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Shareholder Buy Sell Agreement

Shareholder Buy Sell Agreements provide private companies and partnerships with the mechanisms to allow a nominated purchaser to buyout the interests of a partner or shareholder, on the occurrence of a ‘trigger event’ such death or disablement.

These agreements are often looked on as a type of “Will” for a company or partnership. They allow interested persons to set out how the interests of partners or shareholders will be dealt in the event of their death or disablement.

The purchase is funded by insurance proceeds and as such under the terms of the agreement, each shareholder or partner is required to take out an insurance policy to cover their death, disability or such other event as may be agreed.

The beneficiaries of the insurance are usually one or more of the remaining shareholders. However, the beneficiary can be any person who is being appointed the right to buy-out the affected person’s shares on the trigger event. This provides them with the funding required to purchase the shares of the affected shareholder or partner.

Buy-sell Agreements specify:-

  • Who is being given the right to buy a partners or shareholders interest. This is commonly one or more of the existing shareholders or partners. However, it may also be an ‘outsider’ – someone who is not an existing shareholder or partner;
  • The specific events that will trigger a sale, such as death, incapacity, disability, trauma, etc;
  • The purchase price of the shares;
  • Time frames to affect the purchase.

When can a Buy-sell Agreement be used?

A Buy-sell Agreement is a valuable tool that can put into place at any time.

It can be used by partnerships as well as companies. It can be used in conjunction with a Shareholders or Partnership Agreement. Or the terms of this agreement can be incorporated into the Partnership or Shareholders Agreement.

Sample Pages of Shareholders Buy Sell Agreement

Shareholder Buy Sell Agreement

Shareholder Buy Sell Agreement Sample 2

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