{"id":203117,"date":"2021-03-03T16:34:20","date_gmt":"2021-03-03T03:34:20","guid":{"rendered":"https:\/\/legalvision.co.nz\/?p=203117"},"modified":"2026-02-02T14:37:37","modified_gmt":"2026-02-02T01:37:37","slug":"founder-director-shareholder","status":"publish","type":"post","link":"https:\/\/legalvision.co.nz\/startups\/founder-director-shareholder\/","title":{"rendered":"What is the Difference Between a Founder, Director and a Shareholder in NZ?"},"content":{"rendered":"\n<p><span style=\"font-weight: 400\">When founding a company, it is common for you to be both director and shareholder of that company. Being a founder, a director and a shareholder are not all the same thing. You need to ensure you understand the distinction between each role, as each role comes with different rights and responsibilities. This article explains the difference between a founder, director and shareholder. It also identifies some issues to look out for when acting in the capacity of more than one of these roles.<\/span><\/p>\n\n\n\n<div  class=\"box box--icon box--info\">\n    <p>These concepts are only relevant to you if you operate your business via a company.<\/p>\n<\/div>\n\n\n\n<h2 class=\"wp-block-heading\"><span style=\"font-weight: 400\">I&#8217;m a Founder, Director and Shareholder in a Company<\/span><\/h2>\n\n\n\n<p><span style=\"font-weight: 400\">It is common for a founder of a company to be both a director and shareholder of that company. Even if you are not the founder of a company, you may be a director and a shareholder. Each of these roles comes with different rights and responsibilities. If you fail to comply with your responsibilities while performing a role, then you risk:<\/span><\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><span style=\"font-weight: 400\">an individual or company bringing legal action against you;<\/span><\/li>\n\n\n\n<li><span style=\"font-weight: 400\">receiving a fine; and\/or<\/span><\/li>\n\n\n\n<li><span style=\"font-weight: 400\">facing criminal sanction, including a custodial sentence.<\/span><\/li>\n<\/ul>\n\n\n\n<p><span style=\"font-weight: 400\">These risks are all significant. Therefore, it is essential to know what is expected of you in each of your roles. You have duties not only to your company but to other key stakeholders.<\/span><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span style=\"font-weight: 400\">What are the Differences Between the Different Roles?<\/span><\/h2>\n\n\n\n<h3 class=\"wp-block-heading\"><span style=\"font-weight: 400\">Founder<\/span><\/h3>\n\n\n\n<figure class=\"wp-block-table is-style-stripes\"><table><tbody><tr><td><p><b>How Do You Get This Role?<\/b><\/p> <\/td><td>Founders refer to those that start the business, be it alone or with others. The law does not recognise founders as a legal concept. That is, no law exists defining founders. Instead, it is up to you and the people who call themselves \u2018founders\u2019. <br><br><p><span style=\"font-weight: 400\">You do not necessarily have to invest in your company to be a founder. However, founders often contribute capital at an early stage in the business. Usually, this is in the form of equity shares, though it can also be a loan.&nbsp;<\/span><\/p><\/td><\/tr><tr><td><p><b>What Rights Do I Have?<\/b><\/p> <\/td><td>Being a company founder does not automatically grant you certain rights in respect of the company.&nbsp; <br><br>However, certain founder rights may be granted to you under your company constitution or shareholders agreement. Typically, for example, a founder has an entrenched right to appoint a director (regardless of the percentage of shares held). <\/td><\/tr><tr><td><b style=\"font-size: revert;font-family: inherit\">Do I Get Paid For My Role?<\/b> <\/td><td>As a founder, you may be an employee or contractor of your company. If you are, you are entitled to receive payment of at least the minimum wage. Often founders will choose to receive their salary in the form of company shares rather than cash.&nbsp;<\/td><\/tr><tr><td><b style=\"font-size: revert;font-family: inherit;background-color: transparent\">What are my Responsibilities?<\/b> <\/td><td>A founder is not a legal concept. Therefore, you do not have any legal responsibilities as a founder unless you have agreed to specific responsibilities under, for example, the shareholders agreement or a contractor or employment agreement. <\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n\n\n\n\n<h3 class=\"wp-block-heading\"><span style=\"font-weight: 400\">Director<\/span><\/h3>\n\n\n\n<figure class=\"wp-block-table is-style-stripes\"><table><tbody><tr><td><b style=\"font-size: revert;font-family: inherit\">How Do You Get This Role?