Share Option Agreement (New Zealand)
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SHARE OPTION AGREEMENT
This Share Option Agreement ("Agreement") is entered into on [Agreement Date] between:
COMPANY: [Company Name], NZBN [Company NZBN], of [Company Address] ("Company"); and
OPTION HOLDER: [Option Holder Name], of [Option Holder Address], holding the position of [Option Holder Role] ("Option Holder").
This Agreement sets out the terms and conditions of the grant of share options by the Company to the Option Holder.
Background
BACKGROUND
A. The Company is a company incorporated in New Zealand under the Companies Act 1993 (NZBN: [Company NZBN]).
B. The Option Holder is employed by or engaged with the Company as [Option Holder Role] and the Company wishes to incentivise the Option Holder's continued performance and loyalty by granting share options over [Number Of Options] [Share Class].
C. This Agreement constitutes an employee share option scheme for the purposes of subpart CE of the Income Tax Act 2007 (NZ).
1. Grant of Options
1. GRANT OF OPTIONS
1.1 Grant. Subject to the terms of this Agreement, the Company grants to the Option Holder, with effect from [Grant Date] ("Grant Date"), [Number Of Options] options ("Options"), each Option giving the Option Holder the right (but not the obligation) to subscribe for one [Share Class] in the Company at an exercise price of NZD $[Exercise Price] per share ("Exercise Price").
1.2 Nature of Options. Each Option is a right (not an obligation) to subscribe for one [Share Class]. The Options are not shares, do not carry voting rights or dividend entitlements, and do not form part of the share capital of the Company unless and until they are exercised.
1.3 Non-Transferable. The Options are personal to the Option Holder and may not be sold, transferred, assigned, pledged, or otherwise encumbered without the prior written consent of the Company's board of directors. The Options lapse automatically if any purported transfer is made without such consent.
1.4 Exercise Price. The Exercise Price of NZD $[Exercise Price] per share has been set by the board of directors at or above the fair market value of a [Share Class] in the Company as at the Grant Date.
2. Vesting
2. VESTING OF OPTIONS
2.1 Vesting Schedule. The Options vest over a period of [Vesting Period Years] years from the Grant Date, subject to the Option Holder's continuous engagement with the Company throughout the applicable vesting period, as follows:
- Cliff Vesting: No Options vest during the first [Cliff Months] months after the Grant Date (the "Cliff Period"). On the date that is [Cliff Months] months after the Grant Date (the "Cliff Date"), [Cliff Percentage]% of the total Options shall vest, provided the Option Holder is continuously engaged with the Company on the Cliff Date.
- Post-Cliff Vesting: Following the Cliff Date, the remaining unvested Options shall vest on a [Vesting Frequency] basis in equal instalments over the remainder of the [Vesting Period Years]-year vesting period.
- Full Vesting: Subject to the terms of this Agreement, all Options shall be fully vested by the date that is [Vesting Period Years] years after the Grant Date.
2.2 Continuous Engagement. For the purposes of this Agreement, "continuous engagement" means the Option Holder's uninterrupted service as an employee, director, or contractor of the Company, as approved by the board. Approved leave (including parental leave) does not break continuity of engagement.
2.3 Unvested Options on Departure. If the Option Holder ceases to be continuously engaged with the Company for any reason before the Full Vesting Date, all unvested Options shall lapse immediately without any right to compensation.
3. Exercise of Options
3. EXERCISE OF OPTIONS
3.1 Exercise Period. Vested Options may be exercised at any time from the date they vest until the date that is [Exercise Period Years] years after the Grant Date (the "Expiry Date"). Options that are not exercised by the Expiry Date shall lapse automatically.
3.2 Post-Departure Exercise Window. If the Option Holder ceases to be engaged with the Company (other than for cause), the Option Holder may exercise any then-vested Options within [Post Departure Exercise Days] days of the date of cessation. Any vested Options not exercised within this period shall lapse.
3.3 Lapse on Termination for Cause. If the Option Holder's engagement with the Company is terminated for serious misconduct or any other cause, all Options (whether vested or unvested) shall lapse immediately on the date of termination without any right to compensation.
3.4 Exercise Notice. The Option Holder may exercise vested Options by delivering a written exercise notice to the Company specifying the number of Options being exercised and paying the aggregate Exercise Price (being NZD $[Exercise Price] multiplied by the number of Options being exercised) to the Company by bank transfer.
