Profit Sharing Agreement (New Zealand)
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PROFIT SHARING AGREEMENT
This Profit Sharing Agreement (the "Agreement") is entered into as of [Effective Date] between [Party A Name] of [Party A Address] (NZBN: [Party A NZBN]) ("Party A") and [Party B Name] of [Party B Address] (NZBN: [Party B NZBN]) ("Party B") (collectively the "Parties").
This Agreement is made under and subject to the Contract and Commercial Law Act 2017 (CCLA) and the laws of New Zealand.
Background
BACKGROUND
The Parties wish to share the net profits arising from the following venture or business activity (the "Venture"): [Venture Description].
The Parties have agreed to enter into this Agreement to set out the terms on which profits from the Venture will be calculated, allocated, and distributed.
Term
1. TERM
This Agreement commences on [Effective Date] and continues for [Agreement Term], unless terminated earlier in accordance with clause 7 of this Agreement.
Profit Allocation
2. PROFIT ALLOCATION
2.1 Subject to the terms of this Agreement, the net profits of the Venture shall be allocated as follows:
- Party A: [Party A Share %]% of Net Profit
- Party B: [Party B Share %]% of Net Profit
2.2 For the purposes of this Agreement, "Net Profit" means: [Profit Definition].
2.3 The Parties acknowledge that the allocation set out in clause 2.1 reflects their respective contributions, roles, and responsibilities in connection with the Venture.
Distributions
3. DISTRIBUTIONS
3.1 Net profits shall be calculated and distributed [Distribution Frequency]. Each distribution shall be paid within [Payment Days] days after the end of each distribution period.
3.2 All distributions shall be made in New Zealand dollars (NZD) by electronic bank transfer to the account nominated by each Party. Payment account details: [Bank Account Details].
3.3 The Parties may, by mutual written agreement, defer, retain, or reinvest any portion of a distribution for the purposes of the Venture.
3.4 No distribution shall be made if doing so would render the Venture insolvent or unable to meet its debts as they fall due.
Record-Keeping and Audit Rights
4. RECORD-KEEPING AND AUDIT RIGHTS
4.1 [Record Keeping Party] shall maintain accurate and complete books of account for the Venture in accordance with generally accepted accounting principles and the Companies Act 1993 (where applicable).
4.2 Financial records shall be retained for a minimum of [Retention Period] years from the end of the relevant financial year.
4.3 Each Party shall have the right, on not less than [Audit Notice Days] days' written notice, to inspect, audit, or arrange for an independent accountant to audit the financial records of the Venture at the auditing Party's expense. If an audit reveals an underpayment of more than 5% of the amount owing, the cost of the audit shall be borne by the party that maintained the records.
4.4 The Parties agree to provide each other with quarterly financial statements for the Venture within 14 days after the end of each quarter.
GST and Tax
5. GST AND TAX
5.1 GST registration status of the Venture: [GST Status]. Where the Venture is registered for GST under the Goods and Services Tax Act 1985, all amounts stated in this Agreement are exclusive of GST unless otherwise stated. GST of 15% will be added where applicable.
5.2 Income tax obligations: [Tax Obligations]. Each Party is solely responsible for filing their own tax returns and paying any taxes arising from distributions received under this Agreement.
5.3 The Parties shall cooperate to provide each other with such information as is reasonably required for each Party to meet its tax obligations, including the preparation of any tax returns or financial statements.
Confidentiality
6. CONFIDENTIALITY
6.1 Each Party agrees to keep confidential all financial information, trade secrets, and proprietary information of the other Party and of the Venture, and not to disclose such information to any third party without the prior written consent of the other Party, except as required by law or to the Party's legal or financial advisers.
6.2 The obligations in this clause survive termination of this Agreement for a period of three (3) years.
Termination
7. TERMINATION
7.1 Either Party may terminate this Agreement by giving [Termination Notice] to the other Party.
7.2 Either Party may terminate this Agreement immediately by written notice if the other Party:
- commits a material breach of this Agreement and fails to remedy that breach within 20 working days of receiving written notice requiring remedy;
- becomes insolvent, is placed into liquidation, receivership, or voluntary administration;
- ceases to carry on business.
7.3 On termination, each Party shall receive their respective share of Net Profit accrued up to the date of termination, calculated and paid within [Payment Days] days of the termination date.
Dispute Resolution
8. DISPUTE RESOLUTION
8.1 If a dispute arises in connection with this Agreement, the Parties shall first attempt to resolve it by good-faith negotiation. If the dispute is not resolved within 20 working days, it shall be referred to [Dispute Resolution].
8.2 Nothing in this clause prevents a Party from seeking urgent interlocutory relief from the New Zealand courts.
General Provisions
9. GENERAL PROVISIONS
9.1 Governing Law. This Agreement is governed by the laws of New Zealand. The courts of [Governing Law City], New Zealand shall have non-exclusive jurisdiction to determine any dispute.
