A buy/sell agreement is a contract between business partners, if a specific event occurs (such as retirement, resignation, default, death, disablement or illness) occurs to one of the partners the other partner is then bound to buy out that partners interest in the business.
The policies are intended to provide the surviving equity holders with adequate funding to purchase the deceased/ disabled equity holder’s interest. This agreement is often linked to equity holders insurance. Key factors to consider when taking out a buy/sell agreement is the business structure ownership and agreed valuation. It is important to seek advice when considering a buy/sell agreement for your business to avoid unnecessary complications.