Nevada Shareholders' Agreement between Two Shareholders of Closely Held Corporation with Buy Sell Provisions

• Category: Corporations - Shareholders and Stock
• State: Multi-State
• Control #: US-02569BG
• 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. This form is a generic example that may be referred to when preparing such a form for your particular state. It is for illustrative purposes only. Local laws should be consulted to determine any specific requirements for such a form in a particular jurisdiction. A Nevada Shareholders' Agreement between Two Shareholders of a Closely Held Corporation with Buy Sell Provisions is a legally binding contract that outlines the rights, responsibilities, and obligations of two shareholders within a closely held corporation based in Nevada. This agreement sets out the rules and procedures for the buying and selling of shares between the involved parties. The primary purpose of this agreement is to provide a framework for the smooth transfer of ownership interests in the corporation, ensuring fairness and protection for all shareholders. It offers a level of certainty and direction in the event of certain triggering events, such as the death, disability, retirement, or voluntary withdrawal of one or both shareholders. The Buy Sell Provisions within the Nevada Shareholders' Agreement establish the procedures and mechanisms for the sale and purchase of shares. These provisions typically include: 1. Right of First Refusal: This provision grants the remaining shareholder the first option to purchase shares being offered for sale by the other shareholder. It ensures that any outside buyers cannot buy the shares without the opportunity for the remaining shareholder to acquire them. 2. Valuation Method: The agreement will specify the method for determining the fair market value of the shares being sold. Common methods include independent appraisals, book value, or a formula based on the company's financial performance. 3. Terms of Payment: The agreement will establish the terms of payment for the transfer of shares. Common approaches include cash payments, installment payments, or a mix of cash and promissory notes. 4. Drag-Along Rights: These provisions allow the majority shareholder to require the minority shareholder to sell their shares if the majority shareholder receives a bona fide offer from a third party to purchase the entire corporation. 5. Tag-Along Rights: Conversely, tag-along rights provide protection to the minority shareholders, allowing them to participate in a sale of the entire corporation if the majority shareholder receives an offer from a third party. It is essential to note that there can be various types of Nevada Shareholders' Agreements based on the specific needs and circumstances of the closely held corporation. Some popular variants include: 1. Cross-Purchase Agreement: In this type of agreement, the shareholders agree to purchase each other's shares upon the occurrence of a triggering event. Each shareholder is responsible for buying the other shareholder's shares directly. 2. Stock Redemption Agreement: In a stock redemption agreement, the corporation itself buys back the shares of the departing shareholder. The corporation usually uses the life insurance policy on the lives of the shareholders to fund the redemption. 3. Hybrid Agreement: A hybrid agreement combines elements of both the cross-purchase and stock redemption agreements. Shareholders have the option to buy each other's shares, but the corporation can also repurchase the shares if the buyer does not have sufficient funds. By having a properly structured Nevada Shareholders' Agreement with Buy Sell Provisions, closely held corporations can ensure a smooth transition in ownership, mitigate potential conflicts, and protect the interests of all shareholders. It is advisable for shareholders to consult with legal professionals well-versed in Nevada corporate law to tailor the agreement to their specific needs and comply with applicable regulations.

A Nevada Shareholders' Agreement between Two Shareholders of a Closely Held Corporation with Buy Sell Provisions is a legally binding contract that outlines the rights, responsibilities, and obligations of two shareholders within a closely held corporation based in Nevada. This agreement sets out the rules and procedures for the buying and selling of shares between the involved parties. The primary purpose of this agreement is to provide a framework for the smooth transfer of ownership interests in the corporation, ensuring fairness and protection for all shareholders. It offers a level of certainty and direction in the event of certain triggering events, such as the death, disability, retirement, or voluntary withdrawal of one or both shareholders. The Buy Sell Provisions within the Nevada Shareholders' Agreement establish the procedures and mechanisms for the sale and purchase of shares. These provisions typically include: 1. Right of First Refusal: This provision grants the remaining shareholder the first option to purchase shares being offered for sale by the other shareholder. It ensures that any outside buyers cannot buy the shares without the opportunity for the remaining shareholder to acquire them. 2. Valuation Method: The agreement will specify the method for determining the fair market value of the shares being sold. Common methods include independent appraisals, book value, or a formula based on the company's financial performance. 3. Terms of Payment: The agreement will establish the terms of payment for the transfer of shares. Common approaches include cash payments, installment payments, or a mix of cash and promissory notes. 4. Drag-Along Rights: These provisions allow the majority shareholder to require the minority shareholder to sell their shares if the majority shareholder receives a bona fide offer from a third party to purchase the entire corporation. 5. Tag-Along Rights: Conversely, tag-along rights provide protection to the minority shareholders, allowing them to participate in a sale of the entire corporation if the majority shareholder receives an offer from a third party. It is essential to note that there can be various types of Nevada Shareholders' Agreements based on the specific needs and circumstances of the closely held corporation. Some popular variants include: 1. Cross-Purchase Agreement: In this type of agreement, the shareholders agree to purchase each other's shares upon the occurrence of a triggering event. Each shareholder is responsible for buying the other shareholder's shares directly. 2. Stock Redemption Agreement: In a stock redemption agreement, the corporation itself buys back the shares of the departing shareholder. The corporation usually uses the life insurance policy on the lives of the shareholders to fund the redemption. 3. Hybrid Agreement: A hybrid agreement combines elements of both the cross-purchase and stock redemption agreements. Shareholders have the option to buy each other's shares, but the corporation can also repurchase the shares if the buyer does not have sufficient funds. By having a properly structured Nevada Shareholders' Agreement with Buy Sell Provisions, closely held corporations can ensure a smooth transition in ownership, mitigate potential conflicts, and protect the interests of all shareholders. It is advisable for shareholders to consult with legal professionals well-versed in Nevada corporate law to tailor the agreement to their specific needs and comply with applicable regulations.