9.2 Entire Agreement. This Agreement constitutes the entire agreement between the Parties with respect to profit sharing from the Venture and supersedes all prior discussions, negotiations, and agreements.
9.3 Amendments. This Agreement may only be amended by a written instrument signed by both Parties.
9.4 No Partnership or Agency. Nothing in this Agreement creates a partnership, joint venture, or agency relationship between the Parties for any purpose other than the specific profit sharing arrangement described herein.
9.5 Severability. If any provision of this Agreement is held to be invalid, illegal, or unenforceable, the remaining provisions shall continue in full force and effect.
9.6 Waiver. No failure or delay in exercising any right under this Agreement shall constitute a waiver of that right.
9.7 Notices. Notices under this Agreement shall be delivered by email to [Party A Email] (Party A) and [Party B Email] (Party B), or by registered post to the addresses set out above.
9.8 CCLA Compliance. This Agreement is subject to and shall be construed in accordance with the Contract and Commercial Law Act 2017 (CCLA).
Execution
EXECUTION
The Parties have executed this Profit Sharing Agreement as of the date first written above.
SIGNED for and on behalf of [Party A Name]:
SIGNED for and on behalf of [Party B Name]:
Party A Authorised Signatory
________________
Signature
Party B Authorised Signatory
________________
Signature
What Is a Profit Sharing Agreement (New Zealand)?
A Profit Sharing Agreement in New Zealand records a corporate governance arrangement and the obligations of the company and its officers, consistent with the Credit Contracts and Consumer Finance Act 2003.
In New Zealand, profit sharing agreements are governed by the Contract and Commercial Law Act 2017 (CCLA), which consolidates and modernises the general law of contract. The CCLA provides the legal framework for contractual formation, interpretation, performance, and remedies, and its principles apply to all commercial contracts in New Zealand including profit sharing arrangements.
A well-drafted Profit Sharing Agreement covers several key elements: the precise definition of 'net profit' for the venture (including all deductions such as operating expenses, GST, and taxes); the percentage or formula by which profits are allocated between the parties; the frequency of distributions and the number of days within which payments must be made; record-keeping obligations and each party's right to audit the financial books; GST obligations under the Goods and Services Tax Act 1985; each party's individual income tax responsibilities; confidentiality obligations; and the mechanism for terminating the arrangement and distributing final profits.
The template is suitable for joint project arrangements, business collaborations, technology licensing partnerships, property development ventures, and any other commercial arrangement where two parties wish to share financial upside without forming a formal legal partnership.
When Do You Need a Profit Sharing Agreement (New Zealand)?
You need a New Zealand Profit Sharing Agreement whenever two or more parties intend to collaborate on a commercial project or venture and share the resulting net profits, but do not wish to form a formal partnership, joint venture company, or other legal entity.
Common situations where a Profit Sharing Agreement is essential include: two businesses combining their complementary skills to pursue a contract or project, with profits shared according to their respective contributions; a developer and a contractor agreeing to share the profit from a property development without forming a joint venture company; a technology company and a distribution partner agreeing to share the revenue surplus after costs from a product launch; two professionals (such as lawyers, accountants, or consultants) collaborating on a client matter and sharing the resulting fees; or an investor providing capital and a manager providing expertise, with profits shared between them.
A Profit Sharing Agreement is also valuable where the parties have an existing relationship — for example, a franchisor and franchisee, or a licensor and licensee — and wish to layer a specific profit sharing arrangement over their existing commercial relationship for a particular project or initiative.
Without a written Profit Sharing Agreement, the parties risk significant uncertainty about how profits are calculated, when distributions must be made, and what happens if one party believes the financial records are inaccurate. Disputes about profit sharing are among the most contentious commercial disputes in New Zealand, and a clear written agreement is the best protection for all parties involved.
What to Include in Your Profit Sharing Agreement (New Zealand)
A legally sound New Zealand Profit Sharing Agreement should include the following key elements to be effective and enforceable under the Contract and Commercial Law Act 2017 (CCLA):
**Party identification.** Full legal names, registered addresses, and New Zealand Business Numbers (NZBN — 13 digits) for all corporate parties. The NZBN is a unique identifier assigned to all New Zealand businesses and is the recommended way to identify parties to commercial contracts.
**Venture description.** A clear and specific description of the business activity, project, or venture from which profits will be shared. Vague descriptions lead to disputes about whether particular income streams fall within the scope of the agreement.
**Net profit definition.** A precise, agreed definition of 'net profit' including all permitted deductions. This should specify the accounting standard applied, how disputes about the calculation are resolved, and whether any reserves may be retained before distribution.
**Allocation percentages.** The percentage of net profit allocated to each party. These should total 100% and should reflect the parties' respective contributions of capital, expertise, time, or other resources.
**Distribution schedule.** The frequency of distributions (monthly, quarterly, half-yearly, or annually) and the number of days after each period end within which payment must be made. Payments in New Zealand are typically made by electronic bank transfer.
