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Profit Sharing Agreement For Investors for New Zealand

Profit Sharing Agreement For Investors Template for New Zealand

A comprehensive legal agreement governed by New Zealand law that establishes the terms and conditions for profit-sharing arrangements between a business entity and its investors. The document outlines the methodology for calculating and distributing profits, investor rights and protections, reporting requirements, and governance mechanisms. It ensures compliance with New Zealand's Financial Markets Conduct Act 2013 and related regulations while providing a clear framework for managing the financial relationship between the business and its investors. The agreement includes specific provisions for dispute resolution, confidentiality, and termination rights, tailored to meet New Zealand's legal requirements and business practices.

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What is a Profit Sharing Agreement For Investors?

The Profit Sharing Agreement For Investors is a crucial document used in New Zealand business contexts where investors participate in a company's success through profit distribution rather than traditional equity ownership. This arrangement is particularly valuable for businesses seeking to raise capital while maintaining operational control, and for investors looking for regular returns based on business performance. The document aligns with New Zealand's Financial Markets Conduct Act 2013 and related regulations, providing a structured framework for profit calculation, distribution mechanisms, investor rights, and reporting obligations. It's commonly used in various business scenarios, from startup funding to established business expansion, and can be adapted to accommodate different investment sizes and investor types while ensuring regulatory compliance and proper risk management.

What sections should be included in a Profit Sharing Agreement For Investors?

1. Parties: Identifies and provides full details of all parties to the agreement, including registered addresses and company numbers

2. Background: Outlines the context of the agreement, including the business venture and purpose of the profit-sharing arrangement

3. Definitions and Interpretation: Defines key terms used throughout the agreement and establishes interpretation rules

4. Investment Terms: Specifies the investment amount, payment terms, and any conditions precedent to investment

5. Profit Definition and Calculation: Clearly defines what constitutes 'profit' and the methodology for its calculation

6. Profit Distribution: Details the profit-sharing ratio, distribution frequency, and payment mechanisms

7. Financial Reporting: Outlines financial reporting obligations, including frequency, format, and audit requirements

8. Management and Control: Describes management rights and decision-making processes

9. Investor Rights: Specifies investors' rights including information access and voting rights if applicable

10. Term and Termination: States the duration of the agreement and circumstances for termination

11. Confidentiality: Establishes confidentiality obligations regarding business information

12. Dispute Resolution: Details the process for resolving disputes between parties

13. General Provisions: Includes standard clauses such as notices, amendments, governing law, and assignment

What sections are optional to include in a Profit Sharing Agreement For Investors?

1. Tag-Along Rights: Include when investors should have the right to join in the sale of shares by other shareholders

2. Drag-Along Rights: Include when majority shareholders should have the right to force minority shareholders to join in the sale of shares

3. Anti-Dilution Protection: Include when investors should be protected against dilution from future funding rounds

4. Board Representation: Include when investors are to have board representation rights

5. Exit Strategy: Include when specific exit mechanisms or timelines are agreed upon

6. Intellectual Property Rights: Include when the business involves significant IP that needs protection

7. Non-Competition and Non-Solicitation: Include when restrictions on competitive activities are necessary

8. International Transfer Provisions: Include when profit distributions will cross international borders

What schedules should be included in a Profit Sharing Agreement For Investors?

1. Schedule 1: Investment Details: Details of investment amounts, payment schedules, and bank account information

2. Schedule 2: Profit Calculation Methodology: Detailed formula and examples of profit calculations

3. Schedule 3: Financial Reporting Template: Template for required financial reports and statements

4. Schedule 4: Key Performance Indicators: Specific metrics used to measure business performance

5. Schedule 5: Investor Information: Detailed information about each investor including tax status and contact details

6. Appendix A: Business Plan: Current business plan and financial projections

7. Appendix B: Compliance Requirements: List of applicable regulatory requirements and compliance procedures

8. Appendix C: Shareholders' Agreement Reference: Cross-reference to relevant provisions of the shareholders' agreement if applicable

Authors

Alex Denne

Head of Growth (Open Source Law) @ Genie AI | 3 x UCL-Certified in Contract Law & Drafting | 4+ Years Managing 1M+ Legal Documents

Jurisdiction

New Zealand

Publisher

Genie AI

Cost

Free to use

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