Share Subscription Agreements In New Zealand Angel Rounds

A share subscription agreement is the contract that records an investor's agreement to put money into your company in exchange for new shares. In an angel round, it's often the document that turns a handshake, pitch deck and term sheet into a legally clear share issue.

That sounds simple, but there's a bit more going on under the surface. You're not just taking money. You're issuing shares under the Companies Act 1993, checking your offer fits within New Zealand's capital raising rules, giving promises to investors, collecting their money and updating your company records properly.

The good news is that this doesn't have to be overcomplicated. If you get the structure right early, your angel round can be much smoother for you, your investors and any future funders looking at your cap table.

What Is A Share Subscription Agreement?

A share subscription agreement is a contract between your company and an investor for the issue of new shares. The investor subscribes for shares, pays the subscription price, and your company issues those shares to them.

This is different from a share sale. In a subscription, the investor's money usually goes into the company to help grow the business. In a share sale, an existing shareholder sells their shares and the money usually goes to that seller.

For an angel round, the agreement usually covers:

• who the investor is and how much they're investing
• the number and class of shares being issued
• the price per share or valuation used
• what needs to happen before completion
• warranties from the company and the investor
• what happens if completion doesn't occur
• company record updates after the shares are issued

For example, say Aroha runs a Wellington software startup. An angel investor agrees to invest $150,000 for ordinary shares. The share subscription agreement records exactly what Aroha's company must issue, when the investor must pay, and what each side is promising about the company and the investment.

Do You Need A Share Subscription Agreement For An Angel Round?

Yes, in most angel rounds you should have a written share subscription agreement. It gives you a clear record of the investment terms and helps avoid confusion about what the investor is getting.

Some very early rounds start informally with a short email or a signed term sheet. That can feel faster, especially when everyone is excited to move. But once money is changing hands for shares, you need more certainty.

Without a written agreement, you may run into practical problems such as:

• disagreement about the valuation or share price
• uncertainty about whether shares are ordinary shares, preference shares or another class
• investors expecting rights that were only mentioned loosely in conversations
• trouble showing future investors what happened in the round
• missing Companies Office filings or share register updates

A subscription agreement also helps keep the investment separate from other documents. Your shareholders agreement usually deals with the ongoing relationship between shareholders, such as voting, founder commitments, drag along rights, tag along rights and share transfer rules. The subscription agreement deals with the actual issue of shares in the round.

Both documents often work together. If you're issuing shares to angel investors, it's common for them to sign the subscription agreement and also become bound by the shareholders agreement.

What Should Be Included In A Share Subscription Agreement?

A good share subscription agreement should include the core commercial terms, the completion mechanics and the promises each side is relying on. The exact wording depends on your business, the round size and the investor's requirements.

Investment Terms

The agreement should clearly state:

• the investor's legal name and contact details
• your company's full legal name, NZBN and Companies Office company number
• the amount being invested
• the number of shares to be issued
• the class of shares
• the price per share
• whether the round is based on a pre-money or post-money valuation
• the completion date or process for setting it

If you're raising from multiple angels, you may use one agreement signed by all investors or separate agreements for each investor. Separate agreements can be easier if investors are coming in at different times, but you'll want the terms to stay consistent unless there's a clear reason to treat investors differently.

Conditions Before Completion

Conditions are things that must happen before the investment completes. Common conditions include:

• board approval for the share issue
• shareholder approval, if required by your constitution or shareholders agreement
• the investor signing a deed of accession to the shareholders agreement
• completion of basic due diligence materials
• confirmation that the offer can be made under a Financial Markets Conduct Act 2013 exclusion
• receipt of the investor's completed investor certificate or wholesale investor confirmation, if relevant

These steps aren't just admin. Under the Companies Act 1993, existing shareholders have default pre-emptive rights for the issue of shares that rank equally with, or ahead of, their existing shares, unless the company's constitution negates, limits or modifies those rights. Your constitution and shareholders agreement should be checked carefully to see whether those rights are modified, excluded or supplemented, and whether you need to offer shares to existing shareholders first or obtain waivers before issuing shares to new investors.

