Mississippi 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 Mississippi Buy-Sell Agreement between Two Shareholders of a Closely Held Corporation is a legally binding contract that outlines the terms and conditions for shareholders to buy or sell their ownership interests in the corporation. It helps establish a framework for the transfer of shares in a fair and orderly manner, providing protection to both shareholders and the corporation. In Mississippi, several types of Buy-Sell Agreements exist: 1. Cross-Purchase Agreement: This type of agreement allows the remaining shareholder(s) to purchase the shares of a departing shareholder. Each shareholder has a separate agreement with the other shareholder(s) outlining their rights and obligations. 2. Stock Redemption Agreement: In this agreement, the corporation itself purchases the shares of a departing shareholder. It is typically funded by the corporation using its own assets or through a life insurance policy on the lives of the shareholders. 3. Hybrid or Wait-and-See Agreement: This agreement combines elements of both the cross-purchase and stock redemption agreements. It provides the remaining shareholders with the first right to purchase the shares, and if they decline, the corporation has the option to buy them. A Mississippi Buy-Sell Agreement typically includes the following key provisions: 1. Purchase Price: The agreement states how the purchase price will be determined, which can be based on a pre-determined formula, an independent appraisal, or a fixed value. 2. Triggering Events: It outlines the events that will trigger the buy-sell provision, such as death, retirement, disability, divorce, bankruptcy, or termination of employment. 3. Restrictions on Transfer: The agreement may impose restrictions on the transfer of shares outside the agreement to ensure that existing shareholders have the opportunity to purchase them. 4. Rights and Obligations: It clarifies the rights and obligations of the shareholders, including the terms of payment and financing options for the purchase. 5. Dispute Resolution: The agreement may include methods for resolving disputes, such as negotiation, mediation, or arbitration, to avoid costly litigation. 6. Right of First Refusal: The agreement may grant existing shareholders the right to match any proposed offer from a third party before the shares can be sold. 7. Life Insurance: If a stock redemption agreement is chosen, the agreement may require the shareholders to maintain life insurance policies to fund the purchase of shares in the event of death. It is important for shareholders of closely held corporations in Mississippi to consider drafting a comprehensive Buy-Sell Agreement to ensure a smooth transition of ownership and protect the interests of all parties involved. Seeking legal advice from a qualified attorney knowledgeable in Mississippi corporate law is highly advised to tailor the agreement to specific circumstances and comply with relevant regulations.

A Mississippi Buy-Sell Agreement between Two Shareholders of a Closely Held Corporation is a legally binding contract that outlines the terms and conditions for shareholders to buy or sell their ownership interests in the corporation. It helps establish a framework for the transfer of shares in a fair and orderly manner, providing protection to both shareholders and the corporation. In Mississippi, several types of Buy-Sell Agreements exist: 1. Cross-Purchase Agreement: This type of agreement allows the remaining shareholder(s) to purchase the shares of a departing shareholder. Each shareholder has a separate agreement with the other shareholder(s) outlining their rights and obligations. 2. Stock Redemption Agreement: In this agreement, the corporation itself purchases the shares of a departing shareholder. It is typically funded by the corporation using its own assets or through a life insurance policy on the lives of the shareholders. 3. Hybrid or Wait-and-See Agreement: This agreement combines elements of both the cross-purchase and stock redemption agreements. It provides the remaining shareholders with the first right to purchase the shares, and if they decline, the corporation has the option to buy them. A Mississippi Buy-Sell Agreement typically includes the following key provisions: 1. Purchase Price: The agreement states how the purchase price will be determined, which can be based on a pre-determined formula, an independent appraisal, or a fixed value. 2. Triggering Events: It outlines the events that will trigger the buy-sell provision, such as death, retirement, disability, divorce, bankruptcy, or termination of employment. 3. Restrictions on Transfer: The agreement may impose restrictions on the transfer of shares outside the agreement to ensure that existing shareholders have the opportunity to purchase them. 4. Rights and Obligations: It clarifies the rights and obligations of the shareholders, including the terms of payment and financing options for the purchase. 5. Dispute Resolution: The agreement may include methods for resolving disputes, such as negotiation, mediation, or arbitration, to avoid costly litigation. 6. Right of First Refusal: The agreement may grant existing shareholders the right to match any proposed offer from a third party before the shares can be sold. 7. Life Insurance: If a stock redemption agreement is chosen, the agreement may require the shareholders to maintain life insurance policies to fund the purchase of shares in the event of death. It is important for shareholders of closely held corporations in Mississippi to consider drafting a comprehensive Buy-Sell Agreement to ensure a smooth transition of ownership and protect the interests of all parties involved. Seeking legal advice from a qualified attorney knowledgeable in Mississippi corporate law is highly advised to tailor the agreement to specific circumstances and comply with relevant regulations.