Nebraska 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 Nebraska Buy-Sell Agreement between Two Shareholders of a Closely Held Corporation is a legal contract that defines the terms and conditions surrounding the transfer of shares or ownership interests within a closely held corporation. This agreement is essential to establish a framework for the future sale, transfer, or disposition of shares in the event of certain triggering events, such as death, disability, retirement, bankruptcy, or voluntary or involuntary withdrawal of one of the shareholders. One type of Buy-Sell Agreement is a Cross-Purchase Agreement. In this arrangement, each shareholder agrees to purchase the shares of the other shareholder upon a triggering event. Another type is the Stock Redemption Agreement, where the corporation buys back the shares directly from the departing shareholder. These agreements are typically drafted by attorneys specializing in corporate law to ensure compliance with Nebraska state laws. The agreement covers several key provisions and addresses various aspects, such as: 1. Purchase Price: The agreement specifies the method for determining the purchase price, which can be based on a pre-determined formula, an independent appraisal, or a mutually agreed price. 2. Triggering Events: The agreement outlines events that can trigger the buyout, including death, disability, retirement, bankruptcy, divorce, or termination of employment of a shareholder. 3. Rights and Obligations: It defines the rights and obligations of the shareholders, including the right to purchase shares and the obligation to sell shares, ensuring a fair and orderly transfer of ownership. 4. Restrictions on Transfer: The agreement may impose restrictions on shareholders' ability to sell, transfer, or pledge their shares to third parties. This provision helps maintain the corporation's control and restricts the entry of unknown or incompatible shareholders. 5. Funding Mechanisms: The agreement determines the funding mechanisms for the purchase, such as life insurance policies, installment payments, or corporate funds. 6. Dispute Resolution: It includes provisions for resolving disputes that may arise during the buyout process, specifying methods like negotiation, mediation, or arbitration. 7. Right of First Refusal: The agreement may grant a right of first refusal to the remaining shareholders if a departing shareholder wishes to sell their shares to a third party. This provision ensures the existing shareholders have an opportunity to purchase the shares before they are offered to outsiders. Nebraska Buy-Sell Agreements provide a framework for a smooth transition of ownership interests, enabling parties to protect their investments and ensure continuity in the closely held corporation. These agreements not only protect the interests of the shareholders but also provide a clear roadmap for resolving disputes and avoiding potential litigation. In summary, a Nebraska Buy-Sell Agreement between Two Shareholders of a Closely Held Corporation is a critical legal document that establishes rules and procedures for the transfer of shares or ownership interests in the event of triggering events. Cross-Purchase Agreements and Stock Redemption Agreements are two common variations of this agreement. By addressing purchase price, triggering events, rights and obligations, restrictions on transfer, funding mechanisms, dispute resolution, and right of first refusal, these agreements offer clarity and protection to shareholders involved in closely held corporations.

A Nebraska Buy-Sell Agreement between Two Shareholders of a Closely Held Corporation is a legal contract that defines the terms and conditions surrounding the transfer of shares or ownership interests within a closely held corporation. This agreement is essential to establish a framework for the future sale, transfer, or disposition of shares in the event of certain triggering events, such as death, disability, retirement, bankruptcy, or voluntary or involuntary withdrawal of one of the shareholders. One type of Buy-Sell Agreement is a Cross-Purchase Agreement. In this arrangement, each shareholder agrees to purchase the shares of the other shareholder upon a triggering event. Another type is the Stock Redemption Agreement, where the corporation buys back the shares directly from the departing shareholder. These agreements are typically drafted by attorneys specializing in corporate law to ensure compliance with Nebraska state laws. The agreement covers several key provisions and addresses various aspects, such as: 1. Purchase Price: The agreement specifies the method for determining the purchase price, which can be based on a pre-determined formula, an independent appraisal, or a mutually agreed price. 2. Triggering Events: The agreement outlines events that can trigger the buyout, including death, disability, retirement, bankruptcy, divorce, or termination of employment of a shareholder. 3. Rights and Obligations: It defines the rights and obligations of the shareholders, including the right to purchase shares and the obligation to sell shares, ensuring a fair and orderly transfer of ownership. 4. Restrictions on Transfer: The agreement may impose restrictions on shareholders' ability to sell, transfer, or pledge their shares to third parties. This provision helps maintain the corporation's control and restricts the entry of unknown or incompatible shareholders. 5. Funding Mechanisms: The agreement determines the funding mechanisms for the purchase, such as life insurance policies, installment payments, or corporate funds. 6. Dispute Resolution: It includes provisions for resolving disputes that may arise during the buyout process, specifying methods like negotiation, mediation, or arbitration. 7. Right of First Refusal: The agreement may grant a right of first refusal to the remaining shareholders if a departing shareholder wishes to sell their shares to a third party. This provision ensures the existing shareholders have an opportunity to purchase the shares before they are offered to outsiders. Nebraska Buy-Sell Agreements provide a framework for a smooth transition of ownership interests, enabling parties to protect their investments and ensure continuity in the closely held corporation. These agreements not only protect the interests of the shareholders but also provide a clear roadmap for resolving disputes and avoiding potential litigation. In summary, a Nebraska Buy-Sell Agreement between Two Shareholders of a Closely Held Corporation is a critical legal document that establishes rules and procedures for the transfer of shares or ownership interests in the event of triggering events. Cross-Purchase Agreements and Stock Redemption Agreements are two common variations of this agreement. By addressing purchase price, triggering events, rights and obligations, restrictions on transfer, funding mechanisms, dispute resolution, and right of first refusal, these agreements offer clarity and protection to shareholders involved in closely held corporations.