𝐒𝐡𝐚𝐫𝐞𝐡𝐨𝐥𝐝𝐞𝐫 𝐀𝐠𝐫𝐞𝐞𝐦𝐞𝐧𝐭𝐬, 𝐒𝐡𝐚𝐫𝐞 𝐒𝐮𝐛𝐬𝐜𝐫𝐢𝐩𝐭𝐢𝐨𝐧 𝐀𝐠𝐫𝐞𝐞𝐦𝐞𝐧𝐭𝐬, & 𝐒𝐡𝐚𝐫𝐞 𝐏𝐮𝐫𝐜𝐡𝐚𝐬𝐞 𝐀𝐠𝐫𝐞𝐞𝐦𝐞𝐧𝐭𝐬: 𝐍𝐨𝐭 𝐀𝐥𝐥 𝐀𝐠𝐫𝐞𝐞𝐦𝐞𝐧𝐭𝐬 𝐀𝐫𝐞 𝐂𝐫𝐞𝐚𝐭𝐞𝐝 𝐄𝐪𝐮𝐚𝐥! When expanding your business or bringing in investors, you’ll likely encounter these three types of agreements. They may sound similar but serve distinctly different purposes. Knowing the difference is essential for every startup and private company. 𝐇𝐞𝐫𝐞’𝐬 𝐭𝐡𝐞 𝐁𝐫𝐞𝐚𝐤𝐝𝐨𝐰𝐧: 1. 𝐒𝐡𝐚𝐫𝐞𝐡𝐨𝐥𝐝𝐞𝐫𝐬 𝐀𝐠𝐫𝐞𝐞𝐦𝐞𝐧𝐭 (𝐒𝐇𝐀): ▪️ 𝘞𝘩𝘢𝘵 𝘪𝘵 𝘪𝘴: A pact between the company and its shareholders. ▪️ 𝘗𝘶𝘳𝘱𝘰𝘴𝘦: Defines the rights, obligations, and governance structure, protecting shareholder interests (especially minority ones). ▪️ 𝘒𝘦𝘺 𝘊𝘭𝘢𝘶𝘴𝘦𝘴: Voting rights, transfer of shares, board composition, dispute resolution, non-compete, and exit strategies. ▪️ 𝘞𝘩𝘦𝘯 𝘜𝘴𝘦𝘥: To establish a framework for managing relationships between shareholders and the company. 2. 𝐒𝐡𝐚𝐫𝐞 𝐒𝐮𝐛𝐬𝐜𝐫𝐢𝐩𝐭𝐢𝐨𝐧 𝐀𝐠𝐫𝐞𝐞𝐦𝐞𝐧𝐭 (𝐒𝐒𝐀): ▪️ 𝘞𝘩𝘢𝘵 𝘪𝘵 𝘪𝘴: A dual promise where the company agrees to issue new shares, and the investor agrees to subscribe to them. ▪️ 𝘗𝘶𝘳𝘱𝘰𝘴𝘦: To bring in fresh capital for growth. ▪️ 𝘒𝘦𝘺 𝘊𝘭𝘢𝘶𝘴𝘦𝘴: Conditions precedent, use of funds, promoter lock-in, tag-along rights, confidentiality, and indemnity. ▪️ 𝘞𝘩𝘦𝘯 𝘜𝘴𝘦𝘥: When onboarding a new investor or raising funds through equity issuance. 3. 𝐒𝐡𝐚𝐫𝐞 𝐏𝐮𝐫𝐜𝐡𝐚𝐬𝐞 𝐀𝐠𝐫𝐞𝐞𝐦𝐞𝐧𝐭 (𝐒𝐏𝐀): ▪️ 𝘞𝘩𝘢𝘵 𝘪𝘵 𝘪𝘴: An agreement between a buyer and seller of existing shares. ▪️ 𝘗𝘶𝘳𝘱𝘰𝘴𝘦: Facilitates ownership transfer and provides an exit route for shareholders. ▪️ 𝘒𝘦𝘺 𝘊𝘭𝘢𝘶𝘴𝘦𝘴: Representations and warranties, capital structure, indemnity, confidentiality, and dispute resolution. ▪️ 𝘞𝘩𝘦𝘯 𝘜𝘴𝘦𝘥: When transferring ownership of existing shares between parties. 𝐊𝐞𝐲 𝐃𝐢𝐬𝐭𝐢𝐧𝐜𝐭𝐢𝐨𝐧𝐬: 1. 𝘍𝘰𝘤𝘶𝘴: ▫️ SHA governs shareholder rights and obligations. ▫️ SSA involves the issuance of new shares. ▫️ SPA transfers existing shares. 2. 𝘍𝘶𝘯𝘥 𝘍𝘭𝘰𝘸: ▫️ In SSA, funds go to the company. ▫️ In SPA, funds go to the selling shareholder. 3. 𝘗𝘶𝘳𝘱𝘰𝘴𝘦: ▫️ SHA = Governance ▫️ SSA = Fundraising ▫️ SPA = Exit 𝐏𝐫𝐨 𝐓𝐢𝐩 𝐟𝐨𝐫 𝐒𝐭𝐚𝐫𝐭𝐮𝐩𝐬 𝐚𝐧𝐝 𝐏𝐫𝐢𝐯𝐚𝐭𝐞 𝐂𝐨𝐦𝐩𝐚𝐧𝐢𝐞𝐬: Each agreement serves a unique purpose. Drafting them requires precision and a thorough understanding of the transaction’s nature and objectives. At Hatch Legal, we specialize in crafting bespoke agreements tailored to your needs, ensuring compliance and safeguarding your interests. #CorporateLaw #Startups #HatchLegal #ShareholdersAgreement #ShareSubscriptionAgreement #SharePurchaseAgreement #LegalAdvisory #Business #Founders #PrivateEquity #CorporateAgreements #CompaniesAct
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1dAbsolutely! It's important to understand that not all Shareholder Agreements, Share Subscription Agreements, and Share Purchase Agreements are created equal. Each agreement can have unique terms based on the specific needs and structure of the company or investment deal. 📑 The key is to tailor these agreements to reflect the intentions of the parties involved and ensure clarity on rights, obligations, and exit strategies. It’s always wise to seek legal advice to ensure these documents are comprehensive and align with your long-term goals. ⚖️ Great topic to discuss—thanks for sharing! 👍