A buy-sell agreement is an agreement between the owners (shareholders) of a firm, defining their mutual obligations, privileges, protections, and rights.
Connecticut Buy-Sell Agreement between Shareholders of Closely Held Corporation is a legally binding contract that outlines the terms and conditions under which shareholders can buy or sell their shares within a closely held corporation in Connecticut. This agreement serves to protect the interests of all shareholders and ensure a smooth transition in the event of a shareholder's departure, retirement, death, or other triggering events. The main purpose of a buy-sell agreement is to establish a fair and predetermined method for valuing the shares and facilitating their transfer from one shareholder to another. By having a buy-sell agreement in place, shareholders can avoid potential disputes and uncertainties that may arise during such transitions. In Connecticut, there are various types of buy-sell agreements that shareholders can consider based on their specific needs and circumstances. Some common types include: 1. Cross-Purchase Agreement: This type of agreement enables the remaining shareholders to purchase the departing shareholder's shares directly. Each shareholder agrees to buy a proportional share of the departing shareholder's equity. 2. Stock Redemption Agreement: In this agreement, the corporation itself has the option to buy the departing shareholder's shares. The corporation will use its resources, such as cash reserves or borrowing, to fund the purchase. 3. Hybrid Agreement: This type of agreement combines elements of both cross-purchase and stock redemption agreements. It provides flexibility for the remaining shareholders and the corporation to decide who will buy the departing shareholder's shares. Key terms and provisions typically included in a Connecticut Buy-Sell Agreement between Shareholders of Closely Held Corporation may include: 1. Purchase Price: The method for determining the fair value of the shares and the terms of payment, such as lump sum or installments. 2. Triggering Events: Clearly defined events that will trigger the buy-sell provisions, such as death, retirement, disability, resignation, divorce, bankruptcy, or loss of license. 3. Right of First Refusal: Shareholders agree to offer their shares to the other shareholders before selling them to external parties. 4. Funding Mechanism: How the purchase of shares will be financed, such as through existing cash reserves, insurance policies, or bank loans. 5. Non-Compete and Non-Disclosure Clauses: Restrictions on departing shareholders to prevent them from competing with the corporation or disclosing confidential information. 6. Dispute Resolution: Procedures for resolving any disputes that may arise between shareholders related to the buy-sell agreement. It is important for shareholders to seek legal advice and customize their buy-sell agreement according to their specific requirements. By having a well-drafted and comprehensive buy-sell agreement in place, shareholders can ensure a smooth transition of ownership and protect the interests of all parties involved in the closely held corporation.
