Selling Your Own Shares in A New Zealand Company

If you’re a founder, early investor, or shareholder in a New Zealand company, there might come a time when you want to take some money off the table. Maybe you’re exiting entirely, maybe you’re selling down your stake, or maybe you’ve found someone who wants in.

Either way, the process of selling shares in a company isn’t just a handshake deal. It can be surprisingly technical, and if you skip key steps, you can end up with disputes, tax surprises, or a transaction that doesn’t properly transfer ownership at all.

Below, we’ll walk you through the key legal and commercial factors to consider before you cash out - written for small business owners and growing companies, not big listed corporates.

What Does “Selling Shares In A Company” Actually Mean?

When people talk about selling shares in a company, they usually mean one of two things:

A share sale - you (the shareholder) sell some or all of your shares to another person/entity, and they step into your shoes as the shareholder.
An asset sale - the company sells its business assets (customers, stock, IP, equipment), but the shareholder ownership of the company stays the same.

This article is about the first scenario: you selling your own shares.

From a practical point of view, a share sale means:

Control (voting power) can change;
Dividend rights can change;
The buyer may inherit exposure to the company’s history (because they’re buying into the company itself, not just buying a bundle of assets); and
You need to follow the company’s rules around transfers (often set out in its constitution and any shareholders agreement).

If you’re unsure whether a share sale is the right approach, it can help to get clarity early on - including how the transfer mechanics work. For a deeper look at the process itself, How To Transfer Shares is a helpful starting point.

Check Your Legal “Rulebook” Before You Agree To Anything

Before you negotiate price or shake hands, you’ll want to identify the documents that govern what you can (and can’t) do as a shareholder. In a small business, these documents are often where deals get stuck.

Your Shareholders Agreement

If your company has a Shareholders Agreement, it may include rules about:

Pre-emptive rights (existing shareholders get “first right” to buy your shares before you sell to an outsider);
Valuation and pricing mechanisms (how the price is set if you can’t agree);
Drag-along and tag-along rights (forcing minority shareholders to sell, or allowing them to join a sale);
Restrictions on who can become a shareholder (e.g. competitors, certain entities); and
Exit processes (what happens if a founder leaves, or a shareholder relationship breaks down).

In many small businesses, the shareholders agreement is the difference between an exit that runs smoothly and one that becomes a dispute.

Your Company Constitution

Even if you don’t have a shareholders agreement, you may have a Company Constitution that sets out how share transfers work. Some constitutions:

Require director approval for transfers;
Set out notice requirements or processes;
Include restrictions on transfers to certain people; or
Link into pre-emptive rights provisions.

It’s common for business owners to assume “I own the shares, so I can sell them whenever I like.” In reality, you may have agreed to restrictions when you first issued or acquired the shares - and those restrictions can be enforceable.

The Companies Act 1993 And Company Records

In New Zealand, share transfers must be properly recorded. This isn’t just admin - ownership of shares is ultimately reflected in the company’s share register and supporting documentation.

As part of selling shares, you’ll typically need the company to:

Update its share register to reflect the buyer;
Issue or update share certificates (if the company uses them); and
Approve the transfer in the way required by the constitution and/or shareholders agreement (which may involve directors’ resolutions or other internal approvals).

These details often sit inside the broader topic of changing company ownership, especially when the sale changes who controls the business day-to-day.

Pricing, Valuation And Payment: Nail Down The Commercial Deal

Once you’ve confirmed you can sell, the next question is: what exactly are you selling, and for how much?

In small businesses, pricing can be tricky because there isn’t a public market price. This is where you want to be clear about the commercial terms, not just the legal mechanics.

How Are Shares Valued In A Small NZ Company?

There are a few common approaches:

Agreed price - you and the buyer negotiate a number based on financials, growth prospects, and risk.
Independent valuation - an accountant or valuation expert values the company, and the shares are priced accordingly.
Formula-based pricing - e.g. a multiple of EBITDA or revenue (often seen in shareholder agreements).

Be careful here: “company value” and “your shares’ value” aren’t always the same thing. A minority stake may be worth less per share due to lack of control, and a majority stake may attract a premium.

What Exactly Is Included In The Sale?

In a share sale, the buyer is buying:

Your rights as a shareholder (votes, dividends, rights on liquidation); and
Exposure to the company’s past and future (because the company continues as the same legal entity).

This is why buyers usually ask for warranties and disclosure - and why sellers should be cautious about what they agree to “promise” in a sale document.

How Will You Actually Get Paid?

Payment terms can vary widely, including:

Lump sum on completion (simplest, cleanest exit);
Deposit + balance later (more risk; you’ll want protections);
Earn-out arrangements (part of the price depends on future performance); or
Vendor finance (you effectively lend the buyer the purchase price, paid over time).

From a risk perspective, the more delayed or conditional your payment is, the more important it is to have a well-drafted agreement that covers defaults, security, and what happens if the company’s performance changes.

For many private company transactions, a tailored Share Sale Agreement is what ties these pricing and payment terms together (and makes sure both sides are clear on the rules).

Due Diligence, Warranties And Disclosure: Reduce The Risk Of A Dispute

It’s easy to think the legal work is just about transferring shares. But the biggest legal risk when selling shares often comes after the sale - when one party claims they were misled, or that something material wasn’t disclosed.

