What Is A Shareholders Agreement? (2026 Updated)

Starting (or growing) a company with other people can be exciting - you’re pooling skills, sharing the workload, and building something bigger than you could alone.

But once there’s more than one shareholder, the big question becomes: what happens when you don’t agree?

That’s where a shareholders agreement comes in. This guide is updated for 2026 so you’re working from current, practical expectations around governance, funding rounds, and the kinds of disputes we commonly see in modern NZ startups and SMEs.

Below, we’ll break down what a shareholders agreement is, what it usually covers, when you need one, and how it works alongside your company constitution and the Companies Act.

What Is A Shareholders Agreement?

A shareholders agreement is a private contract between some or all of the shareholders of a company (and usually the company itself) that sets out:

• how the company will be run day-to-day and strategically
• what rights and obligations each shareholder has
• how major decisions are made
• what happens if a shareholder wants to leave, sell, or there’s a dispute

In plain terms, it’s the “rules of the relationship” between the owners of the company. It’s there to protect everyone - especially when things change (because they always do).

Even if you’re starting with a close friend, a spouse, or a long-time business partner, a shareholders agreement is about clarity, not mistrust. It’s a way to get aligned early, while everyone is still on good terms.

Is A Shareholders Agreement Legally Binding In New Zealand?

Yes - provided it’s properly drafted, signed, and meets standard contract principles. Like any contract, it can be enforced if someone breaches it.

It’s also common for a shareholders agreement to include enforcement tools, like default provisions (what happens if a shareholder breaks key obligations) or dispute resolution steps designed to avoid expensive court proceedings.

Who Is A Shareholders Agreement For?

A shareholders agreement is useful for many NZ companies, including:

• two-founder startups (especially where one founder is more active day-to-day)
• family-run companies where ownership is shared across generations
• SMEs bringing in an investor or silent partner
• companies issuing shares to key employees (even a small percentage)
• joint ventures operating through a company structure

If you’ve got (or plan to have) more than one shareholder, it’s worth considering early - ideally before money changes hands or shares are issued.

Why Do You Need A Shareholders Agreement?

If everything stays the same forever, you might never “need” a shareholders agreement.

But businesses don’t stay the same. People’s circumstances change. New investors arrive. A founder burns out. Someone wants to cash out. And disagreements happen - sometimes over big things, sometimes over surprisingly small things.

A well-drafted shareholders agreement helps you handle those moments calmly and fairly, because the process is already agreed.

It Reduces The Risk Of Costly Disputes

Without clear written rules, shareholders can end up in conflict about:

• who has decision-making power
• whether profits should be paid out or reinvested
• whether someone is pulling their weight (especially “working” shareholders)
• what happens if someone wants to sell shares to an outsider
• how to deal with confidential information and company IP

Disputes between owners can be particularly damaging, because they can freeze the company’s ability to make decisions. A shareholders agreement is a practical way to keep the business moving even when relationships get tense.

It Helps When You Raise Capital Or Bring In New Owners

Investors (even “friends and family” investors) usually want to know their rights and protections are documented. A clear agreement can make your company more investable because it shows the governance is thought through.

If you’re planning a capital raise, it’s also common to align the shareholders agreement with other documents used in funding, like a SAFE note, or to update provisions around share issues and shareholder approvals.

It Protects The Business If A Shareholder Leaves

Here’s a scenario we see a lot:

You and your co-founder start a company. You each own 50%. A year later, your co-founder stops contributing but still owns half the business. The business is growing - but you can’t make key decisions without them, and they can block the direction of the company.

A shareholders agreement can include “good leaver / bad leaver” concepts, buy-out rights, and transfer processes so the company isn’t stuck.

This is especially important if ownership and involvement aren’t perfectly matched (for example, one shareholder is an active director and another is a passive investor).

It Clarifies How Decisions Are Made

In NZ companies, many decisions are made by directors, not shareholders. But shareholders still have real power - particularly around major structural matters.

A shareholders agreement can set out:

• which decisions need unanimous agreement
• which decisions can be made by majority shareholders
• which decisions require a special approval threshold (e.g. 75%)

This reduces ambiguity and helps prevent “surprise” decisions that leave minority shareholders feeling sidelined.

What Should A Shareholders Agreement Include?

Every company is different, so the “right” shareholders agreement depends on your ownership split, business model, funding plans, and how involved each shareholder will be.

That said, most NZ shareholders agreements cover a fairly consistent set of clauses. Below are the big ones to think about.

Shareholder Roles And Company Governance

This section often explains the structure of control, such as:

• who the directors are (and how directors are appointed/removed)
• when shareholder approval is required
• how meetings work (notice, voting thresholds, quorums)
• reserved matters (decisions that must be approved by shareholders)

If you have (or plan to have) a written company rulebook as well, your shareholders agreement should be aligned with your Company Constitution so the governance documents don’t contradict each other.

Funding, Share Issues, And Ongoing Capital Needs

One of the most common stress points in growing companies is money.

Your shareholders agreement can set out what happens if the business needs more capital, for example:

• whether shareholders must contribute (and in what proportions)
• what happens if a shareholder can’t (or won’t) contribute
• whether new shares can be issued, and who needs to approve it
• how dilution is handled

These clauses are especially important if your company might do multiple funding rounds or if one shareholder has deeper pockets than the others.

Dividend Policy And Financial Information Rights

Not every company pays dividends - especially in the early stages. But the disagreement often isn’t “should we pay dividends?”, it’s “who decides?”

A shareholders agreement can cover:

• how profits will be used (reinvest vs paid out)
• dividend approval process (and whether there’s a target policy)
• access to management accounts and annual financial statements
• budgets and business plans (who approves them, and when)

Clear financial reporting rights can be particularly important for minority shareholders and passive investors.

