Virginia Buy-Sell Agreement between Two Shareholders of Closely Held Corporation

• Category: Corporations - Contracts
• State: Multi-State
• Control #: US-02553BG
• 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. Virginia Buy-Sell Agreement between Two Shareholders of Closely Held Corporation is a legal contract that outlines the terms and conditions for the purchase and sale of shares in a closely held corporation between its shareholders in the state of Virginia. This agreement acts as a safeguard and provides a mechanism for the orderly transfer of shares in the event of certain triggering events, such as death, disability, retirement, or voluntary or involuntary termination of employment. The agreement typically includes various key provisions, such as: 1. Purchase Price Determination: The agreement must specify the method for determining the purchase price, which can be based on a predetermined formula, an independent appraisal, or the mutual agreement of the shareholders. 2. Triggering Events: The agreement should clearly outline the triggering events that would initiate the buy-sell process. These events could include death, disability, retirement, termination, divorce, bankruptcy, or other specified circumstances. 3. Purchase Obligations: The agreement should specify the rights and obligations of the parties involved in the buy-sell process. It outlines the requirement or option for the selling shareholder to offer their shares to the remaining shareholder(s) or the corporation itself before seeking external buyers. 4. Funding Mechanisms: The agreement may establish the funding mechanisms to facilitate the purchase of shares, such as insurance policies, sinking funds, lines of credit, or installment payments. 5. Restrictions on Transfer: The agreement may include provisions that restrict the transfer of shares to outside parties, ensuring that shares remain within the closely held corporation and its existing shareholders. 6. Dispute Resolution: The agreement may outline the process for resolving any disputes that may arise during the buy-sell process, such as mediation or arbitration. Different types of Virginia Buy-Sell Agreements between Two Shareholders of Closely Held Corporations may include: 1. Cross-Purchase Agreement: Each shareholder agrees to buy the shares of the other shareholder(s) in the event of a triggering event, using their personal funds or obtaining funding on their own. 2. Redemption Agreement: The corporation itself agrees to buy the shares from the selling shareholder(s) in the event of a triggering event, using corporate funds. 3. Hybrid Agreement: This type of agreement combines elements of both the cross-purchase and redemption agreements, allowing flexibility and customization based on the specific circumstances of the closely held corporation. In summary, a Virginia Buy-Sell Agreement between Two Shareholders of Closely Held Corporation is a vital legal arrangement that ensures the smooth transfer of shares in a closely held corporation when triggering events occur. By defining the purchase price, triggering events, purchase obligations, funding mechanisms, and dispute resolutions, this agreement provides clarity and protection for all parties involved.

Virginia Buy-Sell Agreement between Two Shareholders of Closely Held Corporation is a legal contract that outlines the terms and conditions for the purchase and sale of shares in a closely held corporation between its shareholders in the state of Virginia. This agreement acts as a safeguard and provides a mechanism for the orderly transfer of shares in the event of certain triggering events, such as death, disability, retirement, or voluntary or involuntary termination of employment. The agreement typically includes various key provisions, such as: 1. Purchase Price Determination: The agreement must specify the method for determining the purchase price, which can be based on a predetermined formula, an independent appraisal, or the mutual agreement of the shareholders. 2. Triggering Events: The agreement should clearly outline the triggering events that would initiate the buy-sell process. These events could include death, disability, retirement, termination, divorce, bankruptcy, or other specified circumstances. 3. Purchase Obligations: The agreement should specify the rights and obligations of the parties involved in the buy-sell process. It outlines the requirement or option for the selling shareholder to offer their shares to the remaining shareholder(s) or the corporation itself before seeking external buyers. 4. Funding Mechanisms: The agreement may establish the funding mechanisms to facilitate the purchase of shares, such as insurance policies, sinking funds, lines of credit, or installment payments. 5. Restrictions on Transfer: The agreement may include provisions that restrict the transfer of shares to outside parties, ensuring that shares remain within the closely held corporation and its existing shareholders. 6. Dispute Resolution: The agreement may outline the process for resolving any disputes that may arise during the buy-sell process, such as mediation or arbitration. Different types of Virginia Buy-Sell Agreements between Two Shareholders of Closely Held Corporations may include: 1. Cross-Purchase Agreement: Each shareholder agrees to buy the shares of the other shareholder(s) in the event of a triggering event, using their personal funds or obtaining funding on their own. 2. Redemption Agreement: The corporation itself agrees to buy the shares from the selling shareholder(s) in the event of a triggering event, using corporate funds. 3. Hybrid Agreement: This type of agreement combines elements of both the cross-purchase and redemption agreements, allowing flexibility and customization based on the specific circumstances of the closely held corporation. In summary, a Virginia Buy-Sell Agreement between Two Shareholders of Closely Held Corporation is a vital legal arrangement that ensures the smooth transfer of shares in a closely held corporation when triggering events occur. By defining the purchase price, triggering events, purchase obligations, funding mechanisms, and dispute resolutions, this agreement provides clarity and protection for all parties involved.