<\/b> <\/td><td>The company\u2019s directors and\/or the shareholders appoint directors. Your company\u2019s constitution or shareholders&#8217; agreement typically outlines the appointment process. Absent this, provisions in the<em>Companies Act<\/em> apply. You must sign a director consent form before becoming a <span style=\"font-size: revert;font-family: inherit\">director.<\/span><\/td><\/tr><tr><td><b style=\"font-size: revert;font-family: inherit\">What Rights Do I Have?<\/b> <\/td><td>The company\u2019s directors and\/or the shareholders appoint directors. Your company\u2019s constitution or shareholders&#8217; agreement typically outlines the appointment process. Absent this, provisions in the<em>Companies Act<\/em> applies. You must sign a director consent form before becoming a <span style=\"font-size: revert;font-family: inherit\">director.<\/span><\/td><\/tr><tr><td><b style=\"font-size: revert;font-family: inherit\">Do I Get Paid For My Role?<\/b> <\/td><td>As a director, you may <a style=\"font-size: revert;font-family: inherit;font-weight: inherit\" href=\"https:\/\/legalvision.co.nz\/corporations\/company-director-remuneration\/\">receive payment for your role<\/a><span style=\"font-size: revert;font-family: inherit\">. Generally, the shareholders will decide the amount or approve the amount proposed by you or the other directors. However, if you are also a founder working in the business, you would generally not receive both a salary and a director&#8217;s fee.<\/span> <\/td><\/tr><tr><td><b style=\"font-size: revert;font-family: inherit\">What are my Responsibilities?<\/b> <\/td><td>If you are a director, you will have several responsibilities. The most important of these are your <a style=\"font-size: revert;font-family: inherit;font-weight: inherit\" href=\"https:\/\/legalvision.co.nz\/corporations\/directors-duties\/\">director&#8217;s duties<\/a><span style=\"font-size: revert;font-family: inherit\">. The primary duties of directors are to:<\/span> <br>\u2022 <a style=\"font-family: inherit;font-size: inherit\" href=\"https:\/\/legalvision.co.nz\/employment\/good-faith-obligation\/\">act in good faith<\/a><span style=\"font-family: inherit;font-size: inherit;background-color: transparent\"> and in the best interests of the company;<\/span><br>\u2022 <span style=\"font-family: inherit;font-size: inherit;background-color: transparent\">exercise your power as a director for a proper purpose;<\/span><br>\u2022 <span style=\"font-family: inherit;font-size: inherit;background-color: transparent\">not to create a substantial risk of serious loss to the company\u2019s creditors;<\/span><br>\u2022 <span style=\"font-family: inherit;font-size: inherit;background-color: transparent\">take reasonable care, diligence and skill;<\/span><br>\u2022 <span style=\"font-family: inherit;font-size: inherit;background-color: transparent\">ensure that the company can pay all its debts; and&nbsp;<\/span><br>\u2022<span style=\"font-family: inherit;font-size: inherit;background-color: transparent\">comply with the <\/span><em style=\"font-family: inherit;font-size: inherit;background-color: transparent\">Companies Act<\/em><span style=\"font-family: inherit;font-size: inherit;background-color: transparent\">.<\/span> <br><br>The law applies significant penalties if a director fails to fulfil their duties or acts dishonestly.<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n\n\n\n\n<h3 class=\"wp-block-heading\"><span style=\"font-weight: 400\">Shareholder<\/span><\/h3>\n\n\n\n<figure class=\"wp-block-table is-style-stripes\"><table><tbody><tr><td><b style=\"font-size: revert;font-family: inherit\">How Do You Get This Role?<\/b> <\/td><td>You become a shareholder in a company if you buy shares in the company. This includes any shares you receive upon the company\u2019s incorporation. You will be a shareholder in the company until you sell or surrender all of your shares. <\/td><\/tr><tr><td><b style=\"font-size: revert;font-family: inherit;background-color: transparent\">What Rights Do I Have?<\/b> <\/td><td>Whilst the directors control the day to day running of the company, shareholders have the right to vote on key decisions. These include the decision to remove directors in some cases, change the rights attaching to shares or wind up the company.&nbsp; <br><br><p><span style=\"font-weight: 400\">You may also have the right to share in the profit that the company makes.<\/span><span style=\"font-family: inherit;font-size: inherit;font-weight: inherit;background-color: transparent\"> <\/span><\/p><\/td><\/tr><tr><td><b style=\"font-size: revert;font-family: inherit\">Do I Get Paid For My Role?