Share Transfers And Exit Rules

This is the “what happens if someone wants out?” section - and it matters more than most founders expect.

Common provisions include:

• Right of first refusal (ROFR): existing shareholders get the first opportunity to buy shares before they’re sold to an outsider
• Valuation mechanisms: how shares are priced (agreed valuation, independent valuer, formula, etc.)
• Permitted transfers: when transfers are allowed (e.g. to a family trust) and when they’re restricted
• Drag-along and tag-along rights: protections for majority and minority shareholders during a sale (so the company can be sold cleanly, while minority shareholders aren’t left behind)

If you’re already thinking about future deal terms, it can help to understand how drag along and tag along clauses typically operate in practice.

Founder Commitments, Restraints, And Confidentiality

If your shareholders are also the people building the business, it’s common to include obligations around:

• minimum time commitment or role expectations
• restrictions on competing with the company
• ownership and protection of IP created for the business
• confidentiality obligations

These are the clauses that help protect the company’s value - especially if someone leaves and tries to take customers, staff, or business know-how with them.

If restraints are relevant for your situation, they should be drafted carefully (and reasonably). A poorly drafted restraint can be difficult to enforce, while an overly harsh restraint can create unnecessary conflict.

Deadlock And Dispute Resolution

Deadlock is common in 50/50 ownership structures, where two shareholders disagree and neither can outvote the other.

Rather than letting the business grind to a halt, a shareholders agreement can include a process such as:

• good-faith negotiation between the shareholders/directors
• mediation before legal proceedings
• escalation to an independent expert for certain technical disputes
• a buy-sell mechanism (one party offers to buy the other out at a set price; the other must accept or buy them out at the same price)

These tools aren’t about “planning for failure” - they’re about keeping the business functional if there’s a tough moment.

How Does A Shareholders Agreement Work With The Companies Act And A Constitution?

This is where many business owners get confused - and it’s a really important point.

In New Zealand, companies are governed by:

• the Companies Act 1993
• the company’s constitution (if it has one)
• any shareholders agreement (as a private contract)

Companies Act 1993 (The Default Rules)

If your company doesn’t have a constitution, the Companies Act provides the default rules for how the company operates.

Even if you do have other documents, the Act still matters because it covers key concepts like directors’ duties, shareholder meetings, share issues, and record-keeping requirements.

A shareholders agreement can add extra rules (or processes) that shareholders agree to follow, as long as those rules don’t create something unlawful or impossible under the Act.

Company Constitution (The Public-Facing Internal Rulebook)

A constitution is a set of rules for the company that can modify or replace certain default Companies Act rules. It’s also more “company-facing” - it governs how the company itself operates.

Practically, constitutions often deal with things like share classes, director appointments, and how shareholder resolutions are passed.

Many companies have both a constitution and a shareholders agreement, because they serve slightly different purposes.

Shareholders Agreement (The Relationship Contract)

A shareholders agreement is often more detailed and more personal. It can deal with commercial expectations (like who contributes what, what happens on exit, confidentiality, restraints), and it can be kept private between the parties.

If there’s a conflict between the constitution and the shareholders agreement, what happens can depend on the wording of both documents and the circumstances. That’s why it’s so important to have them drafted (or reviewed) together, rather than mixing a template constitution with a customised agreement.

If you’re putting one in place, it’s common to do it alongside a Shareholders Agreement drafting process so all the moving parts match up.

When Should You Put A Shareholders Agreement In Place?

The best time to put a shareholders agreement in place is when:

• you’re incorporating a company with more than one shareholder
• you’re issuing shares to a co-founder, investor, or key employee
• you’re bringing on a new shareholder (even if it’s a small percentage)
• you’re preparing for investment or a restructure

In other words: do it early, while everyone’s aligned, not later when there’s already tension.

Can You Add One Later?

Yes - and plenty of businesses do. But it can be harder (and slower) because:

• all relevant parties need to agree to the terms
• people’s expectations may have diverged over time
• there may already be unresolved issues (like unequal contributions)

If you’re adding a shareholders agreement later, it’s often a good opportunity to tidy up other legal foundations too - for example, making sure directors’ resolutions and share registers are in order, or formalising share transfers if ownership has shifted informally.

Where shares are being moved around (for example, when someone exits or you’re reorganising ownership), a proper process for transferring shares matters to avoid future disputes about who owns what.

What If You’re Choosing Between A Shareholders Agreement And A Partnership Agreement?

If you’re not yet incorporated and you’re operating as two (or more) people in business together, you might actually be in a partnership - even if you’ve never called it that.

Partnerships and companies have very different legal and tax implications, and the documents you need are different too. If you’re still deciding on structure, it can be worth getting advice early and putting a proper Partnership Agreement in place if you’re not incorporating (or while you’re transitioning).

Key Takeaways

• A shareholders agreement is a legally binding contract that sets out the rules, rights, and responsibilities between shareholders (and often the company) in a New Zealand company.
• It helps prevent disputes by documenting how decisions are made, what happens when someone wants to exit, and how funding and share issues are handled.
• Most shareholders agreements cover governance, reserved matters, dividends and reporting, share transfers, confidentiality, restraints, and deadlock/dispute resolution processes.
• Your shareholders agreement should work consistently with the Companies Act 1993 and your Company Constitution, so you don’t end up with conflicting rules.
• The best time to put a shareholders agreement in place is early - when shares are issued or new shareholders join - because it’s much easier to align expectations before problems arise.
• Because these agreements are highly specific to your business, avoid relying on generic templates and get the document tailored to your ownership structure and growth plans.

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.