Missouri 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 Missouri buy-sell agreement between two shareholders of a closely held corporation is a legally binding contract that outlines the rights and obligations of the shareholders in the event of certain triggering events. This agreement is crucial in ensuring the smooth transition of ownership and protecting the interests of both shareholders. One type of Missouri buy-sell agreement between two shareholders is a cross-purchase agreement. In this arrangement, each shareholder agrees to purchase the shares of the other shareholder in the event of triggering events such as death, disability, retirement, or voluntary withdrawal. The purchase price is typically determined in advance or through a valuation process, ensuring fair compensation for the departing shareholder. Another type of buy-sell agreement is an entity purchase agreement, also known as a stock redemption agreement. In this scenario, the corporation itself is obligated to repurchase the shares from the exiting shareholder. The purchase price is determined similarly to the cross-purchase agreement, offering a fair valuation to the departing shareholder. Key terms included in a Missouri buy-sell agreement typically cover: 1. Triggering Events: Clearly defining the events that can activate the buy-sell agreement, such as death, disability, retirement, bankruptcy, divorce, or voluntary withdrawal. This ensures predictability and clarity for all parties involved. 2. Purchase Price and Valuation: Establishing the methodology or formula to determine the price of the shareholder's interest. Common approaches include appraisals, book value, or predetermined formulas. 3. Funding Mechanism: Outlining how the buyout will be funded. Options include cash payments, installment payments, promissory notes, or insurance policies, where the corporation or shareholders obtain life or disability policies on each other. 4. Restrictions on Transfer: Restricting the ability of shareholders to sell or transfer their shares outside the agreement. This helps maintain control and prevent unwanted third-party involvement. 5. Right of First Refusal: Granting the remaining shareholder the right to purchase the selling shareholder's interest before it can be sold to a third party. This ensures continuity within the corporation and prevents unwanted shareholders from entering. 6. Dispute Resolution: Establishing a mechanism for resolving any disagreements or disputes that may arise during the buy-sell process, such as mediation or arbitration. 7. Term and Termination: Specifying the duration of the agreement and the circumstances under which it can be terminated, ensuring flexibility if circumstances change or when shareholders agree to end the agreement. Overall, a Missouri buy-sell agreement between two shareholders of a closely held corporation serves as a crucial tool in protecting the interests of the shareholders, facilitating a smooth transition of ownership, and maintaining the stability and continuity of the business. It is essential to consult with legal professionals specializing in corporate law to tailor the agreement to meet the specific needs and objectives of the corporation and its shareholders.

A Missouri buy-sell agreement between two shareholders of a closely held corporation is a legally binding contract that outlines the rights and obligations of the shareholders in the event of certain triggering events. This agreement is crucial in ensuring the smooth transition of ownership and protecting the interests of both shareholders. One type of Missouri buy-sell agreement between two shareholders is a cross-purchase agreement. In this arrangement, each shareholder agrees to purchase the shares of the other shareholder in the event of triggering events such as death, disability, retirement, or voluntary withdrawal. The purchase price is typically determined in advance or through a valuation process, ensuring fair compensation for the departing shareholder. Another type of buy-sell agreement is an entity purchase agreement, also known as a stock redemption agreement. In this scenario, the corporation itself is obligated to repurchase the shares from the exiting shareholder. The purchase price is determined similarly to the cross-purchase agreement, offering a fair valuation to the departing shareholder. Key terms included in a Missouri buy-sell agreement typically cover: 1. Triggering Events: Clearly defining the events that can activate the buy-sell agreement, such as death, disability, retirement, bankruptcy, divorce, or voluntary withdrawal. This ensures predictability and clarity for all parties involved. 2. Purchase Price and Valuation: Establishing the methodology or formula to determine the price of the shareholder's interest. Common approaches include appraisals, book value, or predetermined formulas. 3. Funding Mechanism: Outlining how the buyout will be funded. Options include cash payments, installment payments, promissory notes, or insurance policies, where the corporation or shareholders obtain life or disability policies on each other. 4. Restrictions on Transfer: Restricting the ability of shareholders to sell or transfer their shares outside the agreement. This helps maintain control and prevent unwanted third-party involvement. 5. Right of First Refusal: Granting the remaining shareholder the right to purchase the selling shareholder's interest before it can be sold to a third party. This ensures continuity within the corporation and prevents unwanted shareholders from entering. 6. Dispute Resolution: Establishing a mechanism for resolving any disagreements or disputes that may arise during the buy-sell process, such as mediation or arbitration. 7. Term and Termination: Specifying the duration of the agreement and the circumstances under which it can be terminated, ensuring flexibility if circumstances change or when shareholders agree to end the agreement. Overall, a Missouri buy-sell agreement between two shareholders of a closely held corporation serves as a crucial tool in protecting the interests of the shareholders, facilitating a smooth transition of ownership, and maintaining the stability and continuity of the business. It is essential to consult with legal professionals specializing in corporate law to tailor the agreement to meet the specific needs and objectives of the corporation and its shareholders.