Informal partnership agreement nz

This range of New Zealand partnership documents enable various types of partnerships to be established and set out the obligations and powers of the partners.

A partnership involves a contract between the partners to engage in a business in order to make a profit. Assets and responsibilities are shared by the partnership. Unlike a company, a partnership is not a separate legal entity, even though the number of partners may be large. A partnership is, however, required to file tax returns. In general, each partner contributes either property, skill or labour, although a partner may contribute nothing and still have the rights of a partner. A partner that contributes property but no labour is usually referred to as a "sleeping partner".

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Partnership agreement for un-equal partnership

A simple partnership agreement for the operation of a New Zealand partnership, with the ability to buy out a deceased's partner's share. This agreement assumes the partners will make unequal capital contributions and will share any profits or losses on an unequal basis.

Partnership agreement

A comprehensive partnership agreement suitable for a business in any New Zealand industry and with any number of partners.

form a company

How to form a New Zealand company

Is a limited liability company the best option for me?

You need to decide whether a limited-liability company is the best legal form for your business. The alternatives are a partnership (see related articles How to enter into a business partnership agreement) and How to structure your business). A business may change its legal form at any time. Each form provides a different legal framework for your business activities, including your liabilities. A company has a legal identity of its own, separate from its owners.

What are the essential elements of a company?

Before it can be registered and incorporated, a company must have the following elements:

• a name reserved by the Companies Office
• at least one share
• at least one shareholder
• at least one director
• a registered office
• an address for service

Selecting a name for the company

You will need to select a suitable name for your company. The New Zealand Companies Office provides a website where you can check whether your proposed name is already in use. You can search for company details on this website by company name, directors, shareholders and addresses.

It is also a good idea to check that your proposed company name does not infringe on anyone else's trademark name. You can do at the website of the Intellectual Property Office of New Zealand.

Be aware that information obtained at the Companies Office website is no guarantee of a complete search.

Reserving a name for the company

Before you can apply to register your proposed company you must first reserve a name for it with the Companies Office. Your application must be sent to its Auckland Office, together with the prescribed fee.

When the Companies Office has reserved your proposed name, it will send you a notice of reservation. This notice is valid for 20 working days after it is issued, which means that if you wish to register the company under that name you must apply within those 20 days.

If your name reservation is declined the Companies Office will notify you and ask you to select another. There is no additional fee for this.

Applying to register your proposed company

If your desired name has been reserved, one or two people authorised by the company may then apply for the company to be registered. You must file an application for registration on the standard form, along with the following documents:

• a written consent and certificate from every director that he or she consents to be a director and is not disqualified from acting as one
• a written consent from every shareholder (or his or her agent) to take the class and number of shares specified (if the consent is from an agent, you must also include the written authority given to the agent by the shareholder)
• the notice from the Companies Office that the name has been reserved
• a copy of the company's constitution (if there is one) certified by you, the applicant
• the prescribed fee

Where can I get the necessary forms?

You can get all the necessary forms from the Companies Office.

Certificate of incorporation

When the Companies Office is satisfied that your application complies with all the requirements, including payment of the required fee, it will register the company and issue you with a certificate of incorporation for the company. The company is then incorporated under the COMPANIES ACT 1993 from the date stated in the certificate.

Do I have to draw up a constitution for the company?

The constitution is a document that sets out the rules for running the company. You are able to have a company without a constitution and to rely instead on the constitution in the first three schedules of the COMPANIES ACT 1993, which will then automatically apply to your company. This would be acceptable for a husband and wife company, but it is advisable to have a specially designed constitution in any other situation. See How to draft a company constitution .

Buying "off-the-shelf" companies

You may also buy an off-the-shelf company that has already been registered, and then apply for a name change with the Companies Office. Most lawyers or accountants will offer this service.

