To raise capital to start or grow a company, owners and directors may issue shares. A company's right to issue shares is governed by the Companies Act 1993 and the company's own constitution, if it has one.
Share issues and allocations
Every NZ company must have at least 1 shareholder and issue at least 1 share, and an existing company may choose to issue more shares.
When a company passes on shares to new or existing shareholders, this is called a share issue. How a company's shares are arranged, and who holds them, is managed through share allocations.
A company can issue one or more share allocations, and each allocation can have one or more shareholders.
Shares may be issued to anyone, singly or in combination.
Issuing shares in a new company
When a company is formed, the proposed shareholders or their agent must lodge an application for incorporation on the Companies Register. That application must state:
- the number of company shares to be issued, and
- the name of each proposed shareholder.
After the company is incorporated, directors:
- must issue the shares to shareholders as stated in that application, and
- may issue a formal demand, or call, for shareholders to pay for their shares.
Issuing more shares
As a company grows, its directors may need to raise more money to fund new projects, equipment or infrastructure.
Directors can ask new or existing shareholders to invest in an additional allocation of shares at an agreed price.
Issuing shares to minors
While the Companies Act 1993 doesn't specifically prohibit minors (someone under the age of 18) being shareholders in a company, other legislation that limits their contractual liability can make this difficult.
To avoid exposing a minor to potential liability and an adverse credit history, an adult can hold the shares until the minor is 18 years old.
Registering shares and shareholders
You must file notice of a share issue with us within 10 working days. The information you provide must include:
- the number of shares being issued
- the date of issue
- the number of shares held by each shareholder
- the full legal name and residential address or registered office of each shareholder.
Keeping company records
Details of all shares and shareholders must be kept up to date on your company's own share register, and notified in your company annual return.
Your annual return must reflect the company's share register at the date of filing with us.