Succession For Business Group | Business Development | Small Business | Succession Planning | Melbourne | Warrnambool

When a business first starts, most people don’t plan for the consequences of one of the owners leaving. What happens if a business partner wishes to sell shares upon:

• retirement;
• disability;
• death, or
• any other reason.

An Exit agreement can bind the partners to protect the business share value and control who becomes a future shareholder. An example includes:

• Compulsory buy agreements: upon a shareholder retiring, being disabled and/or dying the remaining shareholders must compulsorily buy the shares. The funding of the above buy out can be planned with savings plans and/or borrowings put into place. In the event of death and disability, the buy outs can be funded through the provision of appropriate insurances.
• Compulsory sell agreements: The agreement can predetermine the price or formula for determination of the sale price of the business. The price payable in the event of breach of the agreement may be less than that payable in other circumstances and generally discounted from the market value. This happens in the event a shareholder breaches the shareholders agreement, becomes insolvent or on the happening of other specified events, the non defaulting shareholders can elect to compulsorily acquire shares from a defaulting shareholder and eject that shareholder.