Share Subscription Letter Template For NZ Startups

Yes, you can use a share subscription letter to record a simple issue of shares in a New Zealand startup.

The nuance is that the letter is only one part of the process. You still need to check your constitution and shareholders agreement, get the right board approvals, check the Financial Markets Conduct Act 2013 offer rules, follow the Companies Act 1993, update your company records and file the required documents with the Companies Office.

This doesn't have to be complicated, especially for a small issue to an investor, advisor or founder. But if you skip the basics, you can end up with confusion over who owns what, whether the shares were validly issued, whether the offer needed disclosure, or whether existing shareholders should have been offered the shares first.

What Is A Share Subscription Letter In New Zealand?

A share subscription letter is a short document where someone agrees to subscribe for new shares in your company, and your company agrees to issue those shares on set terms.

In plain English, it's the paper trail for a new share issue. The subscriber might be:

• an investor putting cash into your startup
• a founder receiving shares as part of the initial setup
• an advisor receiving shares for agreed services
• a staff member or contractor participating in an employee share scheme or other equity arrangement

A share subscription letter is different from a share transfer. With a subscription, the company creates and issues new shares. With a transfer, an existing shareholder sells or gives their existing shares to someone else.

That distinction matters because issuing new shares usually dilutes existing shareholders. If your company has 1,000,000 ordinary shares on issue and you issue 100,000 new ordinary shares to an investor, the total becomes 1,100,000. Everyone's percentage changes unless they also receive new shares.

A subscription letter also isn't the same as a full share subscription agreement. A letter is usually shorter and works best where the terms are simple. A fuller agreement is better when there are conditions, investor rights, founder promises, staged payments or more detailed warranties.

When Is A Share Subscription Letter Enough?

A share subscription letter may be enough where the issue is straightforward and your company documents already deal with the bigger governance points.

For example, it can work well if:

• you're issuing ordinary shares, not preference shares or a custom share class
• the investor is paying a fixed cash amount on a set date
• there are no special investor rights, veto rights or board seats
• your shareholders agreement already covers decision-making, exits, confidentiality and founder obligations
• all required shareholder consents have already been obtained
• you aren't running a public or retail capital raise

Say Aroha and Ben run a Wellington SaaS startup through KiwiFlow Limited. Their company has 1,000,000 ordinary shares on issue. Their advisor, Nina, is going to invest $25,000 for 25,000 new ordinary shares at $1 per share. Everyone is comfortable with the dilution, and their shareholders agreement already allows the issue if the board approves it and shareholders holding 75% of shares consent.

In that scenario, a short subscription letter may be a neat way to record the subscription, as long as KiwiFlow also completes the board and shareholder approvals, checks the Financial Markets Conduct Act position, updates the share register and files the required documents with the Companies Office.

On the other hand, if Nina wants information rights, a board observer role, share vesting changes or anti-dilution protections, a short letter is probably too light.

What Should A Share Subscription Letter Template Include?

A share subscription letter template should include the commercial terms, the legal mechanics and the practical completion steps.

Templates can be useful for spotting the issues, but they often miss company-specific details. Your constitution, shareholders agreement, share class, investor terms, approval thresholds and offer disclosure position can all change what the document needs to say. A legal team should tailor the letter before you use it.

Share Subscription Letter Outline

1. Parties: Write the full legal name, company number and NZBN of your company, plus the subscriber's full legal name and address.
2. Background: Briefly explain that the subscriber wants to subscribe for shares and the company wants to issue them.
3. Number And Class Of Shares: State the exact number of shares and whether they're ordinary shares or another class.
4. Subscription Price: State the price per share and the total amount payable, or explain the non-cash consideration if shares are issued for services or assets.
5. Payment Details: Set out when and how payment must be made, including the bank account or invoice process if relevant.
6. Completion Date: State when the shares will be issued, often after payment and approvals are received.
7. Approvals: Record that the issue is subject to any board approvals, shareholder consents, pre-emptive rights requirements and Financial Markets Conduct Act checks.
8. Subscriber Confirmations: Include simple confirmations that the subscriber has authority to sign, is subscribing for their own account and, if relevant, fits the applicable offer exclusion.
9. Company Confirmations: Include confirmations that the company will update its share register and make required Companies Office filings.
10. Governing Law: State that New Zealand law governs the letter.
11. Signing Block: Include signing spaces for the company and subscriber, with dates.

