Puerto Rico 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. Puerto Rico Shareholders' Agreement between Two Shareholders of Closely Held Corporation with Buy-Sell Provisions: Explained Introduction: A Puerto Rico shareholders' agreement between two shareholders of a closely held corporation is a legally binding document that provides a framework for the relationship between shareholders and outlines the rights, responsibilities, and obligations of each party. When such an agreement includes buy-sell provisions, it specifies the agreed-upon mechanisms through which shareholders can buy or sell shares under predetermined circumstances. In Puerto Rico, there are several types of shareholders' agreements, each serving distinct purposes within the realm of buy-sell provisions. 1. General Puerto Rico Shareholders' Agreement: A general Puerto Rico shareholders' agreement between two shareholders of a closely held corporation with buy-sell provisions lays out the common ground rules and expectations for both parties involved. It typically covers topics such as share transfer restrictions, stock valuation methods, dispute resolution mechanisms, decision-making procedures, and governance structure. Furthermore, this agreement addresses the circumstances under which shares can be bought or sold and the process by which such transactions should occur. 2. Cross-Purchase Shareholders' Agreement: A cross-purchase shareholders' agreement between two shareholders of a closely held corporation in Puerto Rico outlines the buy-sell provisions governing the purchase and sale of shares between the shareholders themselves. In this agreement, each shareholder agrees to buy the other party's shares if they meet certain specified triggering events, such as death, disability, retirement, or voluntary departure. The agreement includes the purchase price, payment terms, and any financing arrangements necessary to facilitate the transaction. 3. Redemption Shareholders' Agreement: A redemption shareholders' agreement between two shareholders of a closely held corporation in Puerto Rico establishes the buy-sell provisions wherein the corporation itself purchases the shares of a departing shareholder. Typically, this occurs when certain triggering events, such as death, disability, or voluntary departure, cause a shareholder to want to sell their shares. The agreement includes provisions regarding the price and payment terms for the redemption, the mechanics of the buyout, and any applicable financing arrangements. 4. Hybrid Shareholders' Agreement: A hybrid shareholders' agreement between two shareholders of a closely held corporation in Puerto Rico combines elements of both cross-purchase and redemption agreements. In this scenario, both the shareholders and the corporation have the option to buy back shares under certain conditions. This type of agreement typically offers flexibility and can be tailored to the specific needs and preferences of the shareholders involved. Conclusion: It is crucial for shareholders of a closely held corporation in Puerto Rico to establish a comprehensive shareholders' agreement with buy-sell provisions. By clearly outlining the rights and obligations of each party and establishing mechanisms for share transfers, these agreements help minimize conflicts, ease transitions during significant events, and ensure fairness in the valuation and purchase of shares. Choosing the appropriate type of shareholders' agreement is essential to address the unique circumstances and requirements of each closely held corporation in Puerto Rico.

Puerto Rico Shareholders' Agreement between Two Shareholders of Closely Held Corporation with Buy-Sell Provisions: Explained Introduction: A Puerto Rico shareholders' agreement between two shareholders of a closely held corporation is a legally binding document that provides a framework for the relationship between shareholders and outlines the rights, responsibilities, and obligations of each party. When such an agreement includes buy-sell provisions, it specifies the agreed-upon mechanisms through which shareholders can buy or sell shares under predetermined circumstances. In Puerto Rico, there are several types of shareholders' agreements, each serving distinct purposes within the realm of buy-sell provisions. 1. General Puerto Rico Shareholders' Agreement: A general Puerto Rico shareholders' agreement between two shareholders of a closely held corporation with buy-sell provisions lays out the common ground rules and expectations for both parties involved. It typically covers topics such as share transfer restrictions, stock valuation methods, dispute resolution mechanisms, decision-making procedures, and governance structure. Furthermore, this agreement addresses the circumstances under which shares can be bought or sold and the process by which such transactions should occur. 2. Cross-Purchase Shareholders' Agreement: A cross-purchase shareholders' agreement between two shareholders of a closely held corporation in Puerto Rico outlines the buy-sell provisions governing the purchase and sale of shares between the shareholders themselves. In this agreement, each shareholder agrees to buy the other party's shares if they meet certain specified triggering events, such as death, disability, retirement, or voluntary departure. The agreement includes the purchase price, payment terms, and any financing arrangements necessary to facilitate the transaction. 3. Redemption Shareholders' Agreement: A redemption shareholders' agreement between two shareholders of a closely held corporation in Puerto Rico establishes the buy-sell provisions wherein the corporation itself purchases the shares of a departing shareholder. Typically, this occurs when certain triggering events, such as death, disability, or voluntary departure, cause a shareholder to want to sell their shares. The agreement includes provisions regarding the price and payment terms for the redemption, the mechanics of the buyout, and any applicable financing arrangements. 4. Hybrid Shareholders' Agreement: A hybrid shareholders' agreement between two shareholders of a closely held corporation in Puerto Rico combines elements of both cross-purchase and redemption agreements. In this scenario, both the shareholders and the corporation have the option to buy back shares under certain conditions. This type of agreement typically offers flexibility and can be tailored to the specific needs and preferences of the shareholders involved. Conclusion: It is crucial for shareholders of a closely held corporation in Puerto Rico to establish a comprehensive shareholders' agreement with buy-sell provisions. By clearly outlining the rights and obligations of each party and establishing mechanisms for share transfers, these agreements help minimize conflicts, ease transitions during significant events, and ensure fairness in the valuation and purchase of shares. Choosing the appropriate type of shareholders' agreement is essential to address the unique circumstances and requirements of each closely held corporation in Puerto Rico.