When you’re setting up (or growing) a company in New Zealand, it’s completely normal to get stuck on one deceptively simple question: how many shares can a company have?
The short answer is: there usually isn’t a fixed maximum under New Zealand company law. But the longer (and more useful) answer is that the “right” number of shares depends on what you’re trying to achieve - whether that’s keeping things simple between co-founders, bringing in investors, creating an employee equity plan, or setting up different rights for different shareholders.
This guide is updated to reflect current, practical company set-up approaches and what founders are commonly doing right now - so you can make decisions that are workable today, not just theoretically “allowed”.
Is There A Legal Limit On How Many Shares A Company Can Have In New Zealand?
In most cases, no - there is generally no hard “cap” on how many shares a New Zealand company can have.
Under the Companies Act 1993, a company’s share structure is flexible. A company can:
- have any number of shares issued (subject to what’s recorded on the Companies Register and your internal documents);
- issue different classes of shares (if your constitution allows it); and
- issue new shares over time, as long as you follow the proper process (including director resolutions, shareholder approvals where required, and updating the share register).
So if you were hoping the law would tell you whether you should have 100 shares or 1,000,000 shares - unfortunately (and fortunately), it’s not that simple.
What matters more is:
- what your constitution says (if you have one);
- what agreements exist between owners (especially a shareholders agreement);
- how you plan to raise capital or allocate equity in the future; and
- whether the share structure clearly reflects who owns what and what rights attach to that ownership.
For many companies, having a tailored Company Constitution is what makes the share structure workable in practice - particularly if you want multiple share classes, or you want to control how shares can be issued or transferred.
What Does “Number Of Shares” Actually Mean?
Before you pick a number, it helps to be clear about what we’re counting.
Authorised Shares vs Issued Shares (And Why People Get Confused)
In some countries, companies often have a concept of “authorised share capital” (meaning a maximum number of shares they’re allowed to issue).
In New Zealand, companies are usually focused on issued shares - meaning the shares that have actually been created and allocated to shareholders.
In practical terms, when people ask “how many shares can my company have?”, they usually mean one of these:
- How many shares should we issue on day one?
- Can we issue more shares later to bring in investors?
- Can we create a new share class for employees or investors?
Shares Are Units Of Ownership (Not Always “Value”)
A share is basically a unit that represents part of ownership in the company.
Importantly:
- The number of shares does not automatically mean the company is worth more or less.
- What matters is the percentage ownership (e.g. 50%, 25%, 10%).
- The economic value of that percentage depends on the company’s value, the rights attached to the shares, and what happens on an exit.
So you can have 100 shares total or 10,000 shares total - and in both cases, a person holding 50% still holds 50%.
How Many Shares Should You Issue When Setting Up A Company?
This is the question most founders actually need answered: what’s a sensible number to start with?
There’s no one “correct” number, but there are common approaches that work well depending on your situation.
Option 1: Keep It Simple (E.g. 100 Shares)
Many small businesses start with 100 ordinary shares. This makes ownership easy to understand (each share can represent 1%).
Example:
- Founder A: 60 shares (60%)
- Founder B: 40 shares (40%)
This approach can be great if:
- you don’t plan to raise investment soon;
- you want straightforward ownership percentages; and
- your company is owned by a small group who trust each other and want minimal admin.
Option 2: Plan For More Granularity (E.g. 1,000 Or 10,000 Shares)
Some companies start with 1,000 or 10,000 shares (or more) to make later allocations easier, especially if you anticipate:
- bringing in an additional founder or advisor later;
- creating an employee incentive pool; or
- multiple small share allocations without fractions.
Example: if you want to give someone 0.5%, it’s cleaner to do that with a larger total share count (e.g. 50 shares out of 10,000) rather than issuing half a share (which can cause practical headaches).
Option 3: Build In A Future Equity Plan (But Do It Properly)
If you want to offer equity to employees, contractors, or key contributors, you’ll usually want a properly designed equity plan rather than ad-hoc share gifts.
Depending on the structure, that may involve:
- issuing shares over time;
- setting up vesting conditions; or
- using a separate arrangement like a phantom share scheme.
If you’re heading down the “real shares” path, a Share Vesting Agreement can be essential - because it sets clear rules about what happens if someone leaves early, stops contributing, or doesn’t meet milestones.
And if you’re hiring employees at the same time as planning equity, your baseline legal foundations still matter too (including a proper Employment Contract so the working relationship is clear from day one).
Can You Have Different Classes Of Shares (And Why Would You)?
Yes - a New Zealand company can have different classes of shares, and different classes can carry different rights.
This is one of the biggest reasons the “how many shares can we have?” question turns into a bigger strategic conversation.
Common Share Classes
Many small companies have just one class: ordinary shares. Ordinary shares usually come with:
- voting rights,
- rights to dividends (if any), and
- rights to share in assets if the company is wound up.
But as a company grows, you may consider additional share classes such as:
- non-voting shares (ownership without voting power);
- preference shares (priority rights to dividends or repayment on liquidation);
- redeemable shares (shares the company can buy back in certain circumstances); or
- shares with special “founder” protections (less common, but sometimes used in startups).
