I am not sure that all the parties to the agreement referenced in this post read it carefully. If they had, someone surely would have objected to giving the Corporation the right to acquire the shares of any owner who divorced, even when the shares might not be in danger of being awarded to on out-spouse. This post illustrates the point I have made many times in my book, Buy-Sell Agreements for Closely Held and Family Business Owners, and in this blog. If you have a buy-sell agreement, it is important for you to read it and to understand what it says.

The purpose of the third appraiser in multiple appraiser valuation process buy-sell agreements is to bring the process to a conclusion. Sometimes, things just aren’t queued up for him or her to do the job without some adjustments to the process.

When drafting your buy-sell agreement, understand that the other guy will not always be the first to die or to leave the company. It might be you. If you know you will be a buyer, then you would likely prefer to buy at the lowest possible price. If you know you will be a seller, then you probably would prefer to sell at the highest possible price. If you don’t know which you will be (and you likely do not) and you act rationally, you will desire pricing in the buy-sell agreement that is reasonable regardless of future outcomes.

… The biggest contribution of this book may lie in emphasizing the importance of crafting well-drafted, unambiguous, and comprehensive buy-sell agreements, put in place and reviewed periodically to avoid the unintended consequences.

“Who owns the stock after a trigger event?” is an important question. Many buy-sell agreements do not treat the continuing rights of ownership (or not) following trigger events in specific terms.

Rights of first refusal are used to maintain stock within specified groups of shareholders, and particularly with family businesses. This post explains their purpose in the context of buy-sell agreements.

Too often, buy-sell agreements are created and signed without adequate discussion among and between the owners (shareholders, partners, members, or joint venture participants). Why is this? It can be difficult to talk about difficult issues. So if your buy-sell agreement is flawed, and potentially a ticking time bomb, chances are you share much of the fault with your fellow owners.

Most buy-sell agreements are, indeed, ticking time bombs. There are several reasons for this and this post lists eight.

A few factors have come together recently to make the timing perfect for financial advisors to read Christopher Mercer’s Buy-Sell Agreements for Closely Held and Family Business Owners: How To Know Your Agreement Will Work Without Triggering It. This is a book that fully explores the intricacies of buy/sell agreements and the potential dangers buried beneath the legalese in most of the agreements currently in place.

Unfortunately, divorce is quite common today. The purpose of divorce provisions in buy-sell agreements is, of course, to prevent shares from falling into the hands of potentially unfriendly ex-spouses. Check out this short post on the subject.