Expect Buyer Due Diligence

Even in a small business, a buyer may want to review:

Financial statements, bank statements, and cashflow;
Key contracts (customers, suppliers, leases);
Employee arrangements and contractor agreements;
Any disputes, debts, or outstanding liabilities;
Regulatory compliance (especially for regulated industries); and
Company records (share register, resolutions, constitution).

This is normal. It’s not a sign of mistrust - it’s the buyer managing risk.

Warranties And Indemnities: What Are You Promising?

A share sale agreement often includes warranties (statements you promise are true), such as:

The company’s accounts are accurate;
The company has complied with laws;
There are no undisclosed liabilities; and
The company owns its IP and key assets.

If a warranty turns out to be untrue, you may be liable even after you’ve sold and left the business.

Depending on the deal, there may also be indemnities (a promise to cover specific losses). Indemnities can create more direct exposure than general warranties, so it’s worth getting advice before agreeing.

Disclosure Is Your Best Friend

If there’s something the buyer should know, it’s usually better to disclose it clearly in writing rather than hoping it won’t come up.

This is particularly important because NZ contract law and fair dealing principles can make it risky to stay silent where silence creates a misleading impression. If you want a plain-English explanation of how misinformation can affect contracts, Misrepresentation is worth understanding before you sign anything.

Tax, Governance And Ongoing Obligations After The Sale

When you sell shares, you’re changing the ownership and control settings of a company - so it’s not just a private transaction between you and the buyer. There can be flow-on effects for governance, banking arrangements, and future decision-making.

Tax: Don’t Leave This To The Last Minute

Tax outcomes depend heavily on your specific situation, including how the company is structured, what you paid for the shares, and whether the company holds revenue account property or other assets.

It’s important to loop in an accountant early so you understand what your “cash out” really looks like after tax. (Sprintlaw can help with the legal side of the transaction, but we don’t provide tax advice.)

From the company’s side, a change in shareholders can also affect things like shareholder continuity (which may impact loss offsets) and other tax settings. These are technical issues, but they can materially change the value of the deal.

Director Duties And Conflicts (If You’re Also A Director)

Many founders are both shareholders and directors. If you’re selling shares while still acting as a director, you may need to be careful about conflicts of interest and proper decision-making processes - especially if the company is approving the transfer or negotiating related arrangements.

In New Zealand, directors’ duties sit under the Companies Act framework. If you want a simple overview of the “who do I owe duties to?” question, Fiduciary Duty is a good concept to have on your radar.

Ongoing Restraints And Exit Terms

Even after selling your shares, you might still be bound by obligations like:

Confidentiality (especially around customer lists, pricing, and trade secrets);
Non-compete / restraint clauses (limits on starting a competing business);
IP assignments (confirming the company owns what it should); or
Ongoing consulting arrangements (to support transition).

These terms can be commercially reasonable, but they should be clearly drafted so you know what you’re agreeing to (and so they’re more likely to be enforceable if challenged).

How Do You Actually Document The Sale And Transfer In Practice?

Once you’ve agreed on the deal terms, the next step is getting the paperwork right. This is the part that turns “we agreed” into “it’s legally done”.

In many private sales, the core documents include:

Share Sale Agreement (setting out price, payment terms, warranties, disclosure, restraints, and completion mechanics);
Share transfer documentation (often supported by board approvals and updates to the share register);
Director/shareholder resolutions (as required under the constitution and Companies Act processes); and
Accession documentation if the buyer is joining an existing shareholders agreement.

That last point is often overlooked. If the company has an existing shareholders agreement, the incoming buyer usually needs to sign a deed agreeing to be bound by it - commonly done via a Deed Of Accession.

Completion: When Is The Deal “Done”?

“Completion” is the moment when:

Funds are paid (or payment obligations are triggered);
Share transfer steps take effect;
Resignations/appointments of directors (if any) occur; and
Control of the company may change hands (bank signatories, system access, keys, etc.).

It’s worth treating completion like a mini-project with a checklist. If steps happen out of order (for example, shares transfer but payment hasn’t cleared), you can end up exposed.

Don’t Rely On Templates

It’s tempting to use a free online template for a share sale, especially if you’re trying to keep costs down. But in practice, share sales often involve:

Tailored warranties (based on what the company actually does);
Tailored disclosure (based on the company’s risks);
Specific completion steps (based on governance documents); and
Payment protections (especially if payment is staged or conditional).

A generic document can miss the exact thing you needed it to cover - and that’s usually discovered only once a dispute has already started.

Key Takeaways

Selling shares in a company is different from selling business assets - a share sale transfers ownership in the company itself, including exposure to its history and liabilities.
Before you negotiate, check your company’s shareholders agreement and constitution, as these often restrict transfers and may give other shareholders first rights to buy.
Agreeing on price is only one part of the deal - you also need clear terms on valuation, payment timing, and what happens if payment is delayed or conditional.
Buyers commonly expect due diligence, warranties, and disclosure; getting these right can significantly reduce the risk of post-sale disputes.
Tax outcomes and governance issues (especially if you’re also a director) should be considered early, not after the agreement is signed.
A proper share sale agreement and well-managed completion process help ensure the transfer is legally effective and the commercial deal is actually enforceable.

If you’d like help with selling shares, preparing a share sale agreement, or making sure the transfer is done properly under NZ company law, you can reach us at 0800 002 184 or team@sprintlaw.co.nz for a free, no-obligations chat.

Selling Your Own Shares In A New Zealand Company: Key Factors Before You Cash Out