<\/b> <\/td><td>You do not get paid for your role as a shareholder. However, you may be entitled to receive dividends depending on the rights attached to your shares. (Not all shares pay dividends, though most do). <\/td><\/tr><tr><td><b style=\"font-size: revert;font-family: inherit;background-color: transparent\">What are my Responsibilities?<\/b> <\/td><td>As a shareholder, your only liability is to pay up any amount you have not yet paid for your shares. For example, if you received shares worth $1,000.00 but only paid $1.00, you have a $999.00 liability to the company. You have no other liabilities, meaning that you are not responsible for the company\u2019s debts. <\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n\n<a href=\"#content-next\"\n   class=\"block p-4 mt-10 text-xl font-bold text-center text-white no-underline bg-gray-800 rounded-t-xl\">\n    Continue reading this article below the form\n    <i class=\"text-xl fa-regular fa-arrow-down\"><\/i>\n<\/a>\n<div class=\"px-6 pt-10 pb-12 mb-10 text-center bg-gray-100 rounded-b-xl sm:px-12 test\">\n    <div class=\"mb-8 text-2xl font-bold text-orange\">\n        Need legal advice?\n        <br>\n        <span class=\"text-lg not-prose\">\n                            Call <a href=\"tel:+64800005570\" class=\"not-prose\">0800 005 570<\/a> for urgent assistance.\n                <br>\n                Otherwise, complete this form, and we will contact you within one business day.\n                    <\/span>\n    <\/div>\n\n    \n\n<div class=\"not-prose flex justify-center text-left 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However, there are some situations in which:&nbsp;<\/span><\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><span style=\"font-weight: 400\">a conflict of interest may arise; or&nbsp;<\/span><\/li>\n\n\n\n<li><span style=\"font-weight: 400\">you may be at risk of breaching your responsibilities.&nbsp;&nbsp;<\/span><\/li>\n<\/ul>\n\n\n\n<p><span style=\"font-weight: 400\">Below, this article outlines examples of situations where you should be particularly careful.<\/span><\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span style=\"font-weight: 400\">Making a Decision About High-Risk Business Transactions&nbsp;<\/span><\/h3>\n\n\n\n<p><span style=\"font-weight: 400\">As a founder, it may be tempting to make risky decisions on behalf of your company that<\/span> you believe could have significant benefits down the line. However, as a director, you can only make decisions if you think those decisions are in the best interests of the company. If the chance of pay-off is too low, a high-risk decision may not be in the best interests of the company.&nbsp; Equally, you should also check your shareholders&#8217; agreement for any specific approval requirements, <span style=\"font-weight: 400\">as typically, critical company decisions must go to the shareholders for approval.<\/span><\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span style=\"font-weight: 400\">Making Decisions That Affect Current Shareholders\u2019 Shareholding<\/span><\/h3>\n\n\n\n<p><span style=\"font-weight: 400\">One way to raise money for your company is by issuing shares to new investors. As a director, this decision may be in the best interests of the company. However, as a shareholder, you may not be happy about the company issuing new shares, given the dilutionary impact that the share issue will have on your holding. Typically, an issue of new shares must go to shareholders for approval.<\/span><\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span style=\"font-weight: 400\">Choosing Who Makes Decisions on Behalf of the Company<\/span><\/h3>\n\n\n\n<p><span style=\"font-weight: 400\">As a founder, you may want to retain full control of your company and all decision-making powers. However, as your company grows, you may not have the level of expertise required to run your company as well as your shareholders would like. There may come a point where it would be in the best interests of the company to <\/span><a href=\"https:\/\/legalvision.co.nz\/corporations\/appoint-or-remove-a-company-director\/\"><span style=\"font-weight: 400\">appoint another director<\/span><\/a><span style=\"font-weight: 400\"> to the board who has the required expertise. As a founder, you may not want this. However, your directors\u2019 duties are the most important. You must always ensure that you are acting in the best interests of the company.