Founder Agreements In New Zealand: How To Structure Your Startup

If you’re building a startup with one or more co-founders, you’re probably spending most of your time on the exciting stuff: validating the idea, talking to customers, shipping product, and trying to grow fast.

But there’s one legal document that can make (or break) how smoothly your startup operates when things get real: a founder agreement that New Zealand startups can rely on from day one.

A founder agreement sets out how you and your co-founders will work together, what happens if someone wants to leave, how equity is split, and how key decisions get made. It’s essentially your startup’s “rulebook” before the pressure hits.

Below, we’ll break down what a founder agreement is, when you need one, what it should include, and how it can work alongside other key documents that help you scale confidently in New Zealand.

What Is A Founder Agreement In New Zealand (And Do You Actually Need One)?

A founder agreement is a contract between the founders of a business that sets out the commercial and legal relationship between you.

In practical terms, it answers the questions founders often avoid until they become urgent, like:

• Who owns what (and when do they earn it)?
• Who does what day-to-day?
• How do we make decisions?
• What happens if someone stops contributing?
• What happens if we bring in investors later?

Even if you’re working with someone you trust completely (a friend, partner, or someone you’ve built with for years), the risk usually isn’t “bad intentions”. It’s mismatched expectations, unclear roles, and different views on value.

And if you’re relying on a handshake deal, it can be hard (and expensive) to sort out disputes later - especially once money, IP, customers, or external investors are involved.

Founder agreements are particularly important where:

• you’re splitting equity between multiple people;
• one founder is contributing more time than the other (or contributing cash vs time);
• you’re building valuable IP (software, brand assets, product designs, content);
• you’re expecting to raise funds; or
• you want clear exit rules if someone leaves.

If you’re setting up as a company (which many startups do for liability and investment reasons), your founder agreement often sits alongside a Shareholders Agreement and sometimes a Company Constitution.

When Should You Put A Founder Agreement In Place?

The best time to put a founder agreement in place is before you launch publicly, take money, or start building valuable assets.

That might sound early - but it’s usually when you have the most goodwill, the fewest moving parts, and the clearest view of who is committing what.

Common “trigger points” where founders realise they need a founder agreement include:

• Before you incorporate (or immediately after), so ownership and roles are documented from the start
• Before you raise investment, because investors often want to see clean founder arrangements
• Before you hire contractors/employees to build product, since IP ownership needs to be tidy
• Before one founder goes full-time while others stay part-time
• After a pivot (new business model, new product), where the “old deal” no longer feels fair

If you’re already operating and nothing is documented yet, don’t stress - it’s still worth formalising the arrangement now. The key is to do it while things are calm, rather than when you’re trying to fix a disagreement.

What Should A Founder Agreement Include?

A good founder agreement doesn’t just list names and equity percentages. It should reflect how your startup actually operates and what risks you want to prevent.

Here are the key clauses and concepts we usually expect to see in a founder agreement that New Zealand startups can confidently rely on.

1. Founders’ Roles And Responsibilities

Startups move fast, and roles can evolve - but it’s still important to document expectations.

This section usually covers:

• each founder’s role (e.g. CEO, CTO, operations, sales)
• expected time commitment (full-time, part-time, minimum hours)
• key responsibilities and deliverables
• what approvals are needed for major actions (like signing major contracts)

This is also a good place to cover whether founders can work on other projects, and what “side hustles” are permitted (if any).

2. Equity Split (And What The Split Is Actually Based On)

Equity is one of the biggest sources of founder disputes, mainly because it’s often decided quickly and emotionally.

A founder agreement should clearly set out:

• who gets what percentage (or number of shares)
• whether anyone is receiving equity for past work
• whether contributions are cash, time, assets, connections, or IP
• how future contributions are handled

If you’re unsure whether you should be splitting equity 50/50 or some other way, a structured legal discussion early can save a lot of conflict later.

3. Vesting (So Equity Is Earned, Not Just Gifted)

Vesting is one of the most practical ways to protect your startup if a founder leaves early.

