The Importance of Buy-and-Sell Agreements in Business

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Buy-And-Sell Agreement,Shareholders,Funding

A buy-and-sell agreement specifies how the remaining shareholders in a company will purchase the shares of a co-shareholder if they die or become disabled. It is crucial for shareholders to make provisions for funding the purchase of the shares through life insurance policies or other forms of funding. Without a watertight agreement, disputes and negative consequences can arise for the business and family of the life insured.

A buy-and-sell agreement specifies how the remaining shareholders in a company will purchase the shares of a co-shareholder if they die or become disabled.

In addition to the agreement, shareholders typically make provision for funding the purchase of the shares through life insurance policies or, if one of the shareholders is uninsurable, other forms of funding. If the agreement isn’t watertight, it can lead to disputes, unnecessary taxes, and a slew of other negative consequences for the business and family of the life insured.South Africans need to be in the know if we want to create a prosperous future. News24 has kept the country informed for 25 years, and we're about to enter a new chapter of fearless journalism. Join our free subscription trial to unlock this story and a world of news aimed to inform, empower, and inspire.

 

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