&nbsp;&nbsp;<\/span><\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span style=\"font-weight: 400\">Choosing Who Cannot Make Decisions on Behalf of the Company<\/span><\/h3>\n\n\n\n<p><span style=\"font-weight: 400\">It may no longer be in the best interests of the company for a director to stay on if they have:<\/span><\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><span style=\"font-weight: 400\">consistently displayed poor decision-making abilities;&nbsp;<\/span><\/li>\n\n\n\n<li><span style=\"font-weight: 400\">failed to show up to board meetings; or&nbsp;<\/span><\/li>\n\n\n\n<li><span style=\"font-weight: 400\">they become incapacitated in some way.<\/span><\/li>\n<\/ul>\n\n\n\n<p><span style=\"font-weight: 400\">If this is the case, your company can remove them as directors.<\/span><\/p>\n\n\n\n<p><span style=\"font-weight: 400\">This applies even if that director is your partner, your friend or even you. If you do not remove yourself, your company\u2019s shareholders have the right to do it themselves.<\/span><\/p>\n\n\n    <div class=\"my-7 lg:my-10 border-y-2 border-gray-100 py-7 lg:py-10 flex flex-col sm:flex-row items-start gap-10\">\n                    <img decoding=\"async\" class=\"w-52 mx-auto my-0! rounded\" src=\"https:\/\/img.legalvision.com.au\/wp-content\/uploads\/sites\/2\/2022\/10\/11133736\/NZ-Directors-Duties-560x792-1.jpg\" alt=\"Front page of publication\"\n                 loading=\"lazy\" width=\"208\" height=\"298\">\n                <section>\n            <div class=\"text-2xl font-bold\">NZ Directors Duties<\/div>\n            <div class=\"body-text\">\n                <p>Understand your role as a director and how to meet your legal obligations. Download our free guide today.<\/p>\n            <\/div>\n            \n\n<a href=\"https:\/\/go.legalvision.co.nz\/nz-directors-duties-guide.html\" class=\" block px-5 py-3.5 max-w-fit bg-orange button__hover transition rounded text-white font-bold text-lg no-underline uppercase leading-tight text-center\" target=\"\" rel=\"\">Download Now<\/a>        <\/section>\n    <\/div>\n\n\n\n\n<h2 class=\"wp-block-heading\"><span style=\"font-weight: 400\">Key Takeaways&nbsp;<\/span><\/h2>\n\n\n\n<p><span style=\"font-weight: 400\">As a founder, you do not automatically have any legal rights in respect of your company. If you are a director of your company, you must always act in the best interests of your company. This duty applies even if it affects you negatively as a founder or a shareholder. If you are a director of your company and have a personal interest in a matter, you must disclose it to the other directors. <\/span><\/p>\n\n\n\n<p>LegalVision provides ongoing legal support for New Zealand businesses through our fixed-fee legal membership. Our experienced lawyers help businesses manage contracts, employment law, disputes, intellectual property and more, with unlimited access to specialist lawyers for a fixed monthly fee. To learn more about LegalVision\u2019s legal membership, call <a href=\"tel:+64800005570\" class=\"AVANSERnumber dynamic-number\">0800 005 570<\/a> or visit our <a href=\"https:\/\/legalvision.co.nz\/membership\/\">membership page<\/a>.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span style=\"font-weight: 400\">Frequently Asked Questions<\/span><\/h2>\n\n\n\n<div class=\"schema-faq wp-block-yoast-faq-block\"><div class=\"schema-faq-section\" id=\"faq-question-1674234586040\"><strong class=\"schema-faq-question\"><strong>What is the difference between a founder, a director and a shareholder?<\/strong><\/strong> <p class=\"schema-faq-answer\">A founder is a person who forms and establishes a company. They may elect themselves as a company director or shareholder (or both). Shareholders are the owners of a company and entrust most decision-making to the directors. Directors are responsible for managing a company.<\/p> <\/div> <div class=\"schema-faq-section\" id=\"faq-question-1674234615290\"><strong class=\"schema-faq-question\"><strong>Can a person fill all three roles?<\/strong><\/strong> <p class=\"schema-faq-answer\">Yes, a person can be a founder, director and shareholder. However, in fulfilling the duties and responsibilities of one role, you must ensure you do not ignore your duties of another role.<\/p> <\/div> <div class=\"schema-faq-section\" id=\"faq-question-1674234624288\"><strong class=\"schema-faq-question\"><strong>What does the term \u2018conflict of interest\u2019 mean?<\/strong><\/strong> <p class=\"schema-faq-answer\">A conflict of interest can arise where your duties and responsibilities for one role clash with your obligations in another role. For example, as a director, it may be in your company\u2019s best interest to raise money by issuing shares to new investors.