If the shares are being issued to an advisor or contractor for services, be extra careful. You may need the services agreement to match the equity arrangement, including any profit share, revenue share or vesting terms and what happens if the services stop early. You may also need accounting or tax advice on the treatment of non-cash consideration.

How Do You Issue Shares To An Investor In NZ?

You issue shares to an investor in NZ by following your company documents, approving the issue properly, checking the offer rules, recording it in your share register and filing the required documents with the Companies Office.

The Companies Act 1993 sets the core company law rules. The Financial Markets Conduct Act 2013 sets important rules about offers of shares. Your constitution and shareholders agreement can add extra steps, so always check them first.

Step 1: Check Your Constitution And Shareholders Agreement

Look for rules about:

• who can approve new share issues
• whether existing shareholders have pre-emptive rights
• any investor consent or special majority requirements
• whether the company can issue different classes of shares
• whether new shareholders must sign a deed of accession to the shareholders agreement

Under the Companies Act 1993, existing shareholders may have pre-emptive rights to new shares that rank equally with or ahead of their existing shares, unless your constitution modifies or excludes those rights. If those rights apply, you may need to offer the shares to existing shareholders first or get a valid waiver.

Step 2: Get Board Approval And The Section 47 Certificate

The board normally approves the share issue. Before issuing shares under section 42 of the Companies Act 1993, the board must decide the consideration and terms of the issue and resolve that they're fair and reasonable to the company and to all existing shareholders.

Directors who vote in favour of the issue must also sign a section 47 director's certificate confirming that, in their opinion, the consideration and terms are fair and reasonable to the company and all existing shareholders. A copy of that certificate must be delivered to the Registrar within 10 working days after it's given.

In practice, your board minutes or written resolutions should record:

• the number and class of shares being issued
• the subscription price or other consideration
• who the shares are being issued to
• why the issue is fair and reasonable to the company and existing shareholders
• that the approving directors will sign the section 47 certificate
• that any required shareholder consents or waivers have been obtained
• that the share register and Companies Office records will be updated

If the shares are issued for non-cash consideration, such as services, assets or intellectual property, take extra care with the certificate and records. The section 47 process has extra requirements for non-cash consideration, including recording the consideration and the board's assessment of its value.

Step 3: Check The Financial Markets Conduct Act Offer Rules

Before you sign or complete the issue, check whether the offer of shares is a regulated offer under the Financial Markets Conduct Act 2013. If it's a regulated offer, the company may need formal disclosure, including a product disclosure statement and register entry.

Many startup share issues rely on a Schedule 1 exclusion. Common examples include offers to wholesale investors, close business associates, relatives, certain employee share schemes, or small offers that meet the Act's conditions. The right exclusion depends on the investor, how you approach them, how many people are involved and the amount being raised.

This is why a simple subscription letter is usually not the right tool for a public or retail capital raise. If you're advertising broadly, approaching lots of investors, or unsure whether an exclusion applies, get tailored advice before sending offer materials or taking money.

Step 4: Sign The Subscription Letter And Receive Payment

The company and subscriber should sign the letter before the shares are issued. If the investor is paying cash, wait until funds are received unless the letter clearly says otherwise.

Step 5: Update The Share Register And Companies Office

Your company must keep an accurate share register. For a new share issue, you should record the subscriber's name, address, number of shares, class of shares and issue date.

You also need to file the share allocation with the Companies Office. For a New Zealand company, a notice of share issue is generally due within 10 working days after the shares are issued. This is separate from filing a copy of the section 47 director's certificate with the Registrar within 10 working days after the certificate is given.

How Do You Work Out The Price And Number Of Shares?

You work out the price and number of shares by agreeing the investment amount, valuation and target ownership percentage, then checking whether the result is commercially fair and legally workable.

New Zealand companies don't use a par value system for shares, so there isn't a fixed face value you must use. The board still needs to think carefully about the price, especially if the company is issuing shares to one person at a discount compared with others.

A Simple Worked Example

Imagine your startup, TuiTech Limited, has 1,000,000 ordinary shares on issue. An investor agrees to put in $100,000 at $1 per share.

The result is:

• new shares issued to investor: 100,000 ordinary shares
• total shares after issue: 1,100,000 ordinary shares
• investor ownership after issue: 100,000 divided by 1,100,000, which is about 9.09%
• existing shareholders collectively move from 100% to about 90.91%

If you promised the investor exactly 10% after the issue, 100,000 shares wouldn't quite get there. You would need to calculate the number of shares differently, because the new shares increase the total on issue.

