A corporate buy-sell agreement is a legal document that outlines the procedures to be followed if a shareholder of a corporation wants to sell their shares or if a shareholder dies or becomes disabled. This agreement is essential for ensuring the continuity of the corporation and protecting the interests of all shareholders.
Key Components of a Corporate Buy-Sell Agreement Template
1. Parties to the Agreement: Clearly identify the parties involved in the agreement, including the corporation and all shareholders.
2. Definition of Terms: Provide definitions for key terms used in the agreement, such as “shareholder,” “shares,” “triggering event,” and “purchase price.”
3. Triggering Events: Specify the events that will trigger the purchase of a shareholder’s shares, such as death, disability, retirement, or termination of employment.
4. Purchase Price: Determine the method for calculating the purchase price of the shares, such as using a formula based on the corporation’s fair market value, book value, or a negotiated price.
5. Funding the Purchase: Outline the methods for funding the purchase of the shares, such as using the corporation’s cash reserves, obtaining a loan, or requiring the remaining shareholders to purchase the shares.
6. Escrow Account: Consider establishing an escrow account to hold funds for the purchase of shares, ensuring that the funds are available when needed.
7. Right of First Refusal: Grant the remaining shareholders the right of first refusal to purchase the shares before they are offered to an outside party.
8. Non-Compete and Non-Disclosure Agreements: Require the selling shareholder to sign non-compete and non-disclosure agreements to protect the corporation’s interests.
9. Dispute Resolution: Specify the method for resolving disputes arising from the agreement, such as arbitration or mediation.
10. Governing Law and Jurisdiction: Indicate the governing law and jurisdiction for the agreement.
Design Elements for Professionalism and Trust
1. Clear and Concise Language: Use clear and concise language that is easy to understand, avoiding legal jargon whenever possible.
2. Consistent Formatting: Maintain consistent formatting throughout the document, using headings, subheadings, and bullet points to improve readability.
3. Professional Layout: Use a professional layout with ample white space and easy-to-read fonts.
4. Error-Free Content: Ensure that the document is free of errors, including grammatical, spelling, and punctuation mistakes.
5. Legal Review: Have the agreement reviewed by an attorney to ensure that it complies with all applicable laws and regulations.
Additional Considerations
Insurance: Consider purchasing key person insurance to protect the corporation in the event of a shareholder’s death or disability.
By carefully considering these components and design elements, you can create a professional corporate buy-sell agreement template that effectively protects the interests of your corporation and its shareholders.