3.5 Allotment on Exercise. On receipt of a valid exercise notice and the aggregate Exercise Price, the Company shall allot and issue to the Option Holder the number of [Share Class] specified in the exercise notice within 10 business days. The Company shall update its share register under section 87 of the Companies Act 1993 and issue a share certificate to the Option Holder.
3.6 Companies Act Compliance. The issue of shares on exercise shall comply with the Companies Act 1993, including the solvency test under section 42.
4. Acceleration
4. ACCELERATION ON CHANGE OF CONTROL
4.1 Change of Control. A "Change of Control" means any transaction or series of transactions resulting in a third party acquiring more than 50% of the voting shares of the Company, or the sale of all or substantially all of the Company's assets, or the Company's listing on a recognised stock exchange.
4.2 Acceleration. The following acceleration applies on a Change of Control: [Acceleration Type].
4.3 Single Trigger. If single trigger acceleration applies, all unvested Options shall vest immediately and become exercisable upon completion of the Change of Control.
4.4 Double Trigger. If double trigger acceleration applies, unvested Options shall vest and become immediately exercisable only if the Option Holder's engagement is terminated without cause (or the Option Holder resigns for good reason) within 12 months following completion of the Change of Control.
5. Adjustments
5. ADJUSTMENTS
5.1 Adjustments. The Company's board of directors may, in its discretion, adjust the Exercise Price and/or the number of Options to reflect any bonus issue, rights issue, share split, consolidation, reorganisation of the Company's capital structure, or any other event that would otherwise affect the value of the Options relative to the value of shares in the Company.
5.2 Board Discretion. Any such adjustment shall be made by the board in good faith, acting reasonably, and in a manner that preserves the economic value of the Options as nearly as practicable.
6. Tax
6. TAX
6.1 Employee Share Scheme. This Agreement constitutes an employee share option scheme for the purposes of subpart CE of the Income Tax Act 2007 (NZ). The grant, vesting, exercise, and disposal of Options and shares may have tax implications for the Option Holder.
6.2 Option Holder Responsibility. The Option Holder is solely responsible for all tax obligations arising from the grant, vesting, exercise, or disposal of Options and any shares acquired on exercise. The Option Holder is advised to obtain independent tax advice from a New Zealand tax specialist.
6.3 PAYE Withholding. To the extent any amounts arising from the Options are subject to PAYE under the Income Tax Act 2007, the Company shall withhold the applicable PAYE amount from any salary or wages payable to the Option Holder and account for such PAYE to Inland Revenue.
7. General
7. GENERAL PROVISIONS
7.1 Governing Law. This Agreement is governed by the laws of New Zealand. Each Party submits to the non-exclusive jurisdiction of the courts of [Governing Jurisdiction] for the resolution of all disputes.
7.2 Employment. Nothing in this Agreement guarantees the Option Holder's continued employment or engagement with the Company for any period. The Option Holder's employment or engagement is governed by a separate agreement.
7.3 Entire Agreement. This Agreement constitutes the entire agreement between the Parties regarding the share options and supersedes all prior agreements and negotiations.
7.4 Amendment. No amendment to this Agreement is effective unless made in writing and signed by both Parties.
7.5 Confidentiality. The Option Holder shall keep the terms of this Agreement confidential and shall not disclose them to any third party without the Company's prior written consent.
7.6 Counterparts. This Agreement may be executed in counterparts, each of which shall constitute an original.
Execution
EXECUTION
EXECUTED as an agreement on [Agreement Date].
Director
________________
Signature
Option Holder
________________
Signature
What Is a Share Option Agreement (New Zealand)?
A Share Option Agreement in New Zealand records the issue or transfer of shares and the rights attaching to them, consistent with the share-capital provisions of the Companies Act 1993.
Share options are one of the most widely used equity incentive instruments in New Zealand, particularly for technology startups and growth companies that want to attract and retain talented employees by giving them a stake in the company's future success. They are especially useful where the company's shares already have meaningful value (making it impractical to issue shares at a nominal price as in a founder vesting arrangement), but where the company cannot yet afford to pay market salaries.
In New Zealand, share option agreements are governed by the Companies Act 1993 (which applies when the options are exercised and shares are issued) and subpart CE of the Income Tax Act 2007, which contains the employee share scheme (ESS) rules. The ESS rules determine when income tax arises on the option grant, vesting, and exercise, and impose PAYE withholding obligations on companies that grant options to employees.
Share options are typically structured with a vesting schedule (most commonly a one-year cliff followed by monthly vesting over four years) to incentivise the option holder's long-term commitment to the company. The exercise price is set at or above fair market value at the grant date, confirming that the option holder only profits if the company's value increases above that level after the grant — aligning the option holder's incentives directly with shareholder value creation.
