Selling Shares in NZ: Steps, Agreements and Legal Traps for Owners

Selling shares can be an exciting milestone.

Maybe you’re bringing in an investor to fund growth, letting a co-founder exit, or restructuring ownership as your business matures. Whatever the reason, selling shares isn’t just a handshake deal - it’s a legal process that needs to be done properly so you don’t create avoidable risk for your company (or yourself) down the track.

In New Zealand, “selling shares” usually means transferring ownership in a company from one person (the seller) to another (the buyer).

The details matter: what’s being sold, who approves it, whether there are pre-emptive rights, how payment works, and what happens if something goes wrong after settlement.

Below, we break down the key legal and practical points you should understand before you sign anything.

What Does “Selling Shares” Actually Mean?

When you sell shares, you’re selling an ownership interest in a company.

This is different from selling business assets (like stock, equipment, or contracts). With a share sale, the company stays the same legal entity - but the people who own it change. That means the buyer typically “steps into the shoes” of the shareholder, and they’re exposed to the company’s past and future performance.

Why Business Owners Sell Shares

We commonly see shares sold for reasons like:

• Raising capital (selling shares to a new investor in exchange for funding)
• Founder or shareholder exit (one owner wants to leave, retire, or move on)
• Bringing in strategic expertise (a new shareholder adds industry knowledge or networks)
• Restructuring ownership (tidying up shareholdings before a larger transaction)
• Employee equity changes (e.g. vesting, buy-backs, or reorganising incentives)

Share Sale Vs Issuing New Shares (And Why It Matters)

It’s important to clarify whether you’re:

• Selling existing shares (a shareholder sells their shares to someone else), or
• Issuing new shares (the company creates new shares and issues them to an investor).

These two pathways can have very different outcomes. A share sale changes who owns existing shares. A new issue increases the total number of shares and can dilute existing shareholders.

If you’re unsure which approach fits, it’s worth getting advice early - once you’ve made promises to an investor, it can be harder (and more expensive) to unwind.

What To Check Before You Sell Shares In NZ

Before you agree to selling shares, do a quick “legal health check” on your company’s ownership documents. This is where many deals get delayed - not because the parties disagree, but because the paperwork doesn’t match the commercial reality.

1) Your Company’s Constitution (If You Have One)

A company constitution can set the rules for how shares can be transferred, including:

• whether directors must approve a transfer
• whether shareholders get a first right to buy (pre-emptive rights)
• pricing mechanisms or valuation steps
• restrictions on selling to competitors or third parties

If your company has one, you’ll want to review your Company Constitution before negotiating price and terms - otherwise you might promise a sale you’re not actually allowed to complete.

2) Any Shareholders Agreement

A shareholders agreement often contains extra rules that sit alongside (or sometimes go beyond) the constitution, such as:

• pre-emptive rights and transfer restrictions
• drag-along and tag-along rights
• deadlock processes
• what happens if a founder leaves the business
• confidentiality obligations and restraint clauses

In practical terms, a Shareholders Agreement is often the first place we look to confirm whether a sale is permitted, and what steps you need to follow.

3) The Company’s Share Register And Records

In NZ, companies are expected to keep accurate company records, including a share register showing who owns what. If the share register is wrong (or hasn’t been updated in years), it’s not just messy - it can create real disputes about ownership and voting rights.

Before you sell shares, check:

• the current shareholders and number/class of shares
• whether there are different rights attached to shares (e.g. voting vs non-voting)
• whether any shares are subject to vesting or restrictions
• whether there are unpaid amounts on shares (if relevant)

If you’re not confident that the register and Companies Office details align, it’s best to tidy this up early.

4) Whether Anyone Else Must Approve The Transfer

Depending on your company’s documents, a share transfer might require:

• director approval
• shareholder approval
• a waiver of pre-emptive rights by existing shareholders

This is a big one for startups: even if you personally want to sell, you might be contractually restricted from transferring shares without following the agreed process.

How A Share Sale Usually Works (Step-By-Step)

Selling shares can be straightforward, but the “simple” deals usually still follow a sensible process.

Here’s a typical sequence we see for selling shares in NZ.

1) Agree On The Commercial Terms

Start with the basics:

• How many shares are being sold?
• What price (and how was it calculated)?
• What payment terms apply (upfront, instalments, holdback)?
• Is it conditional on finance, due diligence, or approvals?
• What’s the timeline for signing and settlement?

It’s common to record early-stage terms in a short document first, particularly if the parties need time to confirm due diligence and approvals.

2) Work Out Whether Due Diligence Is Needed

Buyers often want to do legal and financial due diligence before completing a share purchase - especially if they’re buying a meaningful stake or taking over management control.

Due diligence may cover things like:

• financial statements and tax position
• key contracts (customers, suppliers, leases)
• employment arrangements
• intellectual property ownership
• privacy and data handling
• any disputes or claims

If your business collects personal information (like customer details or subscriber lists), it’s also worth checking you have a fit-for-purpose Privacy Policy, because buyers will often ask how you comply with the Privacy Act 2020.

3) Prepare The Share Sale Documents

The key document is usually a share sale agreement (sometimes called a share purchase agreement). This sets out:

• what shares are being sold
• the price and payment terms
• conditions precedent (if any)
• warranties and indemnities
• restraint and confidentiality terms (where appropriate)
• completion mechanics (what happens at settlement)

Depending on the deal, you may also need related documents, like board resolutions, shareholder resolutions, waiver notices, or deeds of accession (so the buyer becomes bound by the shareholders agreement).

Where the sale involves a transfer of control or a change in governance, it can also be a good time to update your company’s internal rules and signing processes with the right Directors Resolution documentation.

