Oregon 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. Oregon Buy-Sell Agreement between Shareholders of Closely Held Corporation is a legally binding contract that outlines the terms and conditions for the transfer of shares among shareholders in a closely held corporation operating in the state of Oregon. It is primarily used to provide a mechanism for shareholders to buy or sell shares in certain events, such as death, disability, retirement, divorce, or voluntary transfer. The primary purpose of an Oregon Buy-Sell Agreement is to ensure a smooth transition of ownership and to protect the interests of both the corporation and its shareholders. It helps maintain stability, clarity, and fairness in cases where shareholders wish to sell their shares or when certain triggering events occur. Various types of Oregon Buy-Sell Agreements that can be established between shareholders include: 1. Cross-Purchase Agreement: In this type of agreement, each shareholder agrees to purchase the shares of a departing shareholder based on a predetermined formula or valuation method. This allows the remaining shareholders to maintain control over the corporation while ensuring a fair financial transaction for both parties. 2. Stock Redemption Agreement: Instead of shareholders purchasing shares directly from each other, the corporation agrees to redeem the shares of a departing shareholder. The corporation uses its own funds or borrows money to complete the redemption. This type of agreement can provide tax advantages for the remaining shareholders. 3. Hybrid Agreement: A combination of the cross-purchase and stock redemption agreements, this type allows for flexibility depending on the specific circumstances of the shareholder's departure. It can be structured in a way that certain shareholders purchase the shares while others are redeemed by the corporation. Oregon Buy-Sell Agreements typically include the following key provisions: — Purchase price and valuation method: The agreement should specify how the shares will be valued and the method to determine the purchase price. This can be based on an independent appraisal, book value, or a predetermined formula. — Triggering events: The agreement should outline the events that would trigger the buy-sell provisions, such as death, disability, retirement, divorce, bankruptcy, or voluntary transfer. — Right of first refusal: It is common for the agreement to include a provision granting the remaining shareholders a right of first refusal to purchase shares before they can be sold to an outside party. — Funding mechanisms: The agreement should address how the purchase price will be financed, such as utilizing life insurance policies, cash reserves, or borrowing. — Terms of payment: It should specify the terms and conditions of the payment, whether in a lump sum, installments, or a combination of both. — Dispute resolution: If a disagreement arises regarding the buy-sell provisions, the agreement may include a clause specifying the method of dispute resolution, such as mediation or arbitration. In conclusion, an Oregon Buy-Sell Agreement between Shareholders of Closely Held Corporation is a crucial document for maintaining the stability and smooth transition of ownership within a closely held corporation. Different types of agreements, such as Cross-Purchase, Stock Redemption, or Hybrid, can be tailored to meet the specific needs and preferences of the shareholders. These agreements provide a clear framework and protection for both shareholders and the corporation.

Oregon Buy-Sell Agreement between Shareholders of Closely Held Corporation is a legally binding contract that outlines the terms and conditions for the transfer of shares among shareholders in a closely held corporation operating in the state of Oregon. It is primarily used to provide a mechanism for shareholders to buy or sell shares in certain events, such as death, disability, retirement, divorce, or voluntary transfer. The primary purpose of an Oregon Buy-Sell Agreement is to ensure a smooth transition of ownership and to protect the interests of both the corporation and its shareholders. It helps maintain stability, clarity, and fairness in cases where shareholders wish to sell their shares or when certain triggering events occur. Various types of Oregon Buy-Sell Agreements that can be established between shareholders include: 1. Cross-Purchase Agreement: In this type of agreement, each shareholder agrees to purchase the shares of a departing shareholder based on a predetermined formula or valuation method. This allows the remaining shareholders to maintain control over the corporation while ensuring a fair financial transaction for both parties. 2. Stock Redemption Agreement: Instead of shareholders purchasing shares directly from each other, the corporation agrees to redeem the shares of a departing shareholder. The corporation uses its own funds or borrows money to complete the redemption. This type of agreement can provide tax advantages for the remaining shareholders. 3. Hybrid Agreement: A combination of the cross-purchase and stock redemption agreements, this type allows for flexibility depending on the specific circumstances of the shareholder's departure. It can be structured in a way that certain shareholders purchase the shares while others are redeemed by the corporation. Oregon Buy-Sell Agreements typically include the following key provisions: — Purchase price and valuation method: The agreement should specify how the shares will be valued and the method to determine the purchase price. This can be based on an independent appraisal, book value, or a predetermined formula. — Triggering events: The agreement should outline the events that would trigger the buy-sell provisions, such as death, disability, retirement, divorce, bankruptcy, or voluntary transfer. — Right of first refusal: It is common for the agreement to include a provision granting the remaining shareholders a right of first refusal to purchase shares before they can be sold to an outside party. — Funding mechanisms: The agreement should address how the purchase price will be financed, such as utilizing life insurance policies, cash reserves, or borrowing. — Terms of payment: It should specify the terms and conditions of the payment, whether in a lump sum, installments, or a combination of both. — Dispute resolution: If a disagreement arises regarding the buy-sell provisions, the agreement may include a clause specifying the method of dispute resolution, such as mediation or arbitration. In conclusion, an Oregon Buy-Sell Agreement between Shareholders of Closely Held Corporation is a crucial document for maintaining the stability and smooth transition of ownership within a closely held corporation. Different types of agreements, such as Cross-Purchase, Stock Redemption, or Hybrid, can be tailored to meet the specific needs and preferences of the shareholders. These agreements provide a clear framework and protection for both shareholders and the corporation.