Shareholders Agreement In New Zealand: Why Your Company Needs One

If you’ve started (or you’re about to start) a company with someone else, it’s easy to focus on the exciting stuff first - launching, selling, hiring, building the product and growing revenue.

But when there’s more than one owner, one of the smartest “from day one” moves you can make is getting a shareholders agreement in place.

A shareholders agreement is one of those documents you don’t want to need in a crisis. You want it quietly sitting in the background, doing its job: setting expectations, preventing misunderstandings and giving you a clear process to follow if things change.

In this guide, we’ll break down what a shareholders agreement is in New Zealand, when you need one, what it usually covers, how it interacts with your company constitution, and the common mistakes we see small business owners make.

What Is A Shareholders Agreement?

A shareholders agreement (sometimes called a shareholder agreement) is a private contract between the owners of a company. It sets out the rules for how shareholders will work together and how key decisions will be made.

It’s different from your day-to-day commercial contracts (like customer terms or supplier agreements). This one is about ownership and control - and what happens when circumstances change.

Most shareholders agreements cover things like:

• who owns what percentage of the company
• who controls what (and how decisions get approved)
• what happens if someone wants to sell their shares or exit the business
• what happens if there’s a dispute
• how you handle new investors and future fundraising

In New Zealand, a shareholders agreement will typically sit alongside your company’s constitution (if you have one) and the default rules under the Companies Act 1993.

Because it’s a contract, it’s also supported by general contract law principles in New Zealand (including the Contract and Commercial Law Act 2017), which is why getting the drafting right matters. A vague or inconsistent clause can create more confusion than clarity.

If you’re setting up a company (or you’ve already incorporated and want to lock this in now), a properly drafted shareholders agreement is one of the most practical “risk management” tools you can put in place.

Do You Need A Shareholders Agreement In New Zealand?

Not every business has one - but most companies with more than one shareholder should.

As a small business owner, you’re usually juggling multiple roles at once. That’s exactly why it helps to have clear rules written down, so you don’t have to negotiate from scratch when something happens down the line.

Common Situations Where A Shareholders Agreement Is Worth It

A shareholders agreement is especially important if any of the following apply:

• You have 2+ shareholders (even if one person owns 90% and the other owns 10%).
• You and your co-founder are friends or family (these arrangements can work brilliantly - but expectations still need to be documented).
• Different shareholders contribute different things (e.g. one puts in cash, another does the operational work, another brings in clients).
• You plan to raise capital or bring on an investor in the future.
• You want to protect the business if a shareholder exits, becomes inactive, or stops pulling their weight.
• You’re in a regulated or high-risk industry where stability and governance matter.

“We’re Fine Now” Is Exactly When You Should Do It

The best time to sign a shareholders agreement is when everyone is aligned and optimistic - usually at the beginning. That’s when you can calmly agree on what “fair” looks like.

When you wait until there’s a dispute, people are often negotiating defensively. At that point, you can end up with:

• long delays while shareholders argue over basic issues
• costly disputes (including management time and legal costs)
• deadlock where the company can’t make decisions
• a shareholder leaving in a way that damages the business

Even if you already incorporated your company months or years ago, it’s still worth putting a shareholders agreement in place now - particularly if you’re growing, hiring, or planning for investment.

What Should A Shareholders Agreement Include?

There’s no single “perfect” template, because the best shareholders agreement reflects how your business actually operates.

That said, there are some core clauses we commonly see in a well-drafted New Zealand shareholders agreement for small businesses.

1) Share Ownership, Share Classes And Capital Structure

This section confirms:

• who the shareholders are
• how many shares each shareholder owns
• whether there are different classes of shares (and what rights attach to them)
• what happens if new shares are issued (e.g. for an investor or employee equity plan)

This is also where you can deal with practical issues like whether shareholders are required to contribute more capital in the future, and what happens if they don’t.

2) Decision-Making And “Reserved Matters”

One of the biggest benefits of a shareholders agreement is clarity around decision-making.

You can set out:

• which decisions are made by directors vs shareholders
• which decisions require a simple majority
• which decisions require a special majority or unanimous approval (often called “reserved matters”)

Reserved matters often include things like taking on big debt, changing the business direction, issuing new shares, selling key assets, or changing the constitution.

Even if your company is small, these rules help prevent the “I thought you meant…” conversations when you hit growth milestones.

3) Dividends And Financial Policy

Small business owners often run into tension here: one shareholder wants to reinvest profits, another wants dividends, and another wants to draw a salary.

Your shareholders agreement can document a clear approach to:

• if/when dividends will be considered
• how profits will be reinvested
• what financial reporting shareholders will receive

This won’t replace good accounting and governance, but it can help you avoid surprises and resentment.

4) Transfers Of Shares And Exit Rules

This is the “what happens if someone wants out” part - and it’s one of the most important parts for protecting the long-term stability of your company.

A well-drafted agreement will usually cover:

• when a shareholder is allowed to sell shares
• who they can sell to (and whether competitors are prohibited)
• what process must be followed first
• how shares are valued (or how valuation will be determined)

It’s also common to include pre-emptive rights, which usually require the selling shareholder to offer their shares to existing shareholders first. This concept is closely related to a right of first refusal, and it’s often what stops an “unwanted third party” becoming your new business partner.

If you’re unsure how share transfers work in practice, it’s worth understanding the steps involved in transfer shares scenarios - because the paperwork and approvals matter.

5) Deadlock And Dispute Resolution

Deadlock is more common than people think - particularly in 50/50 companies, where neither side can outvote the other.

