What Is A Shareholders Agreement?

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What Is A Shareholders Agreement?

A Shareholders Agreement is a vital document for the shareholders of a company in New Zealand. It outlines the processes for decision-making, the protocol for when a shareholder wishes to exit the company, how disputes are resolved, and other critical governance aspects. Establishing clear guidelines is beneficial for both personal and professional relationships within the business, particularly as the business expands and the implications of decisions grow.

When Do I Need It?

If you’re launching a company in New Zealand with more than one shareholder, it’s essential to have a Shareholders Agreement in place.

How Do I Use It?

All shareholders should sign the Shareholders Agreement, which then serves as a legally enforceable record of the agreed terms. It should be consulted whenever a relevant issue arises in the business, such as during decision-making processes or when resolving disputes.

Shareholders Agreement Example

Peter and Grace decide to open a cafe together in New Zealand. They incorporate a company where they are each 50% shareholders. They engage a solicitor to draft a Shareholders Agreement detailing their business partnership. Six months later, Peter opts to leave the business for an overseas opportunity. Grace wishes to acquire full ownership of the company upon Peter’s departure. However, Peter’s friend, Maddie, is interested in purchasing Peter’s share. They consult the Shareholders Agreement, which stipulates that if a shareholder intends to leave, they must first offer their shares to the existing shareholders before selling to an outsider. Consequently, Grace can purchase Peter’s share as per their initial agreement, and Maddie has to pass up on this occasion.

What’s In A Shareholder Agreement?

A Shareholders Agreement in New Zealand addresses various issues pertinent to the specific company. It’s advisable to consult a solicitor for a comprehensive list of considerations and guidance on standard practices if you’re uncertain. You should also communicate any unique requirements related to your business, and the solicitor can suggest how to integrate these into the agreement effectively.

Some critical points to consider include:

The number of shareholders involved.
The shareholding percentage each shareholder holds.
The dynamics between the directors and the shareholders.
Approaches to resolving disputes.
Procedures if a shareholder decides to exit.

Need Help With A Shareholders Agreement?

Compiling a Shareholders Agreement can be an overwhelming task, as it’s challenging to determine what to include and the appropriate wording. Engaging a solicitor is a wise investment, as the initial cost can prevent future disputes and liabilities. At Sprintlaw, our team of experienced lawyers can assist you with drafting or reviewing your Shareholders Agreement. Contact one of our consultants for a no-obligation chat on how we can support you with your shareholders agreement and any other legal matters your business may face. Call us on 0800 002 184.

Minna Boyle

Minna is the Head of People & Culture at Sprintlaw. After completing a law degree and working in a top-tier firm, Minna moved to NewLaw and now manages the people operations across Sprintlaw.