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Shareholder Agreements in New Zealand

Categories View all posts in Business
Post date Post author Pierre Wong

If you’re in business with someone or thinking about investing in a business with multiple shareholders, it is important to have a shareholders agreement in place.

A shareholder agreement (SHA) plays a pivotal role in defining relationships and safeguarding interests among shareholders within a company. While often overlooked at the time a company is set up (because they are not a statutory requirement), these often turn out to be crucial documents as they provide clarity on rights, responsibilities, can provide for a smooth exit by one party, and so help mitigate potential conflicts.

A typical SHA in New Zealand will cover a range of aspects such as:

  1. Shareholder Rights and Obligations: what each shareholder is entitled to, including voting rights, ability to appoint a director, dividends and access to company information.
  2. Management and Decision-Making: how major decisions will be made, including matters such as appointment of directors, financial decisions and changes to the company’s structure and business plan.
  3. Transfer of Shares: Procedures for buying and selling shares, including pre-emptive rights that allow existing shareholders to purchase shares before they are offered to a third party.
  4. Dispute Resolution: Mechanisms for resolving conflicts, which may involve mediation or arbitration to avoid costly litigation.
  5. Exit Strategies: Terms for how shareholders can exit the company, whether through sale of shares, retirement, or in the event of death.

One of the benefits of a shareholder agreement is that it can be tailored to suit the specific needs and dynamics of each company and its shareholders. Whether a startup looking to attract investors or a family-owned business planning for succession, the agreement can be adapted accordingly.

Without a SHA, you can end up stuck in a business with someone you don’t get on with, end up owning far less of a company than you expected to, or be faced with having to go to Court to break a deadlock. For any company, especially those where shareholders have varying degrees of involvement, investing in a well-drafted shareholder agreement can be instrumental in protecting interests and ensuring the longevity and success of the business.

Henderson Reeves is a full service law firm, and we love shareholders’ agreements.  If you need advice on an existing shareholders agreement or you are wanting to put one in place, our team of specialist lawyers including Shelley Funnell and Pierre Wong are well placed to assist you in the process.