When Do You Need a Share Option Agreement (New Zealand)?
A Share Option Agreement should be used when a New Zealand company wants to grant equity incentives to employees, directors, or contractors in a tax-efficient manner without requiring those individuals to pay for actual shares upfront. Share options are particularly well-suited to the following situations.
When a company is past the very early founding stage and its shares have meaningful value, making it impractical to issue shares to new employees at a nominal price (as would be done for founding team members under a vesting agreement), a share option plan allows the company to grant equity incentives without triggering an immediate tax liability for the recipient.
When a company is attracting senior hires — such as a VP Engineering, Head of Sales, or General Counsel — who are joining at a stage when the company's valuation is already material, share options allow the company to offer a competitive total compensation package that includes meaningful equity upside without requiring the new hire to invest capital.
When a company is implementing a formal employee share option plan (ESOP) to attract and retain a broader pool of employees, a standardised Share Option Agreement (supplemented by an option plan document or rules) is the appropriate legal instrument.
When a company is awarding equity to key advisers, consultants, or non-executive directors who are not founders or full-time employees, share options are a common and practical choice, subject to confirming that the FMCA and any applicable securities law requirements are met.
From a tax perspective, share options are generally more tax-efficient for later-stage companies than issuing shares directly, because the income tax liability under the Income Tax Act 2007 ESS rules is deferred until the options are exercised (rather than arising at grant). The exercise price should be set at or above fair market value to confirm this deferral applies. Independent tax advice is strongly recommended.
What to Include in Your Share Option Agreement (New Zealand)
A thorough New Zealand Share Option Agreement should include the following key elements.
The parties must be clearly identified: the company (with its full registered name, NZBN, and registered address) and the option holder (with their full legal name, address, and role).
The option grant must specify the number of options being granted, the class of shares to be issued on exercise, the exercise price per share (which should be set at or above fair market value at the grant date), and the grant date.
The vesting schedule must be set out in detail, including the total vesting period, the cliff period and the percentage of options vesting at the cliff, and the frequency of post-cliff vesting. Standard terms are a four-year vesting period with a one-year cliff and monthly post-cliff vesting.
The exercise provisions must specify the exercise period (the window during which vested options can be exercised), the post-departure exercise window (the number of days after departure during which the option holder can exercise vested options), the lapse on termination for cause (all options lapse immediately if terminated for serious misconduct), and the mechanics of exercise (written notice and payment of the aggregate exercise price).
The acceleration provisions must address whether unvested options accelerate on a Change of Control, and whether single trigger or double trigger acceleration applies.
The adjustment provisions must allow the board to adjust the exercise price and number of options in the event of a bonus issue, share split, rights issue, or other capital reorganisation.
The tax clause must acknowledge the application of subpart CE of the Income Tax Act 2007 and the company's PAYE withholding obligations, and recommend that the option holder obtain independent tax advice.
The governing law clause must confirm New Zealand law and the jurisdiction of the New Zealand courts for dispute resolution. The forms-legal.com Share Option Agreement (New Zealand) provides a ready-to-use template that meets New Zealand legal requirements.
Cite this page
Reference this free template in an article, syllabus, or research note:
Forms Legal. (2026). Share Option Agreement (New Zealand) (New Zealand) [Legal document template]. Forms Legal. https://forms-legal.com/new-zealand/business/corporate/share-option-agreement-new-zealand
"Share Option Agreement (New Zealand) (New Zealand)." Forms Legal, 2026, https://forms-legal.com/new-zealand/business/corporate/share-option-agreement-new-zealand.
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title = {Share Option Agreement (New Zealand) (New Zealand)},
year = {2026},
howpublished = {\url{https://forms-legal.com/new-zealand/business/corporate/share-option-agreement-new-zealand}},
note = {Free legal document template. Based on Companies Act 1993}
}Also available for these jurisdictions:
Frequently Asked Questions
A share option is a right — but not an obligation — granted by a company to an individual (typically an employee, director, or contractor) to subscribe for a specified number of shares in the company at a fixed price (the exercise price) at any time during a defined period (the exercise period). The option holder does not own the shares when the option is granted — they only acquire shares if and when they choose to exercise the option by paying the exercise price. The value of the option lies in the difference between the exercise price and the market value of the shares at the time of exercise: if the company's value has increased substantially above the exercise price, the option holder can exercise the option and acquire shares at the lower exercise price, giving them an immediate economic gain. In New Zealand, share options granted to employees are governed by the Companies Act 1993 (for the mechanics of share issuance on exercise) and subpart CE of the Income Tax Act 2007 (for the tax treatment of the option grant and exercise). Unlike actual shares, options are not subject to capital gains tax until the shares are disposed of, but the exercise of options may trigger an income tax liability under the employee share scheme rules.
