A buy-sell agreement is an agreement between the owners (shareholders) of a firm, defining their mutual obligations, privileges, protections, and rights.
A Kentucky Buy-Sell Agreement between Two Shareholders of a Closely Held Corporation is a legally binding contract that defines the terms and conditions for the purchase and sale of shares between the shareholders of a closely held corporation in the state of Kentucky. The purpose of this agreement is to provide a mechanism for the orderly transfer of shares in the event of certain triggering events, such as the death, disability, retirement, or voluntary withdrawal of a shareholder from the corporation. It helps ensure the continuity of the business and protects the interests of the remaining shareholders. The agreement typically includes various provisions and options, such as: 1. Purchase Price: The agreement specifies how the purchase price for the shares will be determined. It may be based on a predetermined formula, a formal valuation, or an independent appraisal. 2. Triggering Events: The agreement identifies the events that will trigger the buy-sell provisions, such as death, disability, retirement, or voluntary withdrawal. Each triggering event may have different provisions and consequences. 3. Obligation to Sell: The agreement may require the shareholder who is triggering the sale to sell their shares to the remaining shareholder(s) or to the corporation itself. 4. Right of First Refusal: This provision grants the remaining shareholder(s) the right to purchase the shares being sold before any external buyers are considered. 5. Funding Mechanisms: The agreement outlines how the purchasing shareholder(s) will fund the purchase of the shares. Common funding mechanisms include life insurance policies, installment payments, or utilizing corporate assets. 6. Payment Terms: The agreement specifies the terms and conditions for payment, such as the timing and method of payment, including any interest or installment options. 7. Non-Compete and Non-Solicitation: This provision restricts the selling shareholder from engaging in any competitive activities or soliciting clients from the corporation for a certain period after the sale. 8. Dispute Resolution: The agreement may include provisions for resolving disputes, such as mediation or arbitration, to avoid lengthy and costly litigation. Different types of Kentucky Buy-Sell Agreements between Two Shareholders of Closely Held Corporations include: 1. Cross-Purchase Agreement: Each shareholder agrees to purchase the shares of the other shareholder upon the occurrence of a triggering event. 2. Entity Redemption Agreement: The corporation itself agrees to purchase the shares of the shareholder upon the occurrence of a triggering event. 3. Hybrid Agreement: This combines elements of both cross-purchase and entity redemption agreements. Shareholders have the option to purchase the shares themselves or allow the corporation to redeem the shares. In conclusion, a Kentucky Buy-Sell Agreement between Two Shareholders of a Closely Held Corporation is a crucial document that ensures a smooth transition of ownership in the event of triggering events. It provides a clear framework for the purchase and sale of shares, protecting the interests of the shareholders and the continuity of the corporation.
