01
Blog
01
Blog
Published: 3 June 2025
Last Updated: 18 August 2026
Categories
When a company goes into liquidation, it can be an uncertain and stressful time for employees. Questions about unpaid wages, holiday pay, redundancy compensation, and even personal grievance claims can quickly arise. Understanding your rights as an employee, how employee claims rank in the liquidation process, and whether there are any alternative options to pursue what you are owed, is essential.
In this blog, we outline what happens to employee entitlements when a company is put into liquidation, including preferential claims, Employment Relations Act protections, and what to consider when thinking about holding directors personally liable.
If you are an employee of a company in liquidation, there are a few things that you need to know. The first, which a liquidator will be very quick to tell you, is that if you are owed money in the liquidation, you should file a proof of debt form, which is really just a document that says who you are and how much you are owed.
Beyond that, what you need to know as an employee, is that you are entitled to be treated as a preferential creditor under the Companies Act. This means you have priority in the distribution of the company’s assets—after the liquidator’s fees and expenses are paid.
The other thing to know is that any personal grievances you may already have, will automatically come to a stop when the company goes into liquidation, unless the liquidator agrees for those to continue or the Employment Court orders otherwise.
However, most of the time, personal grievances may not be worth pursuing in a liquidation context because they will only serve to increase your proof of debt amount, which you are unlikely to be paid anyway.
So, you may wish to consider some other options. For instance, you could look into whether your claim is the type that allows you to hold a director personally liable.
Under the Employment Relations Act, directors can be personally liable for non-payment of certain outstanding entitlements, such as unpaid salaries. They can also be liable for unpaid holiday pay payable to the company’s employees at the date the company entered liquidation, regardless of when the holiday pay accrued. If your claim falls under that category, you could be looking to hold the director personally liable.
Under the Companies Act, there are also other ways that directors can be held personally responsible for those types of debts—particularly if they breached their duties.
Finally, ask yourself: even though you may have these options, is the director someone who is worth pursuing? If they are on their way to bankruptcy, then seeking compensation is likely a waste of time and effort. In that case, you may want to simply file your proof of debt in the liquidation, and move on to find new employment.
If they do have means or assets, then you should consider these alternatives to the standard liquidation process.
If you are an employee affected by a company liquidation in New Zealand, it’s important to understand your rights and whether further action is worth pursuing. Our experienced insolvency team can help. We will assess your situation, explain your options, and support you through the next steps.
02
Author Profile
Brent is the Director of Norling Law. He has a wealth of experience in the District Court, High Court, Court of Appeal and Supreme Court. Brent is passionate about negotiating favourable outcomes for his clients and able to implement this in his daily negotiations.
03
Related Articles
Book a free consultation to get clarity on your options and next steps
We’ve been guiding people through times of uncertainty since 2015. Talk to us for free to see what we can do for you.