Warranties

Warranties are contractual promises about facts. In an angel round, company warranties often cover matters such as:

• the company is properly registered under the Companies Act 1993
• the company has authority to issue the shares
• the cap table provided to investors is accurate
• the company owns or has rights to use its key intellectual property
• there are no undisclosed material contracts or liabilities that would affect the investment
• the company has complied with key laws that apply to its business

Investor warranties are just as important. Your investor may need to promise that:

• they have power to enter the agreement
• they're investing for themselves and not on behalf of someone undisclosed
• they understand startup investing is risky
• they meet the relevant investor category or offer exclusion you're relying on
• the information they've provided about their investor status is true

Templates often miss the practical details that matter in a real round, especially around investor status, IP ownership and completion steps. The document works best when it's tailored to your cap table and the way your angel round is actually being run.

How Do New Zealand Capital Raising Rules Affect Angel Rounds?

New Zealand's capital raising rules matter because shares are financial products. If you're offering shares to investors, the Financial Markets Conduct Act 2013 may require formal disclosure unless an exclusion applies.

For many early-stage angel rounds, you may rely on one or more Schedule 1 exclusions under the Financial Markets Conduct Act 2013. Common examples include:

• Wholesale investors: investors who meet specific financial, investment business or experience tests.
• Eligible investors: investors who certify that they have enough previous experience to assess the offer, with the required confirmation process.
• Close business associates or relatives: people with a close connection to the company or its directors, where the rules are satisfied.
• Small offers: certain personal offers where, broadly, you raise no more than $2 million from no more than 20 investors in a 12-month period.

The exact exclusion matters because it affects what documents you need, what investor confirmations you should collect and how you can approach potential investors.

For instance, if you're using the small offers exclusion, you'll need to keep a careful count of investors and money raised over the relevant 12-month period. You also need to include the prescribed small offer warning statement when required, and usually give the Financial Markets Authority notice within 1 month after the end of the relevant accounting period, unless a limited exception applies. If you're relying on eligible investor certificates, you'll need to make sure the certification process is handled correctly, rather than just asking the investor to tick a casual box.

Your share subscription agreement should support the exclusion you're relying on. It can include investor warranties and acknowledgements that help evidence why the offer was made lawfully. You should also keep supporting records, such as investor certificates, board minutes and a clear list of who received the offer.

What Happens At Completion?

Completion is when the investor pays the money and your company issues the shares. The subscription agreement should set out this process clearly so there's no awkward gap between payment and ownership.

A typical completion process looks like this:

1. Your board decides the consideration and terms of issue, approves the share issue, resolves that the consideration and terms are fair and reasonable to the company and all existing shareholders, and records this in board minutes or a written resolution.
2. The directors voting in favour sign the required Companies Act 1993 certificate for the share issue, including the grounds for their opinion.
3. Any required shareholder approvals or waivers are signed.
4. The investor signs the subscription agreement.
5. The investor signs any deed of accession to the shareholders agreement.
6. The investor provides any required investor status documents.
7. The investor transfers the subscription money to your company's bank account.
8. Your company issues the shares.
9. Your company updates its share register and Companies Office records.

Board approval is especially important. Before issuing shares, the board needs to follow the Companies Act 1993 process for setting the consideration and terms of issue. This includes resolving that the consideration and terms are fair and reasonable to the company and to all existing shareholders, and ensuring the directors who vote in favour sign the required certificate. Directors also need to act in line with their duties, including acting in good faith and in the best interests of the company.

If your company has a constitution, check whether it changes the default position under the Companies Act 1993, including any pre-emptive rights for existing shareholders. Your shareholders agreement may also require investor consent, founder consent or a particular approval threshold before new shares can be issued.

Completion can happen all at once, or in tranches. For example, you might complete $400,000 now and allow a further $100,000 from a named angel investor within 30 days. If you do that, the agreement should explain the timing, whether later investors receive the same price, and what happens if the extra money never arrives.

What Companies Office Updates Are Needed After Issuing Shares?

After issuing shares, you need to update your internal share register and file the required notice with the Companies Office. Under the Companies Act 1993, companies must keep accurate share records and notify the Registrar of share issues within the required timeframe.

