Queenstown mayor Jim Boult is being sued over the collapse of building company Stonewood Homes.
A statement of claim has been lodged in the High Court in Christchurch against Boult and Stonewood founder Brent Mettrick by liquidators Rhys Cain and Rees Logan.
Neither the liquidators nor the court would provide details of the claim to the Otago Daily Times, but Stuff reported the case involves millions of dollars.
Boult says he will "vigourously defend" any suggestions he did not fulfil his duties as a director of the company.
The Christchurch-based company went into receivership on February 22, 2016, owing unsecured creditors $15 million.
It was later placed into liquidation.
About 110 home buyers were affected by the collapse.
Boult joined the Stonewood board in August 2014 but stepped down from the company in February, 2016.
Cain confirmed legal proceedings had been lodged in respect to the Stonewood Homes liquidations.
"The matter is now before the Court and as such the liquidators have no further comment to make at this time."
In a statement, Boult said he rejected the claim made by the liquidators.
He said he was a non-shareholding director of the company for 18 months.
He became involved with the business to "help the owner address a number of issues facing the company following the Canterbury earthquakes", and resigned when it
became "apparent those issues could not be resolved".
"I have provided in-depth information to the liquidator that clearly demonstrates I fulfilled my obligations and duties as a director.
"I am confident any investigation will support this."
There is no date set for the case to be called in court, a court spokesman said.
The next step was for a statement of defence to be filed by the defendants, which was expected to take about six weeks, he said.
In August 2016, the then-mayoral candidate told the ODT his duties as a director were carried out with "care and diligence".
"I always acted in the best interests of the company to implement a solution that was intended to be beneficial to the creditors and the major shareholder."
The contracts of the 110 home buyers were taken up by, Inno, a company owned by the millionaire property magnate Chow brothers, who continue to use the Stonewood brand for unaffected franchises.
Mr Mettrick founded the Stonewood Homes franchise in 1987, and it has 21 franchise
locations throughout the country.
Mettrick declined to comment.