Instead of a founder owning all their equity immediately, vesting means they earn it over time (or based on milestones). This can help prevent situations where:

• a founder leaves after 3 months but keeps a large equity stake; or
• you’re stuck trying to rebuild with someone who isn’t contributing, but still owns a major percentage of the company.

Vesting is usually documented in a dedicated Share Vesting Agreement (or built into the founder arrangements if structured that way).

4. Decision-Making And Deadlock Rules

Founders don’t always agree - and that’s normal. The issue is what happens when you’re stuck.

Your founder agreement should set out:

• what decisions require unanimous approval vs majority approval
• what counts as a “reserved matter” (e.g. issuing shares, taking on debt, changing business direction)
• how meetings and voting work
• what happens in a deadlock (e.g. mediation, a casting vote, or a buy-sell process)

These rules become especially important once your company has real obligations - leases, staff, customer contracts, subscription liabilities, or investors.

5. IP Ownership (So The Company Owns What You’re Building)

For many startups, the most valuable asset is intellectual property (IP): software code, product designs, business processes, branding, and content.

If founders are building IP personally (or through contractors), you want it clearly assigned to the business. Otherwise, you may run into problems when:

• you try to raise capital and investors ask “who owns the IP?”
• a founder leaves and claims ownership over key assets
• you try to sell the business or license technology

Founder agreements often include IP assignment clauses, plus confidentiality provisions to protect trade secrets.

6. Confidentiality And Restraints (Protecting The Business If Someone Leaves)

When you’re small, it can feel awkward to talk about confidentiality or non-competes. But from a business owner perspective, it’s part of protecting what you’re building.

Common protections include:

• confidentiality obligations (during and after involvement)
• non-solicitation of staff, suppliers, and customers
• limited restraints on competing businesses (where reasonable and enforceable)

Restraint clauses need to be drafted carefully - and their enforceability will depend on the circumstances. Overly broad restraints can be hard to enforce, and even well-drafted restraints may not be upheld if they go further than necessary to protect legitimate business interests.

7. Founder Exit: What Happens If Someone Leaves?

Founders leave for all sorts of reasons: burnout, family commitments, better opportunities, or just a change in priorities.

Your founder agreement should set out what happens if a founder:

• resigns voluntarily
• is removed (for example, for serious misconduct or failure to perform)
• becomes unable to contribute (illness, incapacity)
• passes away

This often ties into “good leaver/bad leaver” concepts, buy-back rights (where permitted and correctly structured), and what happens to unvested shares. Because outcomes can vary depending on your company documents and the specific facts, it’s worth getting advice before locking in these provisions.

8. Dispute Resolution

No one starts a business expecting a dispute. But having a dispute process doesn’t create conflict - it helps you handle it quickly and privately if it ever comes up.

A clear dispute resolution clause may include:

• good faith negotiation first
• mediation requirements
• escalation steps (for example, to arbitration or court if unresolved)
• which law applies (typically New Zealand law)

How Does A Founder Agreement Fit With Your Company Structure?

One reason founder agreements get confusing is that “founder agreement” is often used as a catch-all term.

In New Zealand, your founder arrangements usually depend on how you’ve structured your business. Most startups choose between:

• Operating as individuals / informal partnership (not recommended long-term, because liability and ownership can get messy)
• Incorporating a company (common for startups looking to scale or raise capital)

If you incorporate, your “founder agreement” may involve a combination of documents, such as:

• a Founders Agreement to document the relationship and commercial deal between founders
• a Shareholders Agreement to govern share ownership, transfers, and decision-making
• a Company Constitution (optional, but useful) to set the company’s internal rules
• a Directors Resolution for key company decisions (especially early on when the founders are also the directors)

Exactly what you need depends on your growth plans, your investor pathway, and how you want decisions to be made.

For example, if you plan to bring on investors, you’ll usually want a structure that makes it straightforward to issue shares, approve transfers, and document reserved matters - without renegotiating everything from scratch.

Common Founder Agreement Mistakes (And How To Avoid Them)

Most founder issues don’t come from one “big” mistake. They come from small gaps that become major problems later.

Here are some common traps we see when founders try to DIY their setup.

Relying On A Generic Template

Founders often download a template and assume they’re protected. The issue is that templates don’t understand your business reality - and they often miss critical clauses like vesting, IP assignment, or deadlock mechanisms.

Worse, a template can give you false confidence, which can delay fixing the real risk until it’s expensive.

Not Dealing With Vesting Early

If you only introduce vesting after a founder stops contributing, it can feel like you’re “changing the deal” and it becomes much harder to negotiate fairly.

Vesting is easiest to agree on at the start, when everyone is aligned and optimistic.

Unclear IP Ownership

If your software or designs are built “by the founders” but not formally assigned to the company, you might not actually own the key asset your business depends on.

That becomes a serious issue for investment, acquisitions, and sometimes even day-to-day operations (like licensing or enforcing rights).

No Plan For Deadlock

If you have two founders and you split things 50/50, you should assume deadlock can happen. A good founder agreement will anticipate this and include a way forward that doesn’t destroy the business.

Forgetting Employment And Contractor Arrangements

Many startups have founders who also work in the business day-to-day. It’s important to clearly distinguish whether someone is acting as:

• a shareholder (owner),
• a director (governance role), and/or
• an employee or contractor (operational role).

Once you start hiring, make sure your team is properly documented with an Employment Contract and suitable policies - it keeps expectations clear and supports compliance as you grow.

What Laws Should Founders Keep In Mind In New Zealand?

A founder agreement is a private contract, but it sits within a wider legal environment. When structuring your startup, it helps to keep these legal areas in view:

Companies Act 1993

If you operate through a company, the Companies Act 1993 influences how shares are issued and transferred, director duties, and company administration. Your founder documents should work with these rules, not against them.

Contract And Consumer Law (If You’re Selling To Customers)

As soon as your startup sells products or services, you’ll likely need customer-facing terms that align with New Zealand consumer law - including the Fair Trading Act 1986 (misleading conduct and advertising) and the Consumer Guarantees Act 1993 (certain guarantees for consumer transactions).

Founder disputes often arise when a business starts taking on real legal obligations without proper terms in place, so it’s worth getting your contracting sorted early.

Privacy Act 2020 (If You Collect Personal Information)

If your startup collects customer data, email addresses, user accounts, analytics identifiers, or any personal information, you’ll need to comply with the Privacy Act 2020.

Practically, that usually means having a clear Privacy Policy, being careful about data security, and knowing how to respond if something goes wrong.

Health And Safety At Work Act 2015 (If You Have A Workplace)

Even early-stage startups need to think about health and safety if you have premises, staff, contractors, or operational risks. Founders can be personally exposed in certain situations, so it’s worth treating compliance as part of your “from day one” foundations.

It can feel like a lot - but the right legal setup makes it manageable.

Key Takeaways

• A founder agreement for New Zealand startups is a practical way to document equity, roles, decision-making, and exit rules before disputes arise.
• The best time to put a founder agreement in place is early - before you raise money, launch publicly, or create valuable IP that could be contested later.
• Strong founder agreements commonly cover roles, equity splits, vesting, IP ownership, confidentiality, restraints, dispute resolution, and what happens when a founder leaves.
• If you’re operating through a company, your founder arrangement often works alongside a Shareholders Agreement and (sometimes) a Company Constitution to manage ownership and governance.
• DIY templates often miss the clauses that matter most for startups, so tailored drafting is usually the safest option if you’re building something you want to scale.
• Founder documents should be aligned with wider New Zealand obligations, including company law, consumer law, privacy law, and health and safety requirements.

If you’d like help putting the right founder agreement in place (or sorting out your startup’s structure and equity arrangements), you can reach us at 0800 002 184 or team@sprintlaw.co.nz for a free, no-obligations chat.