For a New Zealand company, this usually means you should:

• enter the investor in your company's share register
• record the number and class of shares issued
• record the date of issue
• keep board resolutions, directors' certificates and signed agreements with your company records
• file the notice of share issue with the Companies Office, generally within 10 working days after the issue
• check that your annual return and Companies Office details remain accurate

The share register is a key company record. If the Companies Office record, share register and signed documents don't line up, it can create headaches later when you're raising another round, applying for funding, issuing employee options or preparing investor reports.

It's also worth keeping your cap table updated immediately after completion. Your cap table should show:

• each shareholder
• the number and class of shares they hold
• their percentage ownership before and after the round
• any option pool or convertible instruments
• any agreed rights attached to different share classes

Future investors will usually ask for this. A tidy cap table signals that you're organised and helps the next raise move faster.

Should You Use Ordinary Shares, Preference Shares Or A SAFE?

It depends on your round and investor expectations. Angel rounds in New Zealand can use ordinary shares, preference shares or convertible instruments, but each option works differently.

Ordinary Shares

Ordinary shares are often the simplest option. The investor receives shares now and becomes a shareholder at completion.

This can work well for a small, straightforward angel round where investors are comfortable with standard shareholder rights. The trade-off is that you need to agree the valuation now.

Preference Shares

Preference shares give investors special rights compared with ordinary shareholders. These rights might relate to dividends, liquidation preference, voting, anti-dilution protection or conversion into ordinary shares.

Preference shares can suit more sophisticated rounds, but they need careful drafting in your constitution and shareholders agreement. If the rights are unclear, you may create confusion about who gets paid first or who can approve major decisions.

SAFE Or Convertible Note

A SAFE or convertible note usually delays the issue of shares until a later trigger, often a priced funding round. This can be attractive if it's hard to set a valuation now.

A SAFE isn't the same as a share subscription agreement because the investor isn't usually receiving shares immediately. If you're using a SAFE or convertible note, you'll need a different document and you'll still need to think about Financial Markets Conduct Act 2013 exclusions.

The best choice depends on the amount being raised, your valuation, your investor group and your plans for future rounds.

Common Mistakes To Avoid

The most common mistakes are usually process mistakes, not dramatic legal issues. They happen when the round moves quickly and the paperwork is left until the end.

Watch out for:

• Issuing shares before approvals are sorted: check your constitution, shareholders agreement, default pre-emptive rights and Companies Act share issue steps before promising shares to anyone.
• Using the wrong investor exclusion: don't assume every angel is automatically a wholesale investor.
• Leaving IP ownership unclear: investors will want to know that key software, branding, designs or content are owned by the company or properly licensed to it.
• Forgetting existing shareholder rights: pre-emptive rights and consent rights can affect whether you can issue shares freely.
• Having inconsistent documents: your term sheet, subscription agreement, shareholders agreement, constitution and cap table should tell the same story.
• Missing Companies Office updates: late or inaccurate records can slow down future funding and create avoidable clean-up work.

If your round involves several investors, a tight completion date or special investor rights, it's worth getting the documents checked before signatures start coming in. It's much easier to fix drafting issues before money lands in the account.

Key Takeaways

• A share subscription agreement records the investor's commitment to pay money to your company in exchange for newly issued shares.
• Angel rounds need more than commercial agreement. You also need to consider Companies Act 1993 share issue approvals, default pre-emptive rights and Financial Markets Conduct Act 2013 offer rules.
• The agreement should cover investment terms, completion steps, company warranties, investor warranties and what happens after completion.
• If you're relying on the small offers exclusion, track investor numbers and money raised, and remember the warning statement and FMA notice requirements where they apply.
• Your company should update its share register, cap table and Companies Office records after issuing shares.
• Ordinary shares, preference shares, SAFEs and convertible notes all work differently, so choose the structure that fits your raise and future plans.

If you'd like help with share subscription agreements, shareholder approvals, investor offer rules and Companies Office steps for an angel round, you can reach us at 0800 002 184 or team@sprintlaw.co.nz for a free, no-obligations chat.