If you’ve set up a unit trust (or you’re about to), you’ve probably realised it’s a great structure for holding assets and managing ownership between multiple people.
But once money goes in, units get issued, and decisions need to be made, the big question usually comes up:
Do you actually need a unitholders agreement?
In many cases, the practical answer is “yes” - not because it’s legally required in every situation, but because it can be the difference between a trust that runs smoothly and a trust that becomes a dispute waiting to happen.
This article is updated to reflect current expectations and best practice for unit trust governance, especially where trusts are used for property holding, investment structures, and trading businesses.
What Is A Unitholders Agreement (And How Is It Different From The Trust Deed)?
A unitholders agreement is a contract between the unitholders (and often the trustee as well) that sets out how the unit trust will be managed day-to-day, how key decisions get made, and what happens if something changes (like someone wanting to exit).
It’s easy to assume the trust deed already covers all this. The trust deed is definitely the foundation - but it usually isn’t written with the same level of “commercial detail” as an agreement designed to manage people, expectations, and disputes.
Trust Deed Vs Unitholders Agreement
- The trust deed is the governing document of the trust. It creates the trust and sets out the trustee’s powers and core rules.
- The unitholders agreement is more like the “operating manual” between the owners. It deals with governance, voting, transfers, funding, disputes, and exit events.
Think of it this way: the deed explains what the trustee can do. The unitholders agreement explains what the unitholders agree should happen when real-life scenarios arise.
And real life has a habit of showing up quickly - especially when there are multiple unitholders, family members, or business partners involved.
Do I Legally Need A Unitholders Agreement In New Zealand?
There isn’t a blanket rule in New Zealand that says every unit trust must have a unitholders agreement.
But if you’re asking from a risk and practicality point of view (which is the smarter way to think about it), many unit trusts should have one.
When A Unitholders Agreement Is Usually “Must-Have”
You’ll almost always want a tailored unitholders agreement if any of the following are true:
- There is more than one unitholder (especially if ownership is split unevenly).
- Unitholders are contributing different amounts of money, assets, or effort over time.
- The trust is holding valuable assets (like property or a business).
- The trust is used alongside a company or group structure (for example, a corporate trustee and a trading company).
- You expect ownership changes (new investors, family succession, or an eventual sale).
- You want clear rules about distributions versus reinvestment.
When You Might Not Need One
Some unit trusts operate fine without a separate agreement, for example:
- A single unitholder trust (where you effectively control everything).
- A very simple, low-value arrangement where there is little chance of disputes or changes.
Even then, you’ll want to think carefully. “It’s simple now” is exactly how many avoidable disputes start.
What Problems Does A Unitholders Agreement Actually Prevent?
Most people don’t put legal documents in place because they expect the worst from the people around them.
They do it because relationships change, circumstances shift, and memories get fuzzy - especially once money is involved.
A well-drafted unitholders agreement helps you avoid common pressure points that trust deeds often don’t deal with in enough detail.
1) Disagreements About Decisions
Unit trusts often raise questions like:
- Who can approve buying or selling trust property?
- Can the trustee borrow money, and who guarantees it?
- Can the trust enter leases, grant security, or refinance?
Without written decision-making rules, you can end up stuck - or worse, fighting about whether someone had authority to act in the first place.
2) Funding And Cash Calls
One of the biggest “silent killers” of a unit trust relationship is funding.
Imagine your trust needs $40,000 to cover repairs, tax, insurance, or a shortfall. One unitholder can afford it, the other can’t. What happens next?
A unitholders agreement can set out:
- how additional funding must be contributed (if at all)
- whether funding is treated as a loan or additional units
- what happens if someone doesn’t contribute
This kind of clarity is often the difference between a manageable issue and a lasting dispute.
3) Exits, Transfers, And “I Want Out” Moments
Even if everyone’s getting along now, you should assume that at some point:
- someone will want to cash out
- someone will separate from a partner
- someone will pass away
- someone will hit financial trouble and want to sell or encumber their units
Without clear rules, you can end up co-owning a trust with someone you didn’t choose (like a former spouse, an estate, or even creditors).
4) Misunderstandings About Distributions
Some unitholders assume distributions will happen regularly (like dividends). Others want the trust to reinvest and grow.
The trust deed might allow distributions, but it often won’t answer the more practical questions, like:
- When will distributions be made?
- Do all unitholders need to agree?
- What expenses get paid first?
- Can the trust retain earnings for future projects?
These expectations should be aligned early, in writing.
5) Disputes About Roles And Effort
It’s also common for unit trusts to sit alongside a business where one person does the work and others are more “silent investors”.
If that’s your setup, it helps to document:
- whether anyone is being paid for management or services
- how conflicts of interest are handled
- what happens if the working unitholder steps away
If your trust structure involves people acting on behalf of the trust, you may also want to document decision authority through an Authority to Act arrangement so banks, agents, and third parties are clear on who can sign and negotiate.
What Should A Unitholders Agreement Include?
There’s no one-size-fits-all unitholders agreement. What you need depends on what your unit trust is doing (holding property, operating a business, investing, or a mix).
That said, most well-structured unitholders agreements cover a similar set of “core clauses”.