<br \/>However, as a shareholder, issuing new shares is not ideal as it will reduce your percentage ownership of the company. As a director (and shareholder), you must overcome this conflict of interest by acting in the best interest of the company.<br \/><\/p> <\/div> <\/div>\n<div class=\"not-prose m-feedback-prompt\">\n    <!-- Thumbs up\/down bar -->\n    <div class=\"m-feedback-prompt__main\">\n        <div class=\"m-feedback-prompt__title\">Was this article helpful?<\/div>\n        <div>\n            <!--span class=\"m-feedback-prompt__button--text\">Thanks!<\/span-->\n            <button type=\"button\" class=\"m-feedback-prompt__button m-feedback-prompt__button--yes\"\n                    data-analytics-link=\"feedback-prompt:yes\" aria-label=\"Agree\">\n                <i class=\"fa-regular fa-thumbs-up fa-3x\"><\/i>\n            <\/button>\n            <button type=\"button\" class=\"m-feedback-prompt__button m-feedback-prompt__button--no\"\n                    data-analytics-link=\"feedback-prompt:no\" aria-label=\"Disagree\">\n                <i class=\"fa-regular fa-thumbs-down fa-3x\"><\/i>\n            <\/button>\n        <\/div>\n    <\/div>\n\n    <!-- Feedback form -->\n    <div class=\"m-feedback-prompt__form\">\n        <div class=\"m-feedback-prompt__form--thanks \">\n            <div>Thanks!<\/div>\n            <p>\n                We appreciate your feedback \u2013 your submission has been successfully received.            <\/p>\n        <\/div>\n        <form id=\"contact-form\" class=\"m-feedback-prompt__form--form\" action=\"\" method=\"post\">\n            <input type=\"hidden\" id=\"authenticity_token\" name=\"authenticity_token\" value=\"ed19fd34f0\" \/><input type=\"hidden\" name=\"_wp_http_referer\" value=\"\/api\/wp\/v2\/posts\/203117\" \/>            <input value=\"https:\/\/legalvision.co.nz\/startups\/founder-director-shareholder\/\" type=\"hidden\" name=\"currenturl\"\n                   id=\"currenturl\">\n            <input value=\"What is the Difference Between a Founder, Director and a Shareholder in NZ?\" type=\"hidden\" name=\"currenttitle\"\n                   id=\"currenttitle\">\n            <label>\n                <!-- display on thumbs-up -->\n                <span class=\"m-feedback-prompt__feedback m-feedback-prompt__feedback--yes\">\n                    Can you tell us <span class=\"font-semibold\">why<\/span> you found it helpful?\n                <\/span>\n\n                <!-- display on thumbs-down -->\n                <span class=\"m-feedback-prompt__feedback m-feedback-prompt__feedback--no text-lg\">\n                    How can we better improve this article?\n                <\/span>\n                <textarea name=\"feedbackmessage\" id=\"feedbackmessage\" required><\/textarea>\n            <\/label>\n\n            <div class=\"m-feedback-prompt__form--error\" id=\"form-submit-error\"><\/div>\n            <button id=\"submit-contact-form-button\" type=\"submit\" name=\"commit\" class=\"m-feedback-prompt__form--submit\"\n                    data-analytics-link=\"feedback-prompt:submit\">\n                Submit            <\/button>\n        <\/form>\n    <\/div>\n<\/div>\n","protected":false},"excerpt":{"rendered":"<p>When founding a company, it is common for you to be both director and shareholder of that company. Being a founder, a director and a shareholder are not all the same thing. You need to ensure you understand the distinction between each role, as each role comes with different rights and responsibilities. This article explains<a href=\"https:\/\/legalvision.co.nz\/startups\/founder-director-shareholder\/\">Continue reading <span class=\"sr-only\">&#8220;What is the Difference Between a Founder, Director and a Shareholder in NZ?&#8221;<\/span><\/a><\/p>\n","protected":false},"author":13241,"featured_media":201698,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"_relevanssi_hide_post":"","_relevanssi_hide_content":"","_relevanssi_pin_for_all":"","_relevanssi_pin_keywords":"","_relevanssi_unpin_keywords":"","_relevanssi_related_keywords":"","_relevanssi_related_include_ids":"","_relevanssi_related_exclude_ids":"","_relevanssi_related_no_append":"","_relevanssi_related_not_related":"","_relevanssi_related_posts":"218580,210430,698,1285,216936,202188","_relevanssi_noindex_reason":"","editor_notices":[],"footnotes":""},"categories":[10],"tags":[24,59,223,399,498,628],"class_list":["post-203117","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-startups","tag-startup","tag-shareholders-agreement","tag-company-constitution","tag-shareholder","tag-company-director","tag-founder"],"acf":[],"yoast_head":"<!-- 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