Rhode Island 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. Rhode Island Buy-Sell Agreement between Shareholders of Closely Held Corporation: A Rhode Island Buy-Sell Agreement between Shareholders of a Closely Held Corporation is a legally binding contract that governs the transfer of ownership interests in a closely held corporation. This agreement outlines the terms and conditions under which shares of the corporation can be bought or sold between existing shareholders. Keywords: Rhode Island Buy-Sell Agreement, Shareholders, Closely Held Corporation, Ownership Interests, Transfer of Shares, Terms and Conditions. In Rhode Island, there are different types of Buy-Sell Agreements that shareholders of closely held corporations can choose from based on their specific needs and circumstances. These types include: 1. Cross-Purchase Agreement: This type of agreement allows individual shareholders to contractually agree to purchase the shares of a fellow shareholder who wishes to sell or transfer their ownership interests. The remaining shareholders collectively execute this agreement, and each shareholder has the option to purchase a proportionate share of the selling shareholder's interest. 2. Stock Redemption Agreement: In this agreement, the closely held corporation itself is obligated to redeem the shares of a shareholder who wants to sell or transfer their ownership interests. The corporation purchases the shares directly from the shareholder using company funds. 3. Hybrid Agreement: A hybrid agreement combines elements of both the cross-purchase and stock redemption agreements. In this type of agreement, some shareholders have the right to purchase the shares from the selling shareholder, while the corporation has the option to redeem the shares as well. This hybrid structure allows flexibility in executing the buy-sell provisions. 4. Wait-and-See Agreement: This agreement allows the closely held corporation and its shareholders to defer making a decision about how ownership interests will be transferred until a triggering event occurs, such as a shareholder's death, disability, retirement, or voluntary departure from the company. This type of agreement gives the parties time to assess the situation and make an informed decision at a later date. 5. One-Way Agreement: A one-way agreement is typically used when there is a majority shareholder in a closely held corporation who wants to ensure that their shares remain within the family or certain chosen individuals. This agreement allows the majority shareholder to enforce restrictions on the transfer of their shares, limiting the potential buyer pool to specific parties. Each type of agreement may have additional provisions such as valuation methods, payment terms, dispute resolution mechanisms, and restrictions on transferability to safeguard the interests of all parties involved. It is important for shareholders to consult with legal professionals specializing in corporate law to ensure that their specific circumstances and objectives are appropriately addressed in the Rhode Island Buy-Sell Agreement.

Rhode Island Buy-Sell Agreement between Shareholders of Closely Held Corporation: A Rhode Island Buy-Sell Agreement between Shareholders of a Closely Held Corporation is a legally binding contract that governs the transfer of ownership interests in a closely held corporation. This agreement outlines the terms and conditions under which shares of the corporation can be bought or sold between existing shareholders. Keywords: Rhode Island Buy-Sell Agreement, Shareholders, Closely Held Corporation, Ownership Interests, Transfer of Shares, Terms and Conditions. In Rhode Island, there are different types of Buy-Sell Agreements that shareholders of closely held corporations can choose from based on their specific needs and circumstances. These types include: 1. Cross-Purchase Agreement: This type of agreement allows individual shareholders to contractually agree to purchase the shares of a fellow shareholder who wishes to sell or transfer their ownership interests. The remaining shareholders collectively execute this agreement, and each shareholder has the option to purchase a proportionate share of the selling shareholder's interest. 2. Stock Redemption Agreement: In this agreement, the closely held corporation itself is obligated to redeem the shares of a shareholder who wants to sell or transfer their ownership interests. The corporation purchases the shares directly from the shareholder using company funds. 3. Hybrid Agreement: A hybrid agreement combines elements of both the cross-purchase and stock redemption agreements. In this type of agreement, some shareholders have the right to purchase the shares from the selling shareholder, while the corporation has the option to redeem the shares as well. This hybrid structure allows flexibility in executing the buy-sell provisions. 4. Wait-and-See Agreement: This agreement allows the closely held corporation and its shareholders to defer making a decision about how ownership interests will be transferred until a triggering event occurs, such as a shareholder's death, disability, retirement, or voluntary departure from the company. This type of agreement gives the parties time to assess the situation and make an informed decision at a later date. 5. One-Way Agreement: A one-way agreement is typically used when there is a majority shareholder in a closely held corporation who wants to ensure that their shares remain within the family or certain chosen individuals. This agreement allows the majority shareholder to enforce restrictions on the transfer of their shares, limiting the potential buyer pool to specific parties. Each type of agreement may have additional provisions such as valuation methods, payment terms, dispute resolution mechanisms, and restrictions on transferability to safeguard the interests of all parties involved. It is important for shareholders to consult with legal professionals specializing in corporate law to ensure that their specific circumstances and objectives are appropriately addressed in the Rhode Island Buy-Sell Agreement.