Minnesota 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. A Minnesota Buy-Sell Agreement between Two Shareholders of a Closely Held Corporation is a legally binding contract that outlines the terms and conditions for the sale or transfer of shares between the shareholders in the event of certain triggering events. This agreement is especially important for closely held corporations, where a few shareholders hold a significant portion of the company's shares. The purpose of a Buy-Sell Agreement is to provide a mechanism for resolving ownership transitions smoothly and fairly. It helps avoid potential disputes, conflicts, and disruptions within the corporation by establishing a clear process for buying and selling shares. Keywords: Minnesota Buy-Sell Agreement, shareholders, closely held corporation, sale of shares, transfer of shares, triggering events, ownership transitions, disputes, conflicts, corporation. Types of Minnesota Buy-Sell Agreements between Two Shareholders of Closely Held Corporations: 1. Cross-Purchase Agreement: In this type of agreement, the shareholders agree to purchase each other's shares in the event of a triggering event, such as death, disability, retirement, or voluntary departure. Each shareholder acts as both a buyer and a seller, ensuring a direct transfer of shares between the remaining shareholders. 2. Stock Redemption Agreement: In a stock redemption agreement, the corporation agrees to buy back the shares of a departing shareholder. This type of agreement is beneficial if there are many shareholders in the corporation or when the remaining shareholders want to maintain control of the corporation. 3. Hybrid Agreement: A hybrid agreement combines elements of both the cross-purchase and stock redemption agreements. It allows the corporation and individual shareholders to buy back shares from a departing shareholder based on predetermined formulas or a combination of the two methods. 4. Wait-and-See Agreement: This type of agreement provides flexibility by allowing the remaining shareholders to decide whether they want to execute a cross-purchase or stock redemption agreement at the time of a triggering event. The agreement specifies a waiting period during which the shareholders can assess the situation and make an informed decision. 5. Put-Call Agreement: A put-call agreement grants one shareholder the right to sell their shares (put) and the other shareholder the right to buy those shares (call) based on specified terms and conditions. This agreement ensures that either shareholder has an option to initiate the sale or purchase of shares. 6. Unilateral Agreement: In certain situations, one shareholder may have more control or importance within the corporation. In such cases, a unilateral agreement gives the dominant shareholder the power to impose terms on the other shareholder, often providing more security to the dominant shareholder. It is crucial for shareholders in a closely held corporation to have a comprehensive Buy-Sell Agreement in place to protect their interests and ensure a smooth transition of ownership. Consulting a legal professional experienced in Minnesota corporate law is highly recommended creating an agreement tailored to the unique needs and circumstances of the closely held corporation and its shareholders.

A Minnesota Buy-Sell Agreement between Two Shareholders of a Closely Held Corporation is a legally binding contract that outlines the terms and conditions for the sale or transfer of shares between the shareholders in the event of certain triggering events. This agreement is especially important for closely held corporations, where a few shareholders hold a significant portion of the company's shares. The purpose of a Buy-Sell Agreement is to provide a mechanism for resolving ownership transitions smoothly and fairly. It helps avoid potential disputes, conflicts, and disruptions within the corporation by establishing a clear process for buying and selling shares. Keywords: Minnesota Buy-Sell Agreement, shareholders, closely held corporation, sale of shares, transfer of shares, triggering events, ownership transitions, disputes, conflicts, corporation. Types of Minnesota Buy-Sell Agreements between Two Shareholders of Closely Held Corporations: 1. Cross-Purchase Agreement: In this type of agreement, the shareholders agree to purchase each other's shares in the event of a triggering event, such as death, disability, retirement, or voluntary departure. Each shareholder acts as both a buyer and a seller, ensuring a direct transfer of shares between the remaining shareholders. 2. Stock Redemption Agreement: In a stock redemption agreement, the corporation agrees to buy back the shares of a departing shareholder. This type of agreement is beneficial if there are many shareholders in the corporation or when the remaining shareholders want to maintain control of the corporation. 3. Hybrid Agreement: A hybrid agreement combines elements of both the cross-purchase and stock redemption agreements. It allows the corporation and individual shareholders to buy back shares from a departing shareholder based on predetermined formulas or a combination of the two methods. 4. Wait-and-See Agreement: This type of agreement provides flexibility by allowing the remaining shareholders to decide whether they want to execute a cross-purchase or stock redemption agreement at the time of a triggering event. The agreement specifies a waiting period during which the shareholders can assess the situation and make an informed decision. 5. Put-Call Agreement: A put-call agreement grants one shareholder the right to sell their shares (put) and the other shareholder the right to buy those shares (call) based on specified terms and conditions. This agreement ensures that either shareholder has an option to initiate the sale or purchase of shares. 6. Unilateral Agreement: In certain situations, one shareholder may have more control or importance within the corporation. In such cases, a unilateral agreement gives the dominant shareholder the power to impose terms on the other shareholder, often providing more security to the dominant shareholder. It is crucial for shareholders in a closely held corporation to have a comprehensive Buy-Sell Agreement in place to protect their interests and ensure a smooth transition of ownership. Consulting a legal professional experienced in Minnesota corporate law is highly recommended creating an agreement tailored to the unique needs and circumstances of the closely held corporation and its shareholders.