The same issue comes up with advisor equity. If you have 1,000,000 shares on issue and want an advisor to hold 2% after the issue, issuing 20,000 shares gives them about 1.96%, not 2%. To reach about 2% post-issue, you would issue around 20,408 shares, because 20,408 divided by 1,020,408 is about 2%.

Those numbers might look small, but they matter. Cap table mistakes can cause awkward conversations during your next fundraise, especially if your investor deck says one thing and your Companies Office records say another.

When Do You Need A Fuller Share Subscription Agreement?

You need a fuller share subscription agreement when the deal involves more than a simple issue of shares for a fixed price.

A short subscription letter is usually designed to be simple. It won't usually deal with more detailed investor protections or conditions. If the investor is putting in serious money, taking a special share class or asking for ongoing rights, a longer agreement is often the safer option.

You may need a fuller agreement if:

• the investment will complete only if certain conditions are met
• the investor wants warranties about your company, accounts, intellectual property or contracts
• you're issuing preference shares or creating a new share class
• there will be multiple investors closing at different times
• the investor will get a board seat, observer rights or consent rights
• the subscription is linked to a shareholders agreement or deed of accession
• the investor is contributing assets, intellectual property or services instead of cash
• you're using a convertible note, SAFE-style document or other fundraising instrument

For example, if an investor is putting $300,000 into your startup and wants a board seat, quarterly information rights and warranties that your company owns all of its software code, a short letter probably won't do enough. You would usually document those points in a subscription agreement and update your shareholders agreement if needed.

This is also where IPONZ and intellectual property records can matter. If your startup's value depends on trade marks, copyright in software or confidential know-how, an investor may want comfort that the company actually owns or controls those rights before subscribing.

Common Mistakes To Avoid

The most common mistakes are usually simple process errors, not complicated legal tricks.

Before you issue shares, watch out for these:

• Issuing shares before checking pre-emptive rights: Existing shareholders may have a right to be offered the shares first. If you ignore that, the issue can become messy.
• Missing the Financial Markets Conduct Act check: An offer of shares may need disclosure unless an exclusion applies. Don't use a simple subscription letter for a public or retail raise without tailored advice.
• Using the wrong company name: Use the company's exact registered name, company number and NZBN, not just the trading name.
• Confusing a subscription with a transfer: If the shares are coming from an existing shareholder, you need share transfer documents, not a subscription letter.
• Forgetting the deed of accession: If your shareholders agreement requires every new shareholder to join it, the investor should sign the accession document at completion.
• Skipping the section 47 certificate: Directors who approve the issue need to sign the certificate, and a copy must be delivered to the Registrar within 10 working days after it's given.
• Missing the Companies Office filing: A notice of share issue generally needs to be filed within 10 working days after the issue.
• Getting the maths wrong: Pre-money and post-money percentages can be confusing. Always check the cap table after the proposed issue.

One practical tip is to prepare a completion checklist before anyone signs. It might include the subscription letter, board resolutions, section 47 director's certificate, Registrar filing for that certificate, shareholder consents, pre-emptive rights waivers, Financial Markets Conduct Act exclusion records, payment confirmation, deed of accession, share register update, share buyback or buy out steps if relevant, and notice of share issue filing.

That checklist doesn't need to be fancy. It just helps you keep the legal paperwork aligned with the commercial deal you've agreed.

Key Takeaways

• A share subscription letter can work well for a simple issue of new shares to an investor, advisor or founder.
• Before offering shares, check whether the Financial Markets Conduct Act 2013 requires disclosure or whether a Schedule 1 exclusion applies.
• Under the Companies Act 1993, the board must approve the issue, resolve that the terms are fair and reasonable, and ensure approving directors sign a section 47 certificate.
• A copy of the section 47 certificate must be delivered to the Registrar within 10 working days after it's given, and a notice of share issue is generally filed within 10 working days after the shares are issued.
• If the deal includes special investor rights, warranties, preference shares, public or retail fundraising, or non-cash consideration, a fuller share subscription agreement is usually better.
• Templates are a helpful starting point, but they should be tailored to your constitution, shareholders agreement, cap table and offer process.

If you'd like help with your share subscription letter, board approvals, offer rules or Companies Office filings, you can reach us at 0800 002 184 or team@sprintlaw.co.nz for a free, no-obligations chat.