Buy Sell Agreement Minority Shareholders

The agreement should describe in detail what happens at the time of conclusion. As a rule, share certificates are transferred to the buyer and cash and/or debt note are transferred to the seller. If the purchase price is paid in instalments, the buyer usually needs a stock seizure to ensure payment. If the buyer does not make payments, the seller can recover his stock. Divorce. It`s almost universal that business owners don`t want to be in business with an ex-spouse of an outgoing owner. There is no way to guess how a divorce judge will analyze the assets of an outgoing owner (including the owner`s interest in the transaction). Faced with this uncertainty, agreements often allow the outgoing owner to buy back his interests from his future ex-spouse. In addition, purchase-sale agreements often provide that if the outgoing owner does not exercise this right, the remaining owners and the company have the option of purchasing the owner`s interests from the outgoing owner`s spouse. Think carefully about the order of options and whether buy-out is optional or mandatory.

Often, buy-sell agreements give the remaining owners the first option to buy the business on a pro rata basis. If the owners do not exercise this option, you should exercise special caution in designing the company`s commitment. For example, if the shareholders of a company C are required to acquire the shares of the outgoing shareholder but choose not to do so, the purchase of the C-Gesellschaft could be considered a constructive dividend for the other shareholders (because the company committed an act that facilitated a commitment of its shareholders). A price mechanism sometimes applied is a «push-pull» provision in which one shareholder makes an offer to buy the shares of the other shareholder at a certain price, and then the other shareholder must either sell at that price or buy the shares of the first shareholder at the same price. This is a financial chicken game that should theoretically bring a fair price, since the shareholder who wishes to buy his partner must also agree to sell at the same price. In practice, this mechanism is far from perfect. The mechanism only works if both parties have equivalent assets and liquidity and roughly equivalent share holdings. . . .