write off, remit or arrange payment of tax debt, interest and penalties, and can decline. It consulted in March to May 2026 on a standard practice statement, "Options for relief from tax debt", so check the current IRD guidance.
• PAYE and employee deductions are treated seriously, since they are held on behalf of others. Fix these first.
• File all overdue returns. IRD can pursue you for unfiled returns separately.

Looking after your staff

• Follow a fair process if you must make staff redundant: consult, give notice and pay final pay and holiday pay.
• Staff can claim as preferential creditors in a liquidation for wages and holiday pay from the four months before liquidation, up to a cap. See the employer-in-liquidation guide.
• Contact MSD (RedeploymentSupport@msd.govt.nz or the Employer Line 0800 778 008) before you close or downsize. They can help staff find jobs and get income support.
• Pay KiwiSaver, PAYE and other deductions that you withheld from pay.

Support for you as the owner

Owners can apply for Jobseeker Support when the business stops. Work and Income will look at your income, assets and any remaining business activity. If you still earn from the business, income is assessed.

• Apply as soon as you stop drawing income. Use the stand-down tool, since your income over the past year may lead to a stand-down.
• Ask about hardship grants if you cannot cover rent or food. See the urgent costs guide.
• Free business support: business.govt.nz has guidance on closing a business and insolvency.
• MoneyTalks (0800 345 123) gives free budgeting and debt advice.
• Your mental health matters. Failing businesses cause huge stress. Call or text 1737, or talk to the Depression Helpline (0800 111 757).