North Dakota Buy-Sell Agreement between Shareholders of Closely Held Corporation

• Category: Corporations - Buy Sell
• State: Multi-State
• Control #: US-02462BG
• Format: Word; PDF; 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 North Dakota Buy-Sell Agreement between Shareholders of a Closely Held Corporation is a legally binding contract that outlines the terms and conditions for the buying and selling of shares in a closely held corporation in North Dakota. This agreement is crucial for the efficient transfer of ownership interests among shareholders, ensuring the smooth operation and succession planning for the corporation. The agreement typically includes the following key provisions: 1. Purchase Obligation: This provision establishes the obligation of shareholders to sell their shares upon the occurrence of certain triggering events, such as death, disability, retirement, or termination of employment. It also outlines the obligation of the corporation or other shareholders to purchase the shares. 2. Purchase Price: The agreement sets forth the method for determining the purchase price of the shares, which can be based on shareholder agreements, appraisals, or predetermined formulas. The purchase price calculation can vary depending on the triggering event, as well as any specific provisions for different types of shares in the corporation. 3. Funding Mechanism: This provision describes how the purchase price will be financed. Common methods include cash payments, installment payments, or the use of life insurance policies. Life insurance is often utilized to ensure that sufficient funds are available in the event of a shareholder's death. 4. Restrictive Covenants: These provisions may be included to protect the corporation's business interests. Non-compete and non-solicitation clauses may prohibit selling shareholders from engaging in similar business activities or soliciting the corporation's customers after the sale of their shares. 5. Dispute Resolution: The agreement may include mechanisms for resolving disputes between shareholders, such as mediation or arbitration, to avoid costly litigation. Different types of North Dakota Buy-Sell Agreements between Shareholders of Closely Held Corporations may include: 1. Cross-Purchase Agreement: Shareholders individually agree to purchase the shares of a departing shareholder. This is common in corporations with a limited number of shareholders. 2. Entity-Purchase Agreement: The corporation itself is obligated to purchase the shares of a departing shareholder. This can be more suitable for corporations with many shareholders. 3. Hybrid Agreement: This agreement combines elements of both cross-purchase and entity-purchase agreements, allowing shareholders and the corporation to have the option to purchase shares under certain circumstances. In conclusion, a North Dakota Buy-Sell Agreement between Shareholders of a Closely Held Corporation is a crucial legal document that governs the sale and purchase of shares in a closely held corporation. Considering the specific needs and circumstances of the corporation and shareholders, different types of agreements, such as Cross-Purchase, Entity-Purchase, or Hybrid agreements, can be customized to ensure a smooth transition of ownership interests and the continuity of the corporation's operations.

A North Dakota Buy-Sell Agreement between Shareholders of a Closely Held Corporation is a legally binding contract that outlines the terms and conditions for the buying and selling of shares in a closely held corporation in North Dakota. This agreement is crucial for the efficient transfer of ownership interests among shareholders, ensuring the smooth operation and succession planning for the corporation. The agreement typically includes the following key provisions: 1. Purchase Obligation: This provision establishes the obligation of shareholders to sell their shares upon the occurrence of certain triggering events, such as death, disability, retirement, or termination of employment. It also outlines the obligation of the corporation or other shareholders to purchase the shares. 2. Purchase Price: The agreement sets forth the method for determining the purchase price of the shares, which can be based on shareholder agreements, appraisals, or predetermined formulas. The purchase price calculation can vary depending on the triggering event, as well as any specific provisions for different types of shares in the corporation. 3. Funding Mechanism: This provision describes how the purchase price will be financed. Common methods include cash payments, installment payments, or the use of life insurance policies. Life insurance is often utilized to ensure that sufficient funds are available in the event of a shareholder's death. 4. Restrictive Covenants: These provisions may be included to protect the corporation's business interests. Non-compete and non-solicitation clauses may prohibit selling shareholders from engaging in similar business activities or soliciting the corporation's customers after the sale of their shares. 5. Dispute Resolution: The agreement may include mechanisms for resolving disputes between shareholders, such as mediation or arbitration, to avoid costly litigation. Different types of North Dakota Buy-Sell Agreements between Shareholders of Closely Held Corporations may include: 1. Cross-Purchase Agreement: Shareholders individually agree to purchase the shares of a departing shareholder. This is common in corporations with a limited number of shareholders. 2. Entity-Purchase Agreement: The corporation itself is obligated to purchase the shares of a departing shareholder. This can be more suitable for corporations with many shareholders. 3. Hybrid Agreement: This agreement combines elements of both cross-purchase and entity-purchase agreements, allowing shareholders and the corporation to have the option to purchase shares under certain circumstances. In conclusion, a North Dakota Buy-Sell Agreement between Shareholders of a Closely Held Corporation is a crucial legal document that governs the sale and purchase of shares in a closely held corporation. Considering the specific needs and circumstances of the corporation and shareholders, different types of agreements, such as Cross-Purchase, Entity-Purchase, or Hybrid agreements, can be customized to ensure a smooth transition of ownership interests and the continuity of the corporation's operations.