2023 Drafting