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Triggering Events For Buy Sell Agreement

providing financial resources to enable proposed transactions to be carried out under conditions satisfactory for the sale of the owners and the company (or other purchasers). This is important and often overlooked. As part of the preparations for the trial, I was invited to prepare a supplementary report on behalf of Mercer Capital to assist the court in analyzing relevant shareholder agreements in business and valuation perspectives. Fortunately, on the eve of the trial, the matter was settled with the compliance agreement and the tally with the fair value findings issued by Mercer Capital for the years in question. The issues raised by the relationship between buy-sell agreements and real estate planning are important. We assert that the best pricing mechanism for most successful and inter-family buy-back contracts is a single expert process, in which the expert is selected by the parties from the outset and submits an assessment to determine the initial price of an agreement. The auditor is then asked to reassess each year (or at most every year out of two) to reset the price of the purchase-sale contract. In the case of a fatal event, life insurance can offer an immediate and tax-exempt cash receipt exactly at the time required. Is that an option? Is it enough? Will it take long? Is it well structured? It is important to ensure that insurance benefits, policyholders, beneficiaries and premium payers are properly coordinated. A carefully crafted buyout contract is a must for business owners – the sooner you take the steps to conclude one, the better your chances of successfully avoiding potentially costly interruptions to the continuity of your business. “After the appearance of one of the above trigger events, the owners are assured that their interest in the transaction is acquired,” explains lawyer John Alexandrov. “A repurchase agreement may also provide for optional buy-outs when a member wishes to retire, sell his or her ownership shares to a third party, declare bankruptcy or have a court order that affects his or her ownership interests in the business.” If you have any questions about your agreement, contact us for a free and confidential consultation to discuss or verify your existing agreement.

Better to know and fix a little oops now. A client for many years has a buy-sell contract and the family has worked in a considerable gift and inheritance tax planning. A few years ago, gift tax returns from the owners of a client company were verified. It was not possible to reach an agreement with the Internal Revenue Service and the matter went to the Tax Court. One of the main issues was whether the purchase-sale agreement met the requirements of IRS Code 2703 (b). After many discussions and preparations for the experiment, it was agreed that the purchase-sale agreement was consistent with the exceptions (paragraph (b) of the general rule of Code Section 2703: a purchase sale agreement may be either a separate agreement between the owners of the business, or it may be part of a more comprehensive corporate/member control agreement or a shareholder agreement that also governs other aspects of the business.

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