What are the key elements of a buy-sell agreement that you should review regularly?

A fair and accurate valuation method is essential for a buy-sell agreement to prevent disputes and ensure fairness Eg, Two partners regularly reviewed their valuation method to reflect market changes and the business's performance. The valuation method should be consistent with industry standards to ensure fairness Eg,a company aligned its valuation with industry benchmarks. Specifying how often the valuation will be updated is essential Eg, a business agreed to update its valuation annually to account for market fluctuations. Qualified valuator: It's important to specify who will conduct the valuation Eg, a business agreed to update its valuation annually to account for market fluctuations and changes in the business's performance.

O termo valuation é amplamente utilizado quando da necessidade de se valorar as ações e todos os ativos de uma empresa ou sociedade. Somente através dessa ferramenta é que se obtem as mínimas (e fundamentadas) condições e requisitos (valores e panorama geral de curto a longo prazo) para o início de eventuais tratativas de negócios com terceiros ou dissolução com sócios.

Your accountant is the best source for evaluating your business and the methodology to be used. These amounts should be reviewed annually and be a part of your annual meeting with your accountant to make sure the values of your buy-sell agreement are indeed sufficient.

Making sure that you regularly check the valuation of the business to make sure you have the correct coverage for the buy-sell can be very important to update when needed. This is something I suggest that you stop and make time for regularly.

Leverage an industry-specific valuation multiple, integrating sector trends and benchmarks for a precise valuation. Implement a rolling average update system, recalculating valuations every six months to reflect market shifts. Appoint a valuation committee comprising internal finance experts and an external auditor to ensure accuracy and objectivity. This approach aligns valuations with evolving industry standards and stakeholder expectations.

O mercado financeiro oscila e isso não é novidade para ninguém. A cada anúncio político, conflitos ou desacordos internacionais (ou internamente dentro de um mesmo País), a previsão financeira ajustada para financiar uma grande operação pode colapsar. Fundamental portanto, é precaver-se tentando ajustar a que menos impacto sofrerá nesses cenários.

Life insurance is always the way to go here - without it, a promise to pay doesn't have the financial backing to make it meaningful. You can have a great valuation process, and a crystal clear buy-sell, but if you don't have the funds to pay, what good is it? We always suggest clients fund their buy-sell with adequate life insurance.

Due to the tax advantages of Life Insurance in Canada, life insurance insurance proceeds can flow with very little tax or no tax to the company in order to fulfill the buy/sell agreement contact if there is a death of one of the partners.

While there are many ways to fund a buy-sell agreement, doing so via a life insurance policy is often one of the top options due to tax treatment here in the United States should the policy need to be used. It's also a top option because it doesn't require you to use up your cash on hand (permanent policies can be structured so you maintain liquidity and can dual-purpose the money) and because you don't have to have to put up collateral collateral to qualify nor be on the hook for repaying a loan. It's a hugely powerful yet significantly underutilized strategy, primarily due to lack of knowledge that it's even a possibility.

Of all the buy-sell funding mechanisms, life insurance is the least expensive. It prevents the need for having to leverage other business assets or cash, thus freeing them up for required business operations. Depending upon the policy type, cash value may accumulate as a protected asset to be used by the policy owner (either the business or an individual) and can help to grow the value of the policy in pace with the value of the business. The death benefit proceeds are paid out quickly which ensures the buy/sell transaction is settled quickly.

Prever eventos "previsíveis" é obrigação do profissional que irá elaborar a minuta do contrato de compra e venda, assegurando, assim, que sua gestão não seja paralisada ou sofra solução de continuidade facilmente ajustável pelas partes ou seu gestor.

Your lawyer will have the best advice for setting up the buy/sell agreement to protect the business from these triggering events. The whole process involves your lawyer, accountant, insurance advisor, and banker to make sure all of your bases are covered due to a triggering event.

Disability buy out should be considered as well. Worst case is a disability that prohibits the person from working / contributing going forward. A DI buy out policy would offer a lump sum payment to finance the buy out.

Nem toda compra e venda é adequada aos olhos de quem fica com relação àquele que entra ou assume a empresa ou as ações. Se faz extremamente necessária o atendimento das condições e requisitos mínimos para restringir compradores eventualmente "perigosos" ou "danosos" para a sociedade, sempre, entretanto, aliado ao ordenamento jurídico aplicável.

Embed right of first refusal clauses to give existing owners priority in purchasing shares. Define clear criteria for qualified buyers, including financial capability and industry experience, to maintain business integrity. Mandate board or shareholder approval for any transfer, safeguarding the company’s direction. Regularly audit transfer restrictions for legal compliance and alignment with corporate governance principles.

Although it is not mandatory for every agreement to include a dispute resolution clause, however, incorporating one can offer significant benefits. As an Advocate, I consistently advocate for the inclusion of such clauses in all agreements and contracts. They provide a structured approach to conflict resolution, enhancing clarity and certainty in case of disputes. Furthermore, a dispute resolution clause delineates the steps to be taken, minimizing confusion and misunderstandings between parties. In buy-sell agreements, for instance, these procedures are vital for managing conflicts during the buyout process and ensuring efficient resolution of disputes.

Com o judiciário cada vez mais caro e moroso, é imprescindível antever e ajustar formas mais céleres e eficazes na resolução de litígios a fim de não comprometer a continuidade do negócio ou aumentar o prejuízo para a parte ofendida.

Not having a properly executed buy/sell is one of the biggest risks to a business! If the agreement is ever triggered and one is not in place, the business may not have the capital or the cash flow to sustain a buy out of the partner's equity in the business. This can lead not only to the loss of your partner but the entire business or the sale of the business to a third party that will have the upper hand in negotiations!