Cautionary notes

• It is essential to note that you have 20 working days from the date the name is reserved to apply for registration. Don't delay: make sure that you have all the necessary documents that are to accompany your application so that your application will be accepted in the specified time period.
• Ensure that you include the details of your company's registered office and address for service in your application for registration. These need not be the same location as the place of business, but note that PO Box numbers will not be accepted.
• Forming a company will place important liabilities and obligations on the people involved. Each shareholder and director of the proposed company must consent formally to these.
• Usually when a company is formed a person's livelihood and large amounts of money will be involved. In order to ensure that both of these are protected in the best possible way it is highly recommended that you seek professional and legal advice.
• One step often forgotten when forming a company is to check that the company's name is available as an Internet domain name.

enter into a business partnership agreement

How to enter into a NZ business partnership agreement

Introduction

If you intend to operate a New Zealand business it is important to identify the most appropriate and effective legal relationship for you and any business colleagues; there are a number of different ways to structure this relationship, and different laws govern different relationships (see related article How to structure your business).

Under the partnership option, two or more parties enter into a contract to carry on business together with a common purpose. Because the relationship between the individuals is at law a contractual one, the relationship gives rise to rights and duties that are legally binding between the partners.

How does a partnership work?

Partnership involves a contract between the partners to engage in a business in order to make a profit. Assets and responsibilities are shared by the partnership. Unlike a company, a partnership is not a separate legal entity, even though the number of partners may be large. A partnership is, however, required to file tax returns.

In general, each partner contributes either property, skill or labour, although a partner may contribute nothing and still have the rights of a partner. A partner that contributes property but no labour is usually referred to as a "sleeping partner".

The term "firm" is used to refer collectively to the individuals who make up the partnership.

The PARTNERSHIP ACT 1908 sets out much of the law about partnerships, although it may be overridden on particular matters by the particular partnership agreement (see below).

Does the partnership have to registered with any government office?

Unlike a company, an ordinary partnership does not have to be registered. However, "special partnerships" must be registered with the High Court; these partnerships allow a person to be a partner on the terms that his or her liability to the firm's creditors will be limited, like that of a shareholder in a limited-liability company

The partnership agreement

It is advisable to enter into a written partnership agreement. Partnerships are usually regulated by written agreements, sometimes called "articles".

Many of the provisions of the NZ PARTNERSHIP ACT 1908 apply only if there is no provision for the matter in question in the partnership agreement; therefore the partnership agreement may override these rules in the Act.

Even though there is a written partnership agreement, the partners may vary the agreement orally.

What should be included in the partnership agreement?

Written partnership agreements commonly include the following:

• the name of the firm
• a description of the business to be conducted and the place where it is to be carried on
• whether the business is for a single venture (for a specified term) or whether it is ongoing
• who is contributing to the capital and in what amount
• how the profits are to be divided among the partners
• how disputes between the partners are to be resolved, such as by arbitration
• who the partnership's bank and accountant are to be
• who will be entitled to sign cheques on behalf of the partnership
• procedures for withdrawing from the partnership or admitting new partners

Husband-and-wife farming partnerships & ACC: Why you should have a written agreement

If you and your spouse operate a farm together, you may well not have a written agreement unless you have been farming for some years, because since 1983 Inland Revenue has not required husbands and wives to have written agreements for tax purposes. But the policy of the Accident Compensation Corporation (ACC) on compensation for replacement labour makes a written agreement desirable.

If you or your spouse is injured and unable to work for a period, ACC will not pay full compensation for the cost of employing replacement labour. ACC will pay only 80 percent of half of that cost, its reasoning being that the other partner (your spouse) should carry half the cost, as he or she would with other partnership costs.

But if you have a written partnership agreement, and the agreement says that an injured partner has an obligation to meet the entire cost of the replacement labour, ACC will pay 80 percent of the replacement labour costs.

Cautionary notes

• If you choose a partnership, you are in a legally binding relationship with your partners, and you should obtain legal advice as to the extent of your various rights and obligations.
• You will need to decide if you wish to register the partnership for GST. You should take advice from an accountant about this.

draft a company constitution

How to draft a New Zealand company constitution

What is a company constitution?

The constitution is a formal document, drawn up by those applying to register the company, that sets out the rules for running the company. If a constitution has been adopted, it must be filed with the Companies Office in order for the company to be registered and incorporated with that constitution. Before the NZ COMPANIES ACT 1993, the constitution was known as the "Articles of Association". (For more information on registering and incorporating a company, see related article How to form a company).