Where The Rules Usually Live
If you’re creating multiple share classes, you’ll want to make sure your rules are consistent across:
- your company’s constitution (if adopted); and
- your shareholders agreement.
In practice, the Shareholders Agreement is often where the commercial “deal” is spelled out - things like who can sell shares, what approvals are needed, and what happens if there’s a dispute.
Getting this wrong (or leaving it vague) can create major issues later, especially if you raise investment or one shareholder wants to exit.
What Happens When You Issue More Shares Or Transfer Shares?
Even if there’s no maximum number of shares, you can’t just create shares “on the fly” without following the correct process.
Two of the most common share-related events are:
- issuing new shares (for example, to raise capital), and
- transferring existing shares (for example, when a shareholder sells to someone else).
Issuing New Shares (And Dilution)
When a company issues new shares, the ownership percentages of existing shareholders usually change. This is called dilution.
Example (simple):
- Company has 100 shares.
- You own 50 shares (50%).
- The company issues 100 new shares to an investor.
- You now own 50 out of 200 shares (25%).
This isn’t necessarily “bad” - if the investment helps the business grow, your smaller percentage might be worth more overall - but it’s something you should understand and plan for.
Companies often manage this through:
- pre-emptive rights (existing shareholders get first chance to buy new shares);
- shareholder approval thresholds; and
- clear valuation and pricing mechanics.
Transferring Shares
If a shareholder wants to sell or transfer shares, the process and restrictions should be clear.
For example, you might want rules like:
- other shareholders must approve any new shareholder;
- shares must be offered to existing shareholders first; or
- there are “tag along” or “drag along” rights for exits.
The admin side matters too. If share movements aren’t recorded properly, it can cause delays during investment rounds, business sales, or even disputes about who owns what.
If you’re unsure about the correct steps, it’s worth getting advice early - and if you’re in the middle of a transfer, the process in How To Transfer Shares is a helpful starting point for what’s usually involved.
Buying Back Shares
Some companies also consider share buybacks (for example, if a founder leaves and the company wants to “clean up” the cap table).
Share buybacks can be legally and financially sensitive - there are process requirements, and you want to be careful about solvency and proper approvals.
Where it makes sense, a Share Buyback can be a practical tool, but it’s not something to DIY with a generic template.
Key Legal Documents That Help You Get Shares Right (Without The Headaches)
When shares are involved, most legal problems aren’t caused by the number of shares - they’re caused by unclear rules, missing agreements, or misaligned expectations.
Here are the documents that usually matter most.
Company Constitution
A constitution sets out internal rules for how the company operates, which can include share-related rules - like different share classes, director powers, and shareholder decision-making processes.
Some companies rely only on the default rules in the Companies Act 1993, but a tailored Company Constitution is often worth it if:
- you have (or expect) multiple shareholders;
- you want different rights for different shareholders;
- you plan to raise money; or
- you want clearer internal governance to avoid disputes later.
Shareholders Agreement
A shareholders agreement is usually where the “real world” rules live - the commercial deal between the owners.
It commonly covers:
- how decisions are made (and what needs unanimous vs majority approval);
- how new shares can be issued;
- what happens if someone wants to sell;
- deadlock and dispute processes; and
- exit scenarios.
For many founder teams, a Shareholders Agreement is the difference between “we’ll figure it out later” and “we can grow without falling out.”
Share Vesting (For Founders Or Key People)
If equity is being given in exchange for ongoing contribution - especially in startups - vesting can help keep things fair.
Vesting arrangements are often used so that if someone leaves early, they don’t keep all the equity as if they stayed and built the business for years.
This is where a Share Vesting Agreement can be a key part of protecting the company (and the people still doing the work).
Share Sale Or Investment Documents
If you’re bringing in investors or selling shares, you may need transaction documents (and sometimes a suite of them) - not just a basic transfer form.
Depending on what’s happening, that could include:
- a share sale agreement;
- share subscription terms (if new shares are being issued);
- warranties and disclosures; and
- updates to the constitution and shareholders agreement.
These are the moments where “we’ll just keep it informal” tends to cause expensive problems - so getting advice before you sign anything is a smart move.
Key Takeaways
- In New Zealand, there is generally no fixed legal maximum on how many shares a company can have, but your structure needs to be practical and properly documented.
- The best number of shares depends on your goals - keeping founder ownership simple, allowing for future investment, or creating flexibility for employee or advisor equity.
- Issuing new shares can dilute existing shareholders, so it’s important to set clear rules around who can approve new share issues and whether existing shareholders have pre-emptive rights.
- Share transfers (including founder exits) should be managed carefully, with proper documentation and records, to avoid disputes and delays in future transactions.
- If you plan to use different share classes, raise capital, or have multiple owners, having a tailored Company Constitution and Shareholders Agreement can save you major headaches later.
- Equity arrangements for founders, employees, or key contributors are often best handled with a clear vesting framework, rather than informal promises.
If you’d like help setting up the right share structure for your company - or reviewing your constitution, shareholders agreement, or share issue/transfer documents - you can reach us at 0800 002 184 or team@sprintlaw.co.nz for a free, no-obligations chat.
