A buy-sell agreement is an agreement between the owners of the business for purchase of each others interest in the business. Such an agreement will spell out the terms governing sale of company stock to an outsider and thus protect control of the company. It can be triggered in the event of the owner's death, disability, retirement, withdrawal from the business or other events. Life insurance owned by the corporation is often used to provide the funds to purchase the shares of a closely held company if one of the owners dies.
The time to prevent disputes is before they occur. Experience proves that owners anxieties created in dealing with one another are inversely proportional to the effort they spend addressing business problems in the event that they should happen. Dealing with these contingencies before they manifest themselves is the secret to a harmonious business relationship with other owners, Use the checklist below to determine areas where you may need assistance.
New York Checklist — Buy/Sell Agreements – Contingencies: A Comprehensive Guide When engaging in a buy/sell agreement in New York, it is crucial to have a checklist to ensure you cover all necessary contingencies. A comprehensive checklist will help protect your interests and ensure a smooth transaction. Below, we outline the essential elements to consider in a New York buy/sell agreement, including different types and contingencies. 1. Types of Buy/Sell Agreements: a. Stock Purchase Agreement: This type of agreement involves the transfer of ownership of a company's stock. b. Asset Purchase Agreement: In this agreement, the buyer acquires specific assets or a business division of the seller. c. Membership Interest Purchase Agreement: This agreement is specific to limited liability companies (LCS) and involves the transfer of membership interests. 2. Essential Components to Include in a Buy/Sell Agreement: a. Purchase Price: Clearly define the agreed-upon purchase price and the payment terms. b. Due Diligence: Outline the timeframe and extent of due diligence required by the buyer. c. Contingencies: Include various contingencies to protect both parties, such as financing, third-party approvals, and regulatory compliance. d. Representations and Warranties: Specify the seller's representations of the business/assets being sold, ensuring accuracy and completeness. e. Closing Date: Clearly define the date on which the transaction will be completed. f. Allocation of Purchase Price: Determine how the purchase price will be allocated among the assets being transferred for tax and accounting purposes. g. Seller's Covenants: Include any promises or obligations the seller must fulfill before and after the closing, such as non-compete agreements. h. Indemnification: Define the indemnification obligations of both parties, specifying responsibility for any potential losses or liabilities. 3. Common Contingencies Related to a New York Buy/Sell Agreement: a. Financing Contingency: Include a provision that allows the buyer to secure financing within a specified timeframe. b. Regulatory Approval Contingency: If applicable, account for any required regulatory approvals, such as permits or licenses. c. Third-Party Consents: Consider contingencies involving third-party consents, such as landlord or key customer approvals. d. Legal Compliance: Ensure the agreement includes contingencies related to compliance with applicable laws and regulations, including environmental and employment laws. e. Inspection Contingency: Allow the buyer to conduct inspections of the business or assets being purchased. f. Title and Survey Contingency: Contingent upon the buyer's satisfaction with the marketable title and a clean survey. By following this comprehensive New York buy/sell agreement checklist and addressing various contingencies, you can protect your interests and ensure a successful transaction. However, it is advisable to consult with legal professionals experienced in New York transactions to tailor the agreement to your specific circumstances.New York Checklist — Buy/Sell Agreements – Contingencies: A Comprehensive Guide When engaging in a buy/sell agreement in New York, it is crucial to have a checklist to ensure you cover all necessary contingencies. A comprehensive checklist will help protect your interests and ensure a smooth transaction. Below, we outline the essential elements to consider in a New York buy/sell agreement, including different types and contingencies. 1. Types of Buy/Sell Agreements: a. Stock Purchase Agreement: This type of agreement involves the transfer of ownership of a company's stock. b. Asset Purchase Agreement: In this agreement, the buyer acquires specific assets or a business division of the seller. c. Membership Interest Purchase Agreement: This agreement is specific to limited liability companies (LCS) and involves the transfer of membership interests. 2. Essential Components to Include in a Buy/Sell Agreement: a. Purchase Price: Clearly define the agreed-upon purchase price and the payment terms. b. Due Diligence: Outline the timeframe and extent of due diligence required by the buyer. c. Contingencies: Include various contingencies to protect both parties, such as financing, third-party approvals, and regulatory compliance. d. Representations and Warranties: Specify the seller's representations of the business/assets being sold, ensuring accuracy and completeness. e. Closing Date: Clearly define the date on which the transaction will be completed. f. Allocation of Purchase Price: Determine how the purchase price will be allocated among the assets being transferred for tax and accounting purposes. g. Seller's Covenants: Include any promises or obligations the seller must fulfill before and after the closing, such as non-compete agreements. h. Indemnification: Define the indemnification obligations of both parties, specifying responsibility for any potential losses or liabilities. 3. Common Contingencies Related to a New York Buy/Sell Agreement: a. Financing Contingency: Include a provision that allows the buyer to secure financing within a specified timeframe. b. Regulatory Approval Contingency: If applicable, account for any required regulatory approvals, such as permits or licenses. c. Third-Party Consents: Consider contingencies involving third-party consents, such as landlord or key customer approvals. d. Legal Compliance: Ensure the agreement includes contingencies related to compliance with applicable laws and regulations, including environmental and employment laws. e. Inspection Contingency: Allow the buyer to conduct inspections of the business or assets being purchased. f. Title and Survey Contingency: Contingent upon the buyer's satisfaction with the marketable title and a clean survey. By following this comprehensive New York buy/sell agreement checklist and addressing various contingencies, you can protect your interests and ensure a successful transaction. However, it is advisable to consult with legal professionals experienced in New York transactions to tailor the agreement to your specific circumstances.
