Buy-sell agreement
From Wikipedia, the free encyclopedia
A Buy-sell agreement is an agreement between two parties in which the two agree to exchange goods or services. The agreement is often recorded to use as proof in case of a legal disputes. It is a record of the terms of a trade.
In the sale of a business, a buy-sell clause (or shotgun clause) in a shareholder agreement preserves continuity of ownership in the business and insures that everyone is fairly treated, the buyer as well as the seller. It is a binding contract between business partners or shareholders about the future ownership of the business. A buy-sell agreement is made up of several legally binding clauses in a business partnership or operating agreement (or it can be a separate agreement that stands on its own) that can control the following business decisions:
- Who can buy a departing partner's or shareholder's share of the business (this may include outsiders or be limited to other partners/shareholders);
- What events will trigger a buyout, and;
- What price will be paid for a partner's or shareholder's interest in the partnership and so on.
A buy-sell agreement may be thought of as a sort of "premarital agreement" between business partners/sharholders.
