BUY/SELL AGREEMENTS
California incorporations should be handled by competent business attorneys. The creation of Buy/sell agreements is a good reason why. Buy/sell, agreements are created to control changes in the ownership of a corporation.
Buy/sell agreements are often overlooked by shareholders who have filed their articles of incorporation, adopted their corporate bylaws and issued the corporate stock. However, without a buy/sell agreement if a shareholder wants to leave the company and be bought out, there's no contract that says whether the remaining shareholders or the corporation must buy the shareholder out, or for how much. It is not uncommon for the shareholder who is intent on leaving to believe that his/her shares of stock are worth a great deal. It is common for the remaining shareholders to believe the stock of the corporation is worth much less.
By creating a buy/sell agreement, the owners of a corporation can be prepared when a shareholder wants to be bought out, is permanently Incapacitated or worse, dies. The buy/sell agreement also covers bankruptcy and the divorce of a shareholder from his/her spouse.
Typically, a buyout agreement controls the following decisions:
1. Whether a departing shareholder must be bought out;
2. Who can buy a departing shareholder's stock (this may include outsiders or be limited to other shareholders);
3. What price will be paid for a shareholder's interest in the corporation; and
4. What other events will trigger a buyout.
Buy/sell agreements can be extremely complex and should only be created by an experienced business attorney.
