A corporation whose shares are held by a single shareholder or a closely-knit group of shareholders (such as a family) is known as a close corporation. The shares of stock are not traded publicly. Many of these types of corporations are small firms that in the past would have been operated as a sole proprietorship or partner¬ship, but have been incorporated in order to obtain the advantages of limited liability or a tax benefit or both.
A buy-sell agreement is an agreement between the owners (shareholders) of a firm, defining their mutual obligations, privileges, protections, and rights. This form is a generic example that may be referred to when preparing such a form for your particular state. It is for illustrative purposes only. Local laws should be consulted to determine any specific requirements for such a form in a particular jurisdiction.
Massachusetts Buy-Sell Agreement between Shareholders of Closely Held Corporation is a legally binding agreement designed to provide a framework for the buyout or disposition of shares held by shareholders in a closely held corporation based in Massachusetts. This agreement outlines the terms and conditions under which shareholders can buy, sell, or transfer their shares in order to maintain stability and protect the interests of both the corporation and its shareholders. Some key provisions typically included in a Massachusetts Buy-Sell Agreement are: 1. Triggering Events: This section identifies specific events that can trigger the buyout process, such as retirement, disability, death, voluntary withdrawal, or termination of employment. These events often necessitate the need for a shareholder to sell their shares or for the corporation or other shareholders to purchase them. 2. Valuation Methodology: This section establishes the valuation method to determine the fair market value of the shares involved in the buyout. Common methods include appraisals, book value, or a predetermined formula based on the financial performance of the corporation. 3. Purchase Price and Terms: This clause outlines the purchase price or pricing formula to be used in determining the value of the shares, as well as the terms of payment. It may prescribe an all-cash transaction or installment payments over a specified period. 4. Right of First Refusal: This provision grants existing shareholders or the corporation the first opportunity to purchase shares from a departing or selling shareholder before they are offered to external parties. This helps maintain control and prevents shares from falling into undesirable hands. 5. Non-Compete and Non-Disclosure Clauses: In some cases, a Buy-Sell Agreement may include non-compete and non-disclosure provisions to protect the corporation's competitive advantage and proprietary information. Additionally, there are different types of Buy-Sell Agreements that can be tailored to meet the specific needs of shareholders and the closely held corporation. Some common variations include: 1. Cross-Purchase Buy-Sell Agreement: Shareholders agree to buy each other's shares in the event of a triggering event. This type of agreement is typically used when there are only a few shareholders. 2. Entity Purchase Buy-Sell Agreement: The corporation itself agrees to buy the shares of a departing shareholder. The corporation is often funded through life insurance policies on the shareholders' lives. 3. Hybrid Buy-Sell Agreement: This agreement combines elements of both cross-purchase and entity purchase agreements. Certain shareholders or the corporation may have the option to buy back shares, depending on the triggering event. In conclusion, a Massachusetts Buy-Sell Agreement is a vital document for closely held corporations operating in Massachusetts as it helps establish a clear process for the transfer of shares and can prevent disputes among shareholders. The agreement's content should be tailored to the specific needs and goals of the corporation and its shareholders.
