A Shareholder Agreement and a Share Purchase Agreement are both important legal documents that govern the rights and obligations of shareholders in a company. While they are related, they serve different purposes and cover distinct aspects of the shareholder relationship. Here are the key aspects of each agreement:

Shareholder Agreement

• Ownership and Voting Rights: The agreement specifies the ownership percentages of each shareholder and outlines the voting rights associated with their respective shareholdings.
  
• Decision-Making: It establishes the decision-making process for important matters, such as the appointment of directors, the issuance of additional shares, the approval of annual budgets, and significant corporate actions. This may include provisions on majority or supermajority voting requirements.
  
• Share Transfer: The agreement sets out the conditions and restrictions on the transfer of shares, including pre-emptive rights, rights of first refusal, and drag-along/tag-along rights. It ensures that existing shareholders have control over who can become a shareholder and under what circumstances.
  
• Shareholder Obligations: It outlines the rights and responsibilities of shareholders, including any obligations to contribute additional capital, restrictions on competition, non-solicitation provisions, and confidentiality requirements.
  
• Dispute Resolution: The agreement provides a framework for resolving disputes among shareholders, often through mechanisms like arbitration or mediation. It may also include provisions for deadlock situations where a resolution cannot be reached.
  
• Exit Strategies: Shareholder agreements often address exit options, such as the right of first offer, right of first refusal, or buy-sell provisions. These provisions help facilitate the smooth exit of a shareholder from the company.

Share Purchase Agreement

• Purchase Terms: The agreement specifies the terms and conditions of the sale and purchase of shares, including the purchase price, payment terms, and any adjustments or earn-out provisions based on future performance.
  
• Representations and Warranties: The agreement includes representations and warranties made by the seller regarding the shares being sold. These assurances cover matters such as the ownership of shares, the absence of encumbrances, compliance with laws, financial statements, and the absence of material liabilities.
  
• Conditions Precedent: It outlines the conditions that must be fulfilled before the sale can be completed. This may include obtaining necessary regulatory approvals, consent from other shareholders, or the absence of any material adverse changes in the company’s financial condition.
  
• Indemnification: The agreement typically includes provisions for indemnification by the seller to protect the buyer against any losses, liabilities, or claims arising from breaches of representations and warranties or undisclosed liabilities.
  
• Closing and Post-Closing Obligations: It specifies the procedures for closing the transaction, including the delivery of share certificates, transfer of legal ownership, and any post-closing obligations, such as the cooperation of the seller in transitioning the business to the buyer.

Both the Shareholder Agreement and the Share Purchase Agreement play crucial roles in defining the rights, responsibilities, and relationships of shareholders. The Shareholder Agreement focuses on the ongoing governance and management of the company, while the Share Purchase Agreement primarily addresses the sale and purchase of shares and the associated legal and financial aspects.