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WHAT ARE THEY & WHAT DO THEY COVER …
It is not compulsory to have either a constitution or a shareholders’ agreement but these are important documents that can help to regulate how the company (and business) you’ve created will operate in all kinds of different situations, including day to day operations and decisions, dealing with the departure of one or more shareholders, as well as in more difficult times such as the death of one of the shareholders or disputes.
Constitution
A constitution is a document that sets out the rights, powers and duties of the company, the board, each director and each shareholder. In New Zealand you can incorporate a company either with or without a constitution. If a company has a constitution it needs to be adopted and registered through the Companies Register, thereby making it a public document.
Companies that do not have a constitution are governed by the Companies Act 1993 so having a constitution can allow a company to operate in ways that wouldn’t otherwise be possible under the Act, i.e. binding the company through 1 directors signature witnessed.
Shareholders Agreement
A shareholders agreement is a private contract between the shareholders of a company regarding their dealings with one another and the company. It does not get registered through the Companies Register. This privacy element is one of the main advantages of a shareholders agreement.
A shareholders agreement can include outlining responsibilities for the day to day running of the company and also the rules, processes and framework for dealing with contentious matters that may arise. A shareholders agreement can include as few or as many matters as the shareholders determine and they frequently range in size, covering only as many details as the shareholders agree that it should.
What do they Cover
Any number or combination of issues can be addressed, depending on what matters to you and your fellow shareholders: