Buy And Sell Agreements

     As a general rule, shares of stock of a closely-held corporation are freely transferable. (There must, of course, always be compliance with local corporate securities laws.) Often the shareholders of a corporation do not want their shares to be freely transferable because they want to maintain continuity in the management and policies of the corporation. Shareholders may not want other shareholders to be able to sell their shares to an outsider without first having the opportunity to buy them themselves. If a shareholder passes away the surviving shareholders may not want the heirs of the deceased shareholder suddenly to become involved in the operation of the business. The surviving shareholders may want to have a contractual right to buy the shares from the heirs of the deceased shareholder at a predetermined price.

One of the main advantages of a "Buy and Sell Agreement" is that when carefully prepared it can restrict the transferability of shares.

     An additional benefit that can be obtained with a Buy and Sell Agreement is that it can be life insurance funded. (I do not sell insurance. You must speak with your insurance person to obtain life insurance funding for the agreement). When the agreement is insurance funded, the Corporation may purchase the insurance and pay the premiums. Alternatively, shareholders may purchase life insurance, on the lives of the other shareholders and pay the premiums individually. The object of an insurance funded agreement is that the insurance proceeds will be used to purchase the shares of the deceased shareholder from his or her heirs.

     A Buy and Sell Agreement can be entered into by the shareholders and the corporation at any time. A Buy and Sell Agreement that is not insurance funded may be later amended to include insurance funding.

     If you would like information about Buy and Sell Agreements, feel free to call our toll-free number (800) 782-9051 or click here to receive more information about Buy and Sell Agreements. We do our best to answer personally within 24 hours.