A buy sell agreement is a document of special concern to corporate offices, well elaborated under the corporate laws of the United States. It is a document which provides the terms and conditions of a buyout, that is, it highlights exactly what will happen to a company if one of the co owners is forced to leave the business, through various factors like death, disability, voluntary or forced leave and so on. Such a move may lead to destabilization of the company or the business enterprise unless special care is taken to create an agreement, validated by law that will provide the measures which must be taken to ensure that the buyout is smoothly conducted. Some important factors to be kept in mind while framing buyout agreements or buy sell agreements are as follows:
- Such documents must conform to the laws of the United States with all efforts made to ensure that there are no mistakes, factual errors and so on. Since it is a legally valid document, such lapses on part of the owners of a company may lead to severe repercussions.
- A buy sell agreement must specify the reasons under which a buyout will be considered. For example, only under certain fixed circumstances like death of a co owner, or disability, or some other reasons can a buy sell agreement be rendered effective.
- A buy sell agreement must be clearly written with all information pertaining to the deal highlighted. Care should be taken to specify the financial aspect of the agreement, like the amount to be paid for the buyout, the persons responsible for taking care of the stocks in questions, the decisions regarding the power of attorney and so on.
- Most importantly, the decisions regarding the stake or share of the co owner must be clearly elucidated. Whether outsiders will be allowed to gain control of sizeable stock of a company, or whether it shall be kept within the company itself is a crucial decision that will affect its future, and it must be carefully highlighted.
- Under US laws(1), a buy sell agreement can also take the shape of a cross purchase plan or a repurchase agreement. To ensure greater transparency and clarity, corporate trustees must be involved in the buy sell agreement.
Thus, a buy sell agreement must be written with the careful consideration that it deserves. It is an important document and this should be kept in mind while framing a buy sell agreement.