If you are a business owner, it is safe to say that you are familiar with a buy-sell agreement, and hopefully, you have one that has been put in place. This is not an agreement that is made and then tucked away for a rainy day. It needs frequent attention and updating, typically once a year or at least once every 2 years.

Buy-sell agreements should have a timeline for routine reviews and company valuation updates. These reviews ensure that the agreements align with the appropriate value of the company, current market conditions, and stakeholder circumstances. With constant updates and reviews, the necessary adjustments can be made so the company is always prepared for the purchasing of shares for the control of the company to stay within the desired individuals, regardless of circumstances.

There are various “trigger events” that could take place at any time and put your buy-sell agreement into action. Often events, such as death, disability, retirement, termination, and voluntarily leaving the company are considered. Change in marital status, loss of professional license, or leaving the company on bad terms should also be considered. None of these trigger events are planned and can unfortunately happen to any of us at any time.

External factors also reflect the value of an individual business. When there are shifts in the market or changes to the business valuation process, there should be a review of buy-sell agreements making sure the value aligns with the market and legal requirements. Internal factors such as gaining additional owners, dramatic company growth, or mergers & acquisitions should call for a reevaluation. All new owners should go over, understand, and agree with the current buy-sell agreement, and the addition may also call for changes to it.

Buy-sell agreements are often overlooked after they are set in place, and this can be detrimental to a company. It is crucial that all business owners sit down yearly and review their agreements with their lawyers and appraisers. No one expects the trigger events to happen to them, but it is still vital to be prepared for them.

Contact us today to learn how we can assist you in understanding buy-sell agreements.