Your shareholders agreement can set out a process for:

• escalating discussions internally (with timeframes)
• mediation
• arbitration (in some cases)
• a buy-sell mechanism if the dispute can’t be resolved

The goal isn’t to assume you’ll fall out. It’s to make sure the business can survive and keep operating even if the relationship becomes strained.

6) “Good Leaver / Bad Leaver” Outcomes (If Relevant)

If shareholders are also working in the business (common in startups and small companies), you may want rules that address what happens if someone leaves:

• on good terms (e.g. illness, agreed resignation)
• on bad terms (e.g. serious misconduct, breach of duties, competing with the business)

These clauses can affect whether they can keep their shares, whether they must sell, and how price is calculated. This is a complex area, so getting it drafted properly is key.

7) Confidentiality And Restraints

Many companies include obligations requiring shareholders to:

• keep company information confidential
• not misuse company IP or client lists
• not compete with the business (within reasonable limits)

These protections become particularly important during an exit, or if a shareholder relationship breaks down.

How Does A Shareholders Agreement Work With Your Company Constitution?

If you’re running a New Zealand company, you generally have a few layers of “rules” that can apply at the same time:

• the Companies Act 1993 (default legal rules)
• your company’s constitution (if you adopted one)
• your shareholders agreement (a private contract)

A Company Constitution is part of your company’s formal governance documents, and it can be registered on the Companies Office (and may be available on the public register). A shareholders agreement, by contrast, is typically kept private between the shareholders.

Do You Need Both?

Not always - but many growing companies use both because they serve slightly different purposes.

• The constitution often deals with corporate mechanics (share issues, director appointments, shareholder meetings, voting thresholds).
• The shareholders agreement often deals with relationship and commercial expectations (exit rules, valuation methods, dispute processes, restraints).

The key is making sure they don’t contradict each other. If your constitution says one thing about share transfers and your shareholders agreement says another, you can end up in a messy situation where nobody is sure which rule applies - and you might need lawyers involved to untangle it. Often, agreements include a “priority” clause to clarify which document prevails if there’s an inconsistency (as far as the law allows).

This is why it’s worth having both documents drafted (or at least reviewed) together, so they work as a consistent set.

How Do You Put A Shareholders Agreement In Place (And Keep It Current)?

Putting a shareholders agreement in place doesn’t need to be overwhelming. The goal is to get clarity now, while leaving enough flexibility for the business to grow.

Step 1: Get Clear On The Big “What Ifs”

Before drafting starts, it helps to talk through a few practical questions, such as:

• What happens if someone wants to leave in 12 months?
• What happens if one shareholder stops working in the business?
• Do you want to be able to bring in an investor quickly?
• If there’s a disagreement, who has the final say - or do you want a structured deadlock solution?

This conversation is often where the real value is, because it forces alignment early.

Step 2: Align The Legal “Paper Trail” (Not Just The Intentions)

Your shareholders agreement should match what’s already on record for your company (and what you’re actually doing day-to-day), including:

• your Companies Office shareholdings and director details
• your constitution (if you have one)
• any existing shareholder funding arrangements

If you’re doing something like issuing shares, changing directors, or approving major transactions, you may also need supporting corporate approvals like a directors resolution to properly document decisions.

Step 3: Plan For Ownership Changes (Before They Happen)

Ownership changes are common as businesses grow - investors join, founders reduce involvement, or a shareholder wants liquidity.

Even if you’re not planning a sale right now, having clear rules around changing company ownership can save you serious time (and stress) later.

Think of it this way: if your business is successful, it’s more likely you’ll face share transfer and valuation questions - not less.

Step 4: Review It When Your Business Evolves

A shareholders agreement shouldn’t be forgotten in a drawer.

It’s worth reviewing when:

• you bring on a new shareholder or investor
• you create an employee equity plan
• you change your board or governance structure
• you expand into a new market or business model
• you’re preparing for a sale or major restructure

Small updates at the right time are usually much easier (and cheaper) than a last-minute rewrite during a dispute or transaction.

A Quick Warning About DIY Templates

It can be tempting to grab a generic template online. But shareholders agreements are one of those documents where small drafting choices can have big consequences.

For example, if the agreement is unclear about valuation, transfer rules, or voting thresholds, you can end up stuck in a position where:

• you can’t remove an inactive shareholder
• you can’t approve a deal because of deadlock
• you can’t stop shares being sold to someone you don’t want involved
• an investor won’t proceed because your governance is uncertain

This is why it’s usually worth getting the document tailored to your company’s structure, goals, and risk profile.

Key Takeaways

• A shareholders agreement is a private contract between shareholders that sets out the rules for ownership, decision-making, exits, and dispute resolution.
• Most New Zealand companies with more than one shareholder should consider having a shareholders agreement to protect the business and reduce the risk of disputes.
• Key clauses often include governance and voting rules, dividend policy, share transfer restrictions, valuation methods, deadlock procedures, and confidentiality/restraint protections.
• Your shareholders agreement should work consistently with your constitution (if you have one) and the default rules under the Companies Act 1993.
• The best time to put a shareholders agreement in place is early - when everyone is aligned - but it’s never “too late” to get one drafted properly.
• As your business grows, review and update the agreement when ownership, investment plans, or governance changes.

Disclaimer: This article is general information only and doesn’t take into account your specific circumstances. It isn’t legal advice. If you’d like advice for your situation, get in touch with a lawyer.

If you’d like help putting a shareholders agreement in place (or reviewing an existing one), you can reach us at 0800 002 184 or team@sprintlaw.co.nz for a free, no-obligations chat.