Ownership And Units
- how units are issued and what they represent
- whether different classes of units exist (and what rights attach to each)
- whether units can be partly paid or must be fully paid
Decision-Making And Voting
- what matters require an ordinary resolution vs unanimous approval
- reserved matters (e.g. selling assets, borrowing, changing trustee, major contracts)
- meeting rules, notices, proxies, and written resolutions
Funding, Loans, And Cash Calls
- how additional funds are contributed
- priority of repayment (especially if some unitholders lend money)
- whether interest applies, and on what terms
Distributions And Financial Reporting
- distribution policy (when, how, and whether discretionary)
- accounting and reporting expectations
- budgeting and approval of major expenses
Transfer Restrictions And Exit Pathways
- when units can be transferred (and to whom)
- rights of first refusal (so existing unitholders get first chance to buy)
- valuation mechanisms (how units are priced)
- exit events (death, bankruptcy, incapacity, relationship property events)
If you’re familiar with company ownership structures, you’ll notice some overlap with a Shareholders Agreement - the concept is similar (putting the commercial rules in writing), even though the legal structure is different.
Deadlock And Dispute Resolution
Deadlock clauses are particularly important in 50/50 unit trusts, where decisions can grind to a halt.
Common mechanisms include:
- mediation requirements
- escalation to an independent expert
- buy-sell clauses (where one party can trigger a sale process)
Having this agreed upfront is far easier than negotiating it mid-dispute.
Trustee And Governance Rules
Because a unit trust operates through a trustee, your agreement should also deal with:
- appointment and removal of the trustee
- limits on trustee powers (where appropriate)
- what happens if the trustee becomes insolvent or can’t act
If you’re using a company as trustee, it’s also worth ensuring the company’s internal rules line up properly - for example, through a Company Constitution where needed.
How Does A Unitholders Agreement Fit With Other Legal Documents And NZ Compliance?
Unit trusts rarely exist in isolation.
Often they sit within a wider commercial setup - especially if your trust holds a business, employs staff, collects customer information, or contracts with suppliers.
This is where people sometimes get caught: they have the structure, but not the “supporting documents” that make the structure work safely from day one.
If The Trust Runs A Business Or Owns Business Assets
If your trust is operating a trading business (or leasing assets to a trading company), your legal risk isn’t only about unitholder relationships.
You may also need to consider:
- customer-facing terms, warranties, and consumer compliance
- supply arrangements and contractor agreements
- website and online sales terms (if applicable)
At a minimum, any advertising or representations made by the business need to be accurate and not misleading under the Fair Trading Act 1986. And if you sell to consumers, the Consumer Guarantees Act 1993 will often apply (including around remedies when goods or services aren’t up to standard).
If The Trust Employs Staff
Some unit trusts employ staff directly (especially family trusts with operational businesses), while others use a company to employ staff.
Either way, you’ll want properly drafted Employment Contract documentation and policies that match your real working arrangements.
Employment relationships in NZ are heavily focused on good faith, fair processes, and clear written terms - which means “we’ll sort it out later” can become expensive if things go wrong.
If your unit trust owns an operating business (or even just a booking-based service) you may be collecting customer personal information, such as names, emails, addresses, or payment details.
That triggers obligations under the Privacy Act 2020, including taking reasonable steps to protect information and being transparent about what you collect and why.
In practice, this is where a tailored Privacy Policy becomes important, particularly if you have a website, online store, or use third-party platforms.
If The Trust Signs Key Contracts
Many trusts enter major arrangements such as leases, supply deals, or service contracts. If your trust is taking on long-term obligations (or you’re personally guaranteeing trust debt), it’s worth reviewing those contracts carefully.
For example, if your trust is leasing premises for a business, getting a Commercial Lease Review can help identify hidden costs, risk-heavy clauses, and tricky make-good obligations before you commit.
A Note On “Templates” And DIY Agreements
It’s tempting to grab a template unitholders agreement online and fill in the names.
But unit trusts are highly customised structures, and the agreement needs to match:
- your trust deed
- your tax and accounting approach
- the asset profile (property vs operating business vs investment)
- what each unitholder is contributing (cash, assets, labour, guarantees)
If the documents don’t line up, you can end up with rules that are unclear or unenforceable - which defeats the whole point of having the agreement in the first place.
Key Takeaways
- A unitholders agreement isn’t legally required for every unit trust in New Zealand, but it’s often the document that makes a multi-owner trust workable in practice.
- The trust deed sets the trust’s legal foundation, while a unitholders agreement usually covers the commercial “how we run this” rules between unitholders (including decision-making and exit events).
- Without a unitholders agreement, common issues include disagreements on decisions, unclear funding expectations, disputes about distributions, and messy exits when someone wants to sell or can’t continue.
- A well-drafted unitholders agreement typically covers governance and voting, funding and cash calls, transfer restrictions, valuation methods, deadlock processes, and trustee rules.
- If the trust runs a business, employs staff, or collects customer data, you’ll also need to make sure your wider legal documents and compliance (including the Fair Trading Act 1986, Consumer Guarantees Act 1993, and Privacy Act 2020) are handled properly.
- Because unit trust arrangements are highly specific, relying on generic templates can create gaps or inconsistencies with your trust deed and real-world setup.
If you’d like help putting the right unitholders agreement in place (or checking whether your trust deed and ownership structure are actually aligned), you can reach us at 0800 002 184 or team@sprintlaw.co.nz for a free, no-obligations chat.
