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South Carolina Buy-Sell Agreement between Shareholders of Closely Held Corporation

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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.

South Carolina Buy-Sell Agreements serve as essential legal contracts among shareholders of closely-held corporations, ensuring a structured and regulated process for the transfer of shares within the company. These agreements provide a mechanism to address ownership changes, involuntary transfers, death or disability of shareholders, and other specified triggers. Designed to protect the interests of both majority and minority shareholders, these agreements help maintain stability and continuity within the corporation. There are primarily two types of South Carolina Buy-Sell Agreements frequently utilized by shareholders of closely-held corporations: 1. Entity Purchase Agreement: Under this arrangement, the corporation itself enters into a formal agreement to purchase the shares of a departing shareholder. In the event of a shareholder's exit, whether voluntarily or involuntarily, the corporation holds the right to repurchase the shares at a predetermined price or according to a specific valuation formula. This protects the remaining shareholders' interests while allowing the corporation to maintain control over ownership and preserve strategic decision-making. 2. Cross-Purchase Agreement: In a cross-purchase agreement, the remaining shareholders agree to individually purchase the shares of a departing shareholder. Each shareholder will have the right to acquire a proportionate share of the exiting shareholder's stake in the corporation. In this case, the corporation itself is not involved in the transaction, and the buyout is initiated by the remaining shareholders. This arrangement can be preferable when there are a limited number of shareholders, as it simplifies the process and preserves the existing ownership structure. South Carolina Buy-Sell Agreements may contain various clauses and provisions to address specific scenarios and factors such as valuation methods, funding mechanisms, payment terms, non-competition agreements, and dispute resolution mechanisms. These agreements typically stipulate that shareholders must offer their shares to other shareholders before selling them to external parties, in order to maintain the closely-held nature of the corporation. In summary, South Carolina Buy-Sell Agreements represent a vital tool for shareholders of closely-held corporations to regulate the sale and transfer of shares, establish fair valuation mechanisms, and ensure the smooth and orderly continuation of the business. Consulting legal professionals experienced in South Carolina business law, especially those familiar with the specific requirements of closely-held corporations, is crucial when drafting or reviewing these agreements.

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South Carolina Buy-Sell Agreement between Shareholders of Closely Held Corporation