What are shares and shareholders?

The terms 'shares' and 'shareholders' are bounced around frequently enough in conversation. We may broadly understand them in regards to larger companies and investing in the stock market.

But if you are looking to take that next step for your business and register it as a company, make sure you understand the meaning of these terms in relation to your business.

To put it simply, shares represent ownership of a company. When someone buys shares in your company, they own a part of it and become a shareholder.

You may issue shares in your company to raise capital. This can be in the early stages of your business or to facilitate growth. But be aware, shareholders have rights and can contribute to key decisions on how a business is run.

How do I issue shares?

Every company in NZ must have at least one shareholder and issue at least one share. When you apply to register a company, you'll need to state the number of shares issued, the name of each shareholder, and how many shares they hold.

Existing companies can issue more shares as it grows. Typically, a director’s certificate and board resolution is needed to do this. If your company does not have a shareholder agreement or constitution in place that specifically has guidelines on how to issue further shares, then the process follows the requirements of the Companies Act.

You must update your share register and notify the Companies Office within 10 working days of issuing new shares.

What does it mean to be a shareholder?

As a shareholder, you have rights and responsibilities to act in the best interests of the company you part own. Your details will be listed both on the share register of the business and on the Companies Register.

You have the ability to vote in company meetings on ideas such as major transactions, altering a company’s constitution or closing the business. There is a legal requirement of a director to hold meetings for shareholders to be a part of. Depending on how many shares you own, you are entitled to a percentage of dividends paid.

You do not have the authority to participate in day-to-day management of a company, unless, of course, your role requires you to do so. You aren’t responsible or legally liable for any company debt, only any unpaid amount on your shares.

Information provided on this website is of a general nature only and not legal advice. Please visit our disclaimer for further information.