It was the latest in a string of problems that has plagued the government's revamped lunch programme.
The minister in charge David Seymour previously said leveraging private sector expertise for the scheme would serve up tax payer saving of $130 million a year.
But since its launch, there had been complaints about food quality, plastic in meals, late or no delivery, and dangerously hot meals.
A Food Safety investigation is also currently underway.
Libelle Group - which had been contracted by Compass Group to make more than 125,000 meals a day for the lunch scheme - told liquidators last Thursday that it was in financial trouble.
A worker told RNZ the company was finding it difficult to keep up with the extra workload of delivering the government's revamped lunch programme.
"We were just all brought into a meeting and everybody was told," he said.
The worker said the company was struggling.
"Last year they did 20,000 lunches a week and this year they were trying to do 120,000 a week, so I mean two or three times [as much] is possibly doable, but six times is quite a lot isn't it?"
The worker said they had been told they would receive a letter stating that they would be paid.
The liquidator Deloitte is undertaking and urgent full review of Libelle's operation.
But liquidator David Webb told RNZ that the school lunch production would continue.
The Compass Group was ensuring that would happen and there would be a "continuity of service", he said.
Libelle director Johannes Tietze contacted Deloitte late on Thursday evening to explain he had solvency concerns, Webb said.
Discussions took place over the weekend and Deloitte was appointed as liquidator on Tuesday morning.
Webb said he was not in a position to say how much Libelle owed its multiple creditors nor who those creditors were.
Libelle had 500 staff and had "been struggling for some weeks and some months in terms of its financial position", he said.
Staff will be paid wages owed by Compass and the production of lunches will continue.
He would not say if Compass was up to date in its payments to Libelle or if the company was already experiencing financial difficulties when it was signed up to the programme.
The liquidators had had some initial discussions with Compass, he said.
"The immediate discussions have been around ensuring that from today onwards the continuity of supply of lunches and also supporting Libelle Group's other operations around RSE workers, canteens and boarding houses continue."
"So we are commencing discussions with interested parties around the purchase of the business and also we will look at undertaking a review over coming days as to the reasons for the liquidation."
Libelle had previously supplied lunches for $9 per head to 17,000 school children. Webb said 'the scaling up' to supplying 125,000 lunches for $3 per head was something liquidators would be looking at.
Libelle was named a Deloitte Fast 50 company in 2022.
Libelle director Johannes Tietze did not respond to requests for an interview.
Chance to completely revamp lunch programme - public health expert
A public health expert said a narrow focus on cost efficiency had caused the failures in the school lunch programme.
Auckland University Professor and chair of Health Coalition Aotearoa, Boyd Swinburn, told RNZ the previous programme focused on quality, sustainable business models, and low cost to government.
The major focus of the new programme was cost efficiency and trying to screw the price down, he said.
Three dollars a lunch was never achievable and the programme needed to be revamped to come under both health and education budgets, he said.
Swinburn said this was an opportunity to completely revamp the lunch programme.
"It feels like a tipping point doesn't it, I mean we've had warning signals all along the way and this really feels like time to take stock and do something different to what's been happening and I think the schools would be very keen to get back to the previous model that was working so well for them."
The programme needed to have base funding and to include at least half of all schools to ensure that it was capturing all those students who were at risk, he said.
The minister in charge of the country's school lunches programme David Seymour said he did not think the Libelle Group going into liquidation was necessarily a bad thing.
Labour is demanding explanations on what contingencies are in place.
Labour leader Chris Hipkins told RNZ the lunch programme was originally set up "to provide free, healthy, locally made school lunches" that would both meet kids nutritional needs but also create local employment.
"They've killed all of that off, a lot of local jobs got lost, a lot of local businesses lost the custom that they were getting from their local schools."
Hipkins said they needed to go back to locally based lunches which were fresher and healthier.
"They're fresher, they're healthier, they give schools more choice, they give schools the ability to say to a provider 'actually this lunch isn't working for our kids, they prefer this lunch'."