4) Complete Settlement And Update Company Records

Once the agreement is signed and any conditions are satisfied, you move to completion (settlement). This is where:

• the buyer pays the purchase price
• the seller transfers the shares
• the share register is updated
• any required internal company records and resolutions are filed and stored
• new governance documents are signed (if needed)

In most NZ private company share transfers, there isn’t a routine “share transfer filing” with the Companies Office. The key legal step is updating the company’s own share register and records (and ensuring any related changes, like director details or registered office/address changes, are separately updated where required).

This “back end” administration is easy to overlook, but it’s what makes the transfer legally effective in practice.

Key Legal Issues When Selling Shares (And How To Avoid Common Mistakes)

Even a friendly share transfer between people who trust each other can create problems if the documents don’t cover the real risks.

Here are the big legal issues business owners should keep on their radar when selling shares.

Warranties: What Are You Promising About The Company?

Most buyers will want warranties - statements you make in the agreement about the company’s position. For example, warranties might cover that:

• the seller owns the shares and can transfer them
• the company’s records are accurate
• there are no undisclosed liabilities
• key contracts are valid and not in breach
• tax filings are up to date

Warranties matter because if a warranty is untrue, the buyer may have a claim after settlement. This is why “template” agreements can be risky - they might include broad warranties that don’t match your business reality.

Indemnities: Who Pays If Something Goes Wrong?

An indemnity is a promise to reimburse the other party for a specific loss (often dollar-for-dollar). Indemnities commonly cover known risks, like an unresolved tax issue or a specific dispute.

From a seller’s perspective, you want indemnities to be carefully limited to what’s fair and known, rather than open-ended risk.

Restraints And Confidentiality

Sometimes a buyer wants the seller (especially a founder) to agree not to compete for a period of time, and to keep business information confidential.

These clauses can be reasonable, but in NZ they need to be carefully drafted to be enforceable. Overly broad restraints can be challenged, and unclear confidentiality terms can be hard to rely on later.

Employment And Contractor Arrangements

If you’re selling a meaningful portion of your shares (or control), buyers often want confidence that your team arrangements are solid - because the value of many businesses is in the people and know-how.

This is where having clear, signed Employment Contract documentation (and consistent contractor agreements) can reduce friction during due diligence.

Fair Trading And Misleading Statements

Even though a share sale is not a typical consumer transaction, you still need to be careful about representations made during negotiations.

In business sales generally, it’s common for disputes to arise where a buyer claims they were misled about revenue, key customers, or the real cost base. The Fair Trading Act 1986 can be part of the background risk in how information is presented and relied on when parties are acting “in trade”.

The practical takeaway: be accurate, avoid overstating performance, and make sure important statements are documented properly in the agreement (including any disclosures and limitations).

Tax And Capital Raising (Two Commonly Missed Issues)

Share sales and share issues can have tax consequences for the seller, buyer, and the company (and the right treatment depends on the facts). It’s also common for investment rounds and offers to engage financial markets rules (for example, under the Financial Markets Conduct Act 2013), including questions about disclosure and whether an exception applies.

Because these issues are highly deal-specific, it’s a good idea to get tailored legal and accounting advice early, before terms are finalised or money changes hands.

Special Scenarios: Startups, Co-Founders, And Investor Exits

Startups often face share sales earlier than traditional small businesses - sometimes before revenue is stable - which makes the rules around control and future funding even more important.

Co-Founder Exits (Before Things Get Messy)

Imagine this: your startup is gaining traction, but one co-founder wants to leave. If there’s no clear process for how shares are valued and transferred, the conversation can become stressful fast.

To keep things commercial (and preserve relationships), it helps to have documents that cover:

• what happens if a founder leaves early
• whether there’s vesting (so shares are “earned” over time)
• how pricing is determined (valuation formula or independent valuer)
• whether the company or other shareholders can buy the shares first

If you’re building a company with multiple founders, a Founders Agreement can set expectations early and reduce the risk of disputes later.

Bringing In Investors Without Losing Control

Selling shares to investors can unlock growth - but you want to be clear on what the investor is actually getting.

Beyond the share price, investors often care about:

• board appointment rights
• voting rights and veto rights
• information rights (financial reporting)
• anti-dilution protections
• future funding rules

These points are usually handled through a mix of a shareholders agreement and constitutional settings, not just the share sale agreement.

Minority Share Sales

If you’re selling a minority stake (say 5%–20%), the buyer may still want significant protections, especially if they can’t control day-to-day decisions. That can lead to negotiations about governance and access to information.

On the flip side, if you’re the one selling a minority parcel, be careful you don’t accidentally give the buyer rights that make your business harder to run (or harder to fundraise for later).

Key Takeaways

• Selling shares changes company ownership, so it’s crucial to check your constitution, shareholders agreement, and share register before promising a deal.
• A share sale is different from issuing new shares, and the best approach depends on whether you’re raising capital, exiting, or restructuring ownership.
• Most share sales involve clear documentation around price, payment terms, conditions, warranties, and settlement steps to reduce the risk of disputes.
• Warranties and indemnities can create ongoing liability for the seller after completion, so they should be tailored to the realities of your business.
• Startup share transfers often raise extra issues around founder exits, vesting, investor rights, and maintaining control as the company grows.
• Keeping your company records and contracts organised (including employment documents and privacy compliance) can make due diligence smoother and protect the value of your business.

If you’d like help selling shares or documenting a share transfer properly, you can reach us at 0800 002 184 or team@sprintlaw.co.nz for a free, no-obligations chat.