Succession Planning: Buy Sell Agreements

What would happen to your business if you or one of your fellow owners suffered a serious injury, ill health or death? For most businesses, it would result in major disruption or worse still, closure. Fortunately, there is a solution. 

A Buy Sell Agreement is a legally binding document that sets out what occurs when unfortunate circumstances arise. Typically prepared as part of a succession planning process, this is usually an insured agreement, whereby the triggered buy out is funded by the life insurance of your participating owners lives. This ensures that the buyout is well funded and the business can continue operating.

 What are the benefits of a buy/sell agreement?

• Sets out an agreed course of action when triggered.
• Provide stability for the remaining business owners.
• Details a mutually agreed market value sales price for the departing owner or estate.
• Provides certainty for staff, customers, suppliers and creditors.
• Ensures there is minimal disruption to the business operations.

How do you go about setting up a buy/sell agreement?

• The business owners firstly agree on the triggered events, business valuation method and owner obligations when an agreement is triggered.
• The business and its owners can then apply for the appropriate insurance to meet the funding requirements outlined in the agreement.
• Once complete, a legal professional prepares a legally binding agreement for execution by the business owners.

To discuss a Buy Sell Agreement for your business talk to your PPT representative on (03) 5331 3711.