Shareholder Buyout Agreements - Buyout, or buy-sell agreements control what
happens with changes in ownership of your corporation. It is similar to a prenuptial
agreement between owners (shareholders) and explains what happens when one
shareholder was out.
This buyout agreement is often overlooked from the excitement of creating a new
venture. Included with important documents such as your bylaws or operating
agreement, a company should have this contract. This contract will spell out in
detail how the remaining shareholders will deal with these changes, such a who will
buy him out, such as the shareholders or the corporation, and for how much.
By creating this buyout agreement, owners of a small privately held company will be
prepared when a shareholder wants to be bought out, or if someone days, gets a
divorce or goes bankrupt. There will be no surprises.
Sooner or later your company will go through changes. Often times owners will want
to leave the company and take their investment with them. You must plan for these
events. The shareholders and company will risk court battles and the loss of
business without this agreement. No one wants to be forced to share control of a
company with someone you would rather not be in business with.
The buyout agreement should cover these issues;
What events should be covered:
happens with changes in ownership of your corporation. It is similar to a prenuptial
agreement between owners (shareholders) and explains what happens when one
shareholder was out.
This buyout agreement is often overlooked from the excitement of creating a new
venture. Included with important documents such as your bylaws or operating
agreement, a company should have this contract. This contract will spell out in
detail how the remaining shareholders will deal with these changes, such a who will
buy him out, such as the shareholders or the corporation, and for how much.
By creating this buyout agreement, owners of a small privately held company will be
prepared when a shareholder wants to be bought out, or if someone days, gets a
divorce or goes bankrupt. There will be no surprises.
Sooner or later your company will go through changes. Often times owners will want
to leave the company and take their investment with them. You must plan for these
events. The shareholders and company will risk court battles and the loss of
business without this agreement. No one wants to be forced to share control of a
company with someone you would rather not be in business with.
The buyout agreement should cover these issues;
- whether a departing owner must be bought out
- who can buy the departing owner's stock (this may include outsiders or limited
to other shareholders - what price will be paid for the stocks
- what events will trigger a buyout
What events should be covered:
- retirement or resignation
- offers from outsiders
- divorce settlements
- foreclosure of debt secured by stock
- personal bankruptcy
- disability, death or incapacity
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