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.
Pennsylvania Shareholders' Agreement Between Two Shareholders of Closely Held Corporation with Buy-Sell Provisions A Pennsylvania Shareholders' Agreement between two shareholders of a closely held corporation is a legally binding contract that outlines the rights, responsibilities, and obligations of the shareholders involved. This agreement is specifically designed for businesses incorporated in Pennsylvania and establishes a framework for the management, decision-making, and potential transfer of shares between the shareholders. One essential aspect of this agreement is the inclusion of buy-sell provisions, which govern the circumstances under which a shareholder can sell their shares and how the transaction will be conducted. These provisions provide a mechanism for the orderly transfer of shares and protect the interests of both shareholders. There are several types of Pennsylvania Shareholders' Agreements that may incorporate buy-sell provisions: 1. Buy-Sell Agreement with Right of First Refusal: This type of agreement grants the remaining shareholder(s) the first opportunity to purchase the shares being sold. The shareholder looking to sell must first offer their shares to the other shareholder(s) at a predetermined price. If the other shareholders decline to purchase, the shares can then be offered to a third party. 2. Buy-Sell Agreement with Mandatory Purchase: In this arrangement, the buy-sell provisions require one shareholder to sell their shares to the other shareholder(s) when specified triggering events occur. Triggers can include death, disability, retirement, bankruptcy, or other predefined circumstances. This type of agreement ensures a smooth transition and prevents unwanted parties from becoming shareholders. 3. Buy-Sell Agreement with Valuation Formula: This agreement utilizes a predetermined formula or method to value the shares being sold. It may consider factors such as the corporation's net worth, projected future earnings, or the market value of the shares. The valuation formula ensures a fair and objective price is determined for the shares, reducing the potential for disputes between shareholders during the buy-sell process. 4. Buy-Sell Agreement with Installment Payments: Sometimes, a buy-sell agreement may allow for the purchase price of the shares to be paid in installments over a specified period. This can help make the transaction more manageable for the purchasing shareholder(s) and provide financial security for the selling shareholder. A well-drafted Pennsylvania Shareholders' Agreement containing buy-sell provisions provides clarity, protects the interests of shareholders, and promotes the overall stability of the closely held corporation. It is essential to consult with legal professionals experienced in Pennsylvania corporate law to create a customized agreement that addresses the specific needs and circumstances of the corporation and its shareholders.
