Arkansas Buy-Sell Agreement between Two Shareholders of Closely Held Corporation

• Category: Corporations - Contracts
• State: Multi-State
• Control #: US-02553BG
• Format: Word; Rich Text

Description

A corporation whose shares are held by a single shareholder or a closely-knit group of shareholders (such as a family) is known as a close corporation. The shares of stock are not traded publicly. Many of these types of corporations are small firms that in the past would have been operated as a sole proprietorship or partnership, but have been incorporated in order to obtain the advantages of limited liability or a tax benefit or both. A buy-sell agreement is an agreement between the owners (shareholders) of a firm, defining their mutual obligations, privileges, protections, and rights. Keywords: Arkansas, buy-sell agreement, shareholders, closely held corporation Description: An Arkansas Buy-Sell Agreement between Two Shareholders of a Closely Held Corporation is a legally binding contract that establishes the terms and conditions for buying, selling, or transferring shares between the shareholders of a closely held corporation based in Arkansas. This agreement aims to protect the interests of both shareholders and ensure a fair and smooth transition in the event of certain specified triggering events, such as death, retirement, disability, divorce, bankruptcy, or voluntary withdrawal of one of the shareholders. There are different types of Arkansas Buy-Sell Agreements between Two Shareholders of Closely Held Corporations, including: 1. Cross-Purchase Agreement: In this type of agreement, each shareholder agrees to buy the shares of the other shareholder(s) upon the occurrence of a triggering event. For example, if one shareholder passes away, the surviving shareholder(s) would purchase the shares from the deceased shareholder's estate. 2. Stock Redemption Agreement: In a stock redemption agreement, the closely held corporation itself agrees to buy back the shares from the departing shareholder. This can be beneficial as it allows the corporation to retire the shares and distribute dividends to the remaining shareholders. 3. Hybrid Agreement: This type of agreement combines elements of both cross-purchase and stock redemption agreements. It provides flexibility by allowing either the shareholders or the corporation to buy back the shares, depending on the triggering event. The Arkansas Buy-Sell Agreement typically includes provisions pertaining to the purchase price of the shares, the method of valuation, any restrictions on transferring shares outside the agreement, the funding mechanisms for purchasing shares, and the dispute resolution procedures. Moreover, it may contain clauses that outline non-compete arrangements, drag-along and tag-along rights, and other protective measures for the shareholders. It is crucial for shareholders of closely held corporations in Arkansas to have a well-drafted Buy-Sell Agreement in place. By establishing clear guidelines for the transfer of shares, this agreement helps minimize potential conflicts and ensures the continuity and stability of the corporation's operations. It is advisable to consult with an experienced attorney who specializes in business law to draft or review the agreement to ensure compliance with relevant Arkansas laws and to address specific needs and circumstances of the shareholders and the closely held corporation.

Keywords: Arkansas, buy-sell agreement, shareholders, closely held corporation Description: An Arkansas Buy-Sell Agreement between Two Shareholders of a Closely Held Corporation is a legally binding contract that establishes the terms and conditions for buying, selling, or transferring shares between the shareholders of a closely held corporation based in Arkansas. This agreement aims to protect the interests of both shareholders and ensure a fair and smooth transition in the event of certain specified triggering events, such as death, retirement, disability, divorce, bankruptcy, or voluntary withdrawal of one of the shareholders. There are different types of Arkansas Buy-Sell Agreements between Two Shareholders of Closely Held Corporations, including: 1. Cross-Purchase Agreement: In this type of agreement, each shareholder agrees to buy the shares of the other shareholder(s) upon the occurrence of a triggering event. For example, if one shareholder passes away, the surviving shareholder(s) would purchase the shares from the deceased shareholder's estate. 2. Stock Redemption Agreement: In a stock redemption agreement, the closely held corporation itself agrees to buy back the shares from the departing shareholder. This can be beneficial as it allows the corporation to retire the shares and distribute dividends to the remaining shareholders. 3. Hybrid Agreement: This type of agreement combines elements of both cross-purchase and stock redemption agreements. It provides flexibility by allowing either the shareholders or the corporation to buy back the shares, depending on the triggering event. The Arkansas Buy-Sell Agreement typically includes provisions pertaining to the purchase price of the shares, the method of valuation, any restrictions on transferring shares outside the agreement, the funding mechanisms for purchasing shares, and the dispute resolution procedures. Moreover, it may contain clauses that outline non-compete arrangements, drag-along and tag-along rights, and other protective measures for the shareholders. It is crucial for shareholders of closely held corporations in Arkansas to have a well-drafted Buy-Sell Agreement in place. By establishing clear guidelines for the transfer of shares, this agreement helps minimize potential conflicts and ensures the continuity and stability of the corporation's operations. It is advisable to consult with an experienced attorney who specializes in business law to draft or review the agreement to ensure compliance with relevant Arkansas laws and to address specific needs and circumstances of the shareholders and the closely held corporation.