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.
A Maryland Shareholders' Agreement between Two Shareholders of a Closely Held Corporation with Buy-Sell Provisions is a legally binding contract that outlines the rights, responsibilities, and obligations of the shareholders in a closely held corporation located in Maryland. This type of agreement is crucial for closely held corporations, especially when there are only two shareholders involved, as it helps protect the interests of both parties and ensures the smooth functioning of the corporation. Buy-sell provisions, also known as buyout provisions or shotgun clauses, are essential components of this agreement. These provisions establish rules and procedures for the purchase and sale of shares in the event certain triggering events occur, such as a shareholder's death, disability, retirement, or desire to sell their shares. The agreement typically includes several important clauses that govern various aspects of the shareholders' relationship, including: 1. Purpose and Scope: This clause outlines the purpose of the agreement, stating that it is intended to protect the rights and interests of the shareholders and promote the corporation's stability. 2. Ownership and Shares: This clause specifies the number and type of shares owned by each shareholder, their percentage of ownership, and any restrictions on transferring or selling their shares. 3. Governance: This clause defines the governance structure of the corporation, including the appointment of directors, voting rights, and decision-making processes. 4. Management and Operations: This clause outlines the responsibilities and duties of each shareholder, along with any specific roles they may have within the corporation. 5. Buy-Sell Provisions: This is the most critical clause in the agreement, detailing the triggering events that would necessitate a purchase or sale of shares. It includes methods of valuation, dispute resolution processes, and the mechanisms for executing a buyout. 6. Purchase Price and Payment Terms: This clause specifies how the purchase price of the shares will be determined, whether it is through a predetermined formula, independent appraisal, or negotiation. It also defines the payment terms, such as lump sum, installment payments, or financing options. 7. Restrictions on Transfer: This clause may include restrictions on the transfer of shares to third parties, ensuring that existing shareholders have the right of first refusal or the ability to block undesirable transfers. 8. Non-Compete and Confidentiality: This clause may include provisions preventing shareholders from engaging in competition with the corporation or disclosing confidential information. 9. Dispute Resolution and Governing Law: This clause establishes the method for resolving disputes, such as mediation, arbitration, or litigation, and specifies that the agreement is governed by the laws of the state of Maryland. Some additional types or variations of Maryland Shareholders' Agreements between Two Shareholders of Closely Held Corporations with Buy-Sell Provisions may include: — Maryland Shareholders' Agreement with a Right of First Offer: This variation gives one shareholder the first opportunity to purchase another shareholder's shares before they can be offered to a third party. — Maryland Shareholders' Agreement with a Right of First Refusal: This variation provides other shareholders with the ability to match the terms of an offer made by a third party for the shares of another shareholder. — Maryland Shareholders' Agreement with a Put Option: This variation grants one shareholder the right to sell their shares to another shareholder or the corporation at a predetermined price or within a specified window of time. — Maryland Shareholders' Agreement with a Call Option: This variation allows one shareholder or the corporation to purchase the shares of another shareholder at a predetermined price or within a specified window of time. In conclusion, a well-drafted Maryland Shareholders' Agreement between Two Shareholders of a Closely Held Corporation with Buy-Sell Provisions is crucial for establishing clear guidelines concerning ownership, governance, and the purchase and sale of shares. It helps safeguard the interests of shareholders and contributes to the harmonious operation of the corporation.
