Buy & Sell Agreement – 2 Parties being legal entities, Death & Disability

BUY & SELL AGREEMENT

 2 parties, being legal entities

 Death & Disability

Summary A Buy and Sell Agreement may be used to protect the shares of a company in the event of the death or disability of one of the shareholders. It is intended to be used where there are two shareholders, with one or both of the shareholders being a legal entity. The Agreement provides for the remaining shareholder to buy the deceased or disabled party’s shares.

Do you only want to cover death, and not disability? We have the Buy & Sell Agreement for you.

Why do I need a Buy and Sell Agreement? A written agreement sets out the procedure to be followed if a shareholder dies or becomes disabled. The Agreement provides for the remaining shareholder to buy the equity, and it also refers to any buy and sell life policies that have been taken out to cover the purchase price. Standard Buy and Sell Agreements are usually associated with life insurance policies. But you do not necessarily have to have life insurance policies in place to implement a Buy and Sell arrangement. This contract includes the possibility of the death or disability of a key individual, should one or both of the equity-owners be a legal entity such as a company or a trust.

Who should use a Buy and Sell Agreement? Shareholders in private companies should have a frank discussion with each other on what would happen to the shares should something happen to one of them. A written agreement can be used to record a decision that the one would buy the other out should one of them die or become disabled.

What does the agreement say? The template terms consists of: Definitions; Introduction; Policies; Valuation; Purchase Price; Delivery of Documents; Cession of Policies; Disputes; General.

What does this agreement look like? The document can be printed onto seven pages.

What do you need to do to use the document?

• Read the template Buy and Sell document to ensure that it suits your requirements. Make any changes as required.
• Complete Annexure A by including the policy details of any buy and sell insurance policies that may have been taken out.
• Ensure both shareholders sign the Agreement with each getting a copy of the final, signed agreement.

Also viewed: Key Man Agreement

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