Is a company required to have its own constitution?

No, there is no requirement for a company to have a constitution. It is up to those forming the company to decide whether or not they will draw up a constitution for it.

If there is no constitution then the company is governed by the COMPANIES ACT 1993. This will determine the rights, powers, duties and obligations conferred on the company, its board of directors and its shareholders. If there is a constitution the rules contained in the Act will still apply, except to the extent that they are negatived or modified by the constitution where the Act permits this; in general, however, the constitution cannot contravene or be inconsistent with the Act.

What should the constitution contain?

A company has a wide discretion as to what it may include in its constitution. The COMPANIES ACT 1993 says that a constitution may contain matters contemplated by the Act for inclusion, or any other matters that the company wishes to include.

However, in the interests of the company and those involved in it, it is strongly recommended that the constitution deal with the rights, powers and obligations of all people involved in the company, and that it set out clear guidelines as to what conduct and behaviour is acceptable and what is unacceptable.

The constitution cannot extend the legal capacity, rights, powers and privileges that the company would otherwise have – it can only restrict them.

One of the advantages of having a constitution is that there are a number of features that are permissible in a constitution that are not found in the Act.

What is the effect of the constitution?

As long as the company constitution does not contravene the COMPANIES ACT 1993, the effect of the document is that it will be binding between the company and each shareholder according to its terms.

Can a company adopt a constitution after the company's been formed?

Yes, it can do this by a special resolution of its shareholders.

How can a constitution be changed?

Once a company has adopted a constitution, there are ways in which shareholders and other associated people may either amend, modify or revoke it. However, you must notify the Registrar of the Companies Office within 10 working days of making any change to the constitution.

The court may alter a company's constitution, if it is satisfied that an application made by either a director or shareholder justifies this. A court-imposed alteration to a constitution must be lodged with the Registrar at the Companies Office within 10 working days of the change.

Cautionary notes

• A provision in a constitution will have no effect if it contravenes or is inconsistent with the COMPANIES ACT 1993. It may therefore be advisable to obtain legal advice to ensure that the proposed constitution is compatible with the Act.

structure your business

How to structure your New Zealand business

Introduction

If you are intending to buy or establish a business (see related articles How to buy a business ), you will need to consider how you should structure it. There are a number of options to consider, and these are listed below.

Sole trader

Operating as a sole trader is the simplest form of operation and suits many small businesses. The individual personally owns all assets and receives all profits, but also personally bears all responsibilities and all liability for losses.

Partnership

Under the partnership option, two or more parties carry on business with a common purpose. (The term "firm" is used to refer collectively to the individuals who make up the partnership.)

This form of operation has many of the advantages of a sole trader, but the assets and responsibilities are shared by the partnership. Unlike a company, a partnership is not a separate legal entity. It is, however, required to file tax returns. (See How to enter into a business partnership agreement ).

As well as ordinary partnerships, there are also "special partnerships", which allow a person to be a partner on the terms that his or her liability to the firm's creditors will be limited, like that of a shareholder in a limited-liability company (see below). Unlike the ordinary partnership, a special partnership must be registered with the High Court.

Limited-liability company

Unlike a partnership, a limited-liability company is a separate legal entity. Among other things, this means that the company can sue and be sued in the name of the company as if it were a natural person.

In general, if the company is liquidated (wound up) the liability of a shareholder of a limited-liability company is limited to any amounts that are unpaid on the shareholder's shares. In practice this transfers the risk of business failure from the shareholders to the business's creditors.

To be registered as a company, a company must have at least one share, one shareholder and one director. You must first reserve a name for the company with the Companies Office, and then apply for the company to be registered and incorporated under the COMPANIES ACT 1993 (see How to form a company ). It is, however, possible to buy an "off-the-shelf" company that has already been registered, and then apply to change the company's name.

Trading trust

Another possible business structure, although not popular in New Zealand, is that of a trading trust. Here, those who own the business are separate from those who receive the benefit of the income from the business (see How to set up a trust).

Cautionary notes

• It is advisable that you obtain legal advice before setting up your business. Your lawyer will be able to advise you as to which business structure will, for example, limit your personal liability and give you the best tax benefits.