The tax treatment of share options for New Zealand employees is governed by subpart CE of the Income Tax Act 2007, which contains the employee share scheme (ESS) rules. Under the ESS rules, the taxing point for a share option is generally when the option is exercised (not when it is granted or vests). The amount subject to income tax (and, for employees, PAYE) is the difference between the market value of the shares acquired on exercise and the exercise price paid — this is known as the 'share scheme taxing date amount'. For example, if an employee exercises options to buy 10,000 shares at an exercise price of NZD $0.50 per share when the market value is NZD $2.00 per share, the taxable amount is NZD $15,000 (10,000 × ($2.00 - $0.50)), which is treated as employment income. The employer (the company) is responsible for withholding PAYE on this amount if the employee is paid a salary or wages. If the option holder is a contractor (not an employee), the tax treatment may differ. After the exercise, if the shares are later sold, any further gain may be subject to tax if the shares were acquired with a dominant purpose of resale, but New Zealand does not impose a general capital gains tax. Tax advice specific to the option holder's circumstances is strongly recommended.
The exercise price for share options in New Zealand should be set at or above the fair market value of the shares at the time of grant. Setting the exercise price at fair market value ensures that the option holder only profits if the company's value increases after the grant date — this is the fundamental incentive design of a share option. For private companies (which have no publicly quoted share price), the fair market value must be determined by the board of directors in good faith. Common methods for determining fair market value include using a recent arm's-length share transaction price, applying a standard valuation methodology (such as a discounted cash flow analysis or a comparable company multiple), or obtaining a formal valuation from an independent valuer. From a tax perspective under the Income Tax Act 2007, if the exercise price is set below fair market value, the discount element is treated as employment income at the time of grant under the ESS rules, which can create an immediate tax liability for the option holder. Setting the exercise price at or above fair market value defers the taxing point to when the option is exercised, which is generally more favourable for both the company and the option holder. The Companies Act 1993 also requires that shares be issued for adequate consideration (not less than fair value) under section 44.
When a New Zealand company is acquired (a 'Change of Control'), the treatment of outstanding share options depends on the specific terms of the share option agreement and the terms negotiated as part of the acquisition. Common outcomes include: (1) Acceleration — if the option agreement includes a single trigger acceleration provision, all unvested options vest immediately upon completion of the acquisition, allowing the option holder to exercise and receive the acquisition consideration for their shares; (2) Double trigger acceleration — if the agreement includes a double trigger provision, options only accelerate if the option holder is terminated without cause (or resigns for good reason) within a specified period after the acquisition; (3) Rollover — the acquirer may offer to replace the existing options with equivalent options in the acquiring company, typically on equivalent economic terms; or (4) Cash settlement — the acquirer may pay the option holders a cash amount equal to the difference between the per-share acquisition price and the exercise price, without requiring the options to be exercised. The tax treatment of each outcome differs under the Income Tax Act 2007, and the option holder should obtain tax advice specific to the particular transaction. The option agreement should address these scenarios clearly to avoid uncertainty and disputes at the time of an acquisition.
A share option agreement and a vesting agreement are both equity incentive instruments but they work quite differently. Under a share option agreement, the option holder receives the right (not the shares themselves) to subscribe for shares at a fixed exercise price in the future. The option holder never actually owns shares until they choose to exercise the option and pay the exercise price. Options are typically used for employees who are joining the company after the founding stage, when the company already has some value and actual shares would cost more than a nominal amount. Under a vesting agreement, the recipient actually receives (is allotted) the shares immediately, but those shares are subject to a buyback right by the company if the recipient departs before the shares have vested. Vesting agreements are typically used for founders and very early employees, where shares are issued at a nominal price (such as NZD $0.001 per share) because the company has little or no value at the time of issue. The key practical difference is: with options, the recipient does not own shares until exercise; with a vesting agreement, the recipient owns shares immediately but may have to return unvested shares on departure. From a tax perspective, options are taxed under the employee share scheme rules at exercise, while vesting shares are typically taxed under the same ESS rules at the vesting date.
This template is provided for informational purposes only and does not constitute legal advice. Laws vary by jurisdiction and change over time. Consult a qualified attorney for advice specific to your situation.Full disclaimer
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