The Handshake Agreement That Wasn’t Enough

Many businesses begin with trust. A shared idea, a common goal and a strong working relationship can provide the foundation for a successful partnership. For migrants starting a new chapter in New Zealand, those connections can be especially valuable as they build platforms, establish themselves and navigate a new business environment.

 

Why New Zealand Businesses Need Clear Shareholders’ Agreements

In one case, two friends migrated to New Zealand and opened a business together. They had complete confidence in each other, so they did not put formal agreements in place. There was no shareholders’ agreement, no agreed process for exiting, no succession plan and no mechanism for resolving disputes. Their partnership was built entirely on trust.

 

Business Growth Can Create Governance Challenges

For the first few years, that approach appeared to work. The business grew, became profitable and created significant value. However, as the business evolved, the owners’ priorities began to differ. One wanted to expand and reinvest profits into future growth, while the other preferred to focus on taking returns from the business. Neither position was unreasonable. The challenge was that they had never agreed on how these decisions would be made.

What began as a difference of opinion gradually became a disagreement about control, financial priorities and the future direction of the business. Without clear processes in place, each owner felt the other was moving away from their original understanding of how the business would operate. Over time, the relationship became strained, the business was affected and the matter eventually required legal involvement.

 

The Questions Every Business Partnership Should Answer Early

For many closely held companies, the greatest challenges do not appear when the business is starting out. They emerge later, when the business has grown, has value and owners have different goals for the future.

At that point, important questions need clear answers:

• Who makes decisions about the future direction of the business? 
• What happens if one owner wants to leave? 
• How are profits distributed? 
• What happens if one person stops working in the business? 
• How are disagreements resolved?

Without agreed processes, even strong relationships can come under pressure.

 

How a Shareholders’ Agreement Protects Your Business

A well-drafted shareholder’s agreement does not show a lack of trust. It is a way of protecting the partnership by creating clarity before difficult decisions arise. It can set out decision-making rights, funding obligations, dividend policy, exit rules, valuation methods, deadlock procedures and dispute resolution steps.

 

Why Migrant Business Owners Should Plan for the Unexpected

For migrant entrepreneurs, this planning can be particularly important because business relationships are often shaped by experiences, expectations and practices from different countries. While formal agreements may feel unnecessary when trust is strong, in New Zealand clear documentation helps establish expectations, provide certainty and support better decision-making if circumstances change.

 

Building Strong Business Foundations with the right advice

The best time to speak with an advisor is before decisions become difficult and relationships become strained. An experienced advisor can help owners put the right structures in place, clarify expectations and create a framework that supports the future of the business. 

A handshake may start a business, but it should not be the only thing holding it together. 

Andersen’s Asian Business Team combines knowledge of New Zealand’s business environment with experience supporting migrant business owners to navigate decisions around growth, governance and long-term planning.