Co Founder Agreement Template for New Zealand
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What is a Co Founder Agreement?
The Co-Founder Agreement is essential for any new business venture in New Zealand where multiple founders are involved in establishing and running the company. This document should be created at the earliest stages of business formation, ideally before or during company incorporation. It sets out the fundamental terms of the founders' relationship, including share ownership, vesting schedules, roles and responsibilities, decision-making processes, and intellectual property rights. The agreement must comply with New Zealand law, particularly the Companies Act 1993, Partnership Act 1908, and Contract and Commercial Law Act 2017. It serves as a crucial risk management tool by preventing future disputes and providing clear mechanisms for resolving any conflicts that may arise between co-founders.
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About the Co Founder Agreement
A Co Founder Agreement is a legally binding contract that establishes the fundamental relationship between multiple founders of a New Zealand business venture. This document creates the framework for your partnership, defining everything from share ownership and vesting schedules to decision-making authority and exit strategies. Under New Zealand law, this agreement must comply with the Companies Act 1993, Contract and Commercial Law Act 2017, and other relevant legislation to ensure enforceability.
When do you need this document?
You need a Co Founder Agreement whenever you're starting a business with one or more partners in New Zealand. This includes launching a tech startup with technical and business co-founders, establishing a professional services firm with multiple principals, or creating any venture where founders will contribute different skills, resources, or capital. The agreement is particularly crucial when founders are contributing unequal amounts of time, money, or intellectual property to the venture. You should execute this document before incorporating your company or, at the very latest, immediately after incorporation to avoid future disputes about fundamental terms.
Key legal considerations
Your Co Founder Agreement must address several critical legal elements to protect all parties. Share allocation and vesting schedules are fundamental, determining how equity is distributed and earned over time. The document should specify each founder's roles, responsibilities, and decision-making authority, including voting rights and management structure. Intellectual property clauses are essential, ensuring that all founders' contributions and future developments belong to the company. Include provisions for salary, benefits, and expense reimbursements, as well as non-compete and confidentiality obligations. Exit mechanisms are crucial, covering scenarios like voluntary departure, termination for cause, death, or disability, including how shares will be valued and transferred.
Legal requirements in New Zealand
Under the Companies Act 1993, your agreement must align with your company's constitution and shareholder arrangements. If you're operating as a partnership before incorporation, the Partnership Act 1908 governs your relationship. The Contract and Commercial Law Act 2017 requires that your agreement meets standard contract formation requirements, including offer, acceptance, consideration, and intention to create legal relations. For tax purposes, the Income Tax Act 2007 affects how you structure founder remuneration and share arrangements. Your agreement should also comply with the Fair Trading Act 1986 to ensure all representations are accurate and not misleading. Consider whether any founders are overseas residents, as this may trigger additional compliance requirements under the Overseas Investment Act 2005.
GOVERNING LAW
Applicable law
This Co Founder Agreement is drafted to comply with New Zealand law. Key legislation includes:
Partnership Act 1908: Relevant for understanding the legal framework of business partnerships and joint ventures between co-founders before company incorporation.
Contract and Commercial Law Act 2017: Governs the formation and enforcement of contracts, essential for establishing binding agreements between co-founders.
Income Tax Act 2007: Important for understanding tax implications of share distributions, salary vs. dividend arrangements, and other financial aspects of the co-founder relationship.
Fair Trading Act 1986: Ensures fair trading practices and prevents misleading conduct in business relationships and agreements.
Copyright Act 1994: Crucial for protecting intellectual property rights and establishing ownership of work created during the co-founder relationship.
Patents Act 2013: Important for protecting any inventions or innovative processes developed by the co-founders.
Privacy Act 2020: Governs how personal information must be handled and protected within the business relationship.
Employment Relations Act 2000: May be relevant if co-founders are also employees of the company or if their roles evolve into employment relationships.
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