Share Loan Agreement Template for New Zealand

A Share Loan Agreement is a sophisticated financial contract that allows you to temporarily transfer ownership of shares to another party while maintaining economic exposure to those securities. Under New Zealand law, this arrangement must comply with the Financial Markets Conduct Act 2013 and Companies Act 1993, making proper documentation essential for legal protection and regulatory compliance.

When do you need this document?

You'll need a Share Loan Agreement when engaging in short selling strategies, where you borrow shares to sell immediately with the intention of buying them back at a lower price. Investment banks and institutional investors frequently use these agreements to cover settlement failures when they cannot deliver securities on time. Market makers rely on share loans to maintain liquidity in specific stocks, ensuring they can fulfill client orders even when they don't hold the underlying shares. Hedge funds and sophisticated investors also use share loans as part of complex arbitrage strategies or to hedge existing positions without directly selling their holdings.

Key legal considerations

Your Share Loan Agreement must clearly define the loan terms, including the specific shares being borrowed, loan duration, and fee structure. Collateral arrangements are critical—you'll need to specify what security the borrower provides, typically cash or other securities worth more than the borrowed shares. The agreement should address dividend and voting rights, as these typically transfer to the borrower during the loan period. Risk management provisions must cover margin calls, forced recalls, and default scenarios. You should also include comprehensive termination clauses that protect both parties' interests and ensure smooth unwinding of the arrangement when market conditions change.

Legal requirements in New Zealand

Under the Financial Markets Conduct Act 2013, share loans involving retail investors require specific disclosure obligations and may need to be offered through licensed financial service providers. The Companies Act 1993 governs how share transfers are recorded and recognized, requiring proper documentation for any change in beneficial ownership. You must comply with the Personal Property Securities Act 1999 when shares serve as collateral, potentially requiring registration on the Personal Property Securities Register. Anti-Money Laundering and Countering Financing of Terrorism Act 2009 obligations apply to all parties, requiring customer due diligence and ongoing monitoring of the arrangement. The Contract and Commercial Law Act 2017 establishes the fundamental principles governing your agreement's formation, performance, and enforcement, ensuring your contract meets New Zealand's legal standards for commercial arrangements.