**Audit rights.** Each party's right to inspect and audit the financial records of the venture, including the required notice period, cost allocation, and record retention requirements (minimum 7 years under the Companies Act 1993).
**GST and tax provisions.** Confirmation of the venture's GST registration status and each party's individual income tax obligations. GST is charged at 15% in New Zealand under the Goods and Services Tax Act 1985.
**Termination provisions.** How and when the agreement may be terminated, including notice periods and the process for calculating and paying final profit distributions upon termination.
**Dispute resolution.** A tiered dispute resolution clause referring disputes first to negotiation, then to mediation, and finally to arbitration under the Arbitration Act 1996 or court proceedings. The forms-legal.com Profit Sharing 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). Profit Sharing Agreement (New Zealand) (New Zealand) [Legal document template]. Forms Legal. https://forms-legal.com/new-zealand/financial/agreements/profit-sharing-agreement-new-zealand
"Profit Sharing Agreement (New Zealand) (New Zealand)." Forms Legal, 2026, https://forms-legal.com/new-zealand/financial/agreements/profit-sharing-agreement-new-zealand.
@misc{formslegal-profit-sharing-agreement-new-zealand,
author = {{Forms Legal}},
title = {Profit Sharing Agreement (New Zealand) (New Zealand)},
year = {2026},
howpublished = {\url{https://forms-legal.com/new-zealand/financial/agreements/profit-sharing-agreement-new-zealand}},
note = {Free legal document template. Based on Credit Contracts and Consumer Finance Act 2003}
}
Frequently Asked Questions
A Profit Sharing Agreement is a legally binding contract under which two or more parties agree to share the net profits generated by a joint venture, business activity, or project. In New Zealand, the agreement is governed by the Contract and Commercial Law Act 2017 (CCLA), which codifies and modernises the general law of contract, including rules on formation, interpretation, performance, and remedies. A Profit Sharing Agreement is distinct from a Partnership Agreement (governed by the Partnership Act 1908) in that it does not necessarily create a legal partnership — the parties may operate as separate legal entities and simply share financial outcomes. The agreement must clearly define how 'net profit' is calculated, what percentage each party receives, how often distributions are made, and what records are kept. It should also address GST obligations under the Goods and Services Tax Act 1985 and each party's individual income tax responsibilities.
Not automatically. Under the Partnership Act 1908, a partnership exists when persons carry on business in common with a view to profit. A Profit Sharing Agreement may evidence a partnership if the parties are carrying on a common business enterprise with a view to shared profit. However, the parties can expressly state in the agreement that no partnership, joint venture, or agency is created and that each party remains an independent legal entity. This distinction matters significantly because partners owe each other fiduciary duties and are jointly and severally liable for the debts of the partnership, whereas parties to a standalone profit sharing arrangement are not. New Zealand lawyers recommend clearly documenting the nature of the relationship to avoid unintended partnership liability. If the arrangement is intended to be a partnership, a full Partnership Agreement should be prepared instead.
The definition of 'net profit' is the most critical term in any Profit Sharing Agreement and should be agreed in writing before the arrangement commences. A poorly defined profit definition is the most common cause of disputes. In New Zealand, net profit is typically defined as gross revenue from the venture less: direct costs of goods or services sold; operating expenses including wages, rent, and utilities; GST payable (where the venture is GST-registered under the Goods and Services Tax Act 1985); income tax payable on the venture's income; depreciation on assets used in the venture; and any agreed reserves or reinvestment amounts. Parties should also agree on the accounting standard to be used (typically New Zealand GAAP or IFRS as applicable), and whether distributions may be withheld if doing so would leave the venture unable to pay its debts — consistent with insolvency law principles under the Companies Act 1993.
Audit rights are a critical protection for any party that is not responsible for day-to-day financial management of the venture. A New Zealand Profit Sharing Agreement should grant each party the right to inspect and audit the financial records of the venture on reasonable notice — typically 14 to 20 working days. The agreement should specify who bears the cost of the audit (usually the party requesting the audit, unless the audit reveals a material underpayment, in which case the defaulting party pays). Record retention obligations should comply with the Companies Act 1993, which requires companies to retain accounting records for at least 7 years. Parties should also require periodic financial statements — typically quarterly — to provide ongoing visibility of the venture's financial performance without requiring a formal audit each time.
Disputes about profit sharing arrangements in New Zealand can be resolved in several ways. First, the parties should attempt good-faith negotiation between their senior representatives. If negotiation fails, mediation through a recognised New Zealand mediation provider (such as AMINZ — the Arbitrators' and Mediators' Institute of New Zealand) is cost-effective and confidential. If mediation does not resolve the dispute, arbitration under the Arbitration Act 1996 provides a binding private resolution mechanism — arbitration awards are enforceable as court judgments under the Act. Litigation in the District Court or High Court is also available but tends to be more expensive and time-consuming. For smaller amounts, the Disputes Tribunal can hear claims up to NZD $30,000. The Profit Sharing Agreement should specify the chosen dispute resolution process clearly to avoid uncertainty.
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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