Director Fee Agreement Template for New Zealand
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What is a Director Fee Agreement?
The Director Fee Agreement is essential for companies operating in New Zealand that need to formally document the remuneration arrangements for their board members. This document is typically used when appointing new directors or updating terms for existing directors, ensuring compliance with the Companies Act 1993 and other relevant New Zealand legislation. The agreement encompasses crucial details such as fee structure, payment frequency, expense reimbursement policies, and service expectations. It's particularly important for establishing clear governance frameworks, maintaining transparency in director compensation, and protecting both the company's and director's interests. The document should be reviewed regularly to ensure ongoing compliance with legal requirements and market standards.
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About the Director Fee Agreement
A Director Fee Agreement is a crucial legal document that establishes the terms and conditions for director compensation in New Zealand companies. Under the Companies Act 1993, this agreement creates a formal framework for remuneration arrangements while ensuring compliance with statutory obligations and protecting both company and director interests.
When do you need this document?
You need a Director Fee Agreement when appointing new directors to your company board, updating compensation terms for existing directors, or restructuring your governance arrangements. This document becomes essential when transitioning from informal arrangements to professional governance structures, particularly as your company grows or seeks investment. Listed companies on the New Zealand Exchange require these agreements to meet disclosure obligations under the Financial Markets Conduct Act 2013. You'll also need this agreement when establishing subsidiary companies with separate boards or when appointing independent directors who require clear compensation frameworks.
Key legal considerations
The agreement must clearly define the scope of director duties beyond statutory requirements, including attendance expectations for board meetings and committee work. Fee structures should specify whether compensation is fixed annual amounts, meeting-based payments, or performance-linked remuneration, with clear payment schedules and expense reimbursement policies. The document should address potential conflicts of interest, confidentiality obligations, and termination procedures to protect company information and ensure smooth transitions. Directors' and officers' insurance coverage should be explicitly referenced, along with indemnification provisions that comply with section 162 of the Companies Act 1993. Tax implications require careful consideration, particularly withholding tax obligations under the Income Tax Act 2007 and proper classification of director fees versus employment income.
Legal requirements in New Zealand
New Zealand law requires director remuneration to be authorized by company shareholders through ordinary resolution or constitutional provisions under sections 161-162 of the Companies Act 1993. The agreement must comply with tax reporting requirements, including PAYE obligations where applicable and proper invoicing procedures for fee payments. Listed companies face additional obligations under the Financial Markets Conduct Act 2013, requiring disclosure of director remuneration in annual reports and immediate notification of material changes. The Tax Administration Act 1994 mandates accurate record-keeping and timely reporting of director fee payments. Companies must ensure agreements don't breach related party transaction rules and maintain proper documentation for audit purposes. Regular review ensures ongoing compliance with evolving legal requirements and corporate governance best practices.
GOVERNING LAW
Applicable law
This Director Fee Agreement is drafted to comply with New Zealand law. Key legislation includes:
Income Tax Act 2007: Covers the taxation of director fees, including withholding tax obligations and tax treatment of various forms of director compensation.
Financial Markets Conduct Act 2013: Relevant for listed companies, including disclosure requirements for director remuneration and related party transactions.
Tax Administration Act 1994: Contains administrative provisions for tax collection and compliance related to director fees, including reporting requirements.
Anti-Money Laundering and Countering Financing of Terrorism Act 2009: May be relevant for due diligence requirements and verification of director identity and payments.
Goods and Services Tax Act 1985: Relevant if the director is GST-registered and providing services through a personal entity.
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