Co Founder Vesting Agreement Template for New Zealand

A Co Founder Vesting Agreement is a legally binding contract that governs how equity is distributed among founders of a New Zealand company over a specified period. Rather than granting all shares immediately, this agreement ensures founders earn their equity gradually through continued involvement with the business, protecting both the company and remaining founders if someone leaves early.

When do you need this document?

You need a Co Founder Vesting Agreement when establishing a company with multiple founders who will receive equity stakes. This is particularly crucial during the early stages of startup formation, before significant funding rounds, or when bringing on new co-founders to an existing business. The agreement becomes essential when founders are contributing different levels of capital, expertise, or time commitments, ensuring fair equity distribution based on ongoing contribution rather than initial investment alone. It's also vital when seeking investment, as investors typically require vesting agreements to ensure founder commitment and protect their investment from key person risk.

Key legal considerations

Several critical legal elements must be addressed in your vesting agreement. The vesting schedule typically spans three to four years, with a one-year cliff period where no shares vest until the founder has remained with the company for twelve months. Acceleration clauses should specify circumstances where vesting speeds up, such as company sale, involuntary termination, or founder death or disability. The agreement must clearly define "good leaver" versus "bad leaver" scenarios, determining whether departing founders retain vested shares or face buyback provisions. Share transfer restrictions and right of first refusal clauses protect remaining founders from unwanted third-party shareholders. Tax implications under the Income Tax Act 2007 should be considered, particularly regarding timing of income recognition and potential tax elections.

Legal requirements in New Zealand

Under New Zealand law, your Co Founder Vesting Agreement must comply with the Companies Act 1993, particularly regarding share issuance, transfer restrictions, and shareholder rights. The Financial Markets Conduct Act 2013 may apply if your vesting arrangement constitutes a financial product or security offering. All founders must have legal capacity to enter contracts, and the agreement should be executed as a deed to ensure enforceability without consideration issues. The company's constitution must permit the share classes and transfer restrictions outlined in the vesting agreement. If founders are also employees, the Employment Relations Act 2000 may impact certain provisions, particularly around termination and restraint clauses. Proper documentation with the Companies Office regarding share issuance and any share transfers is essential for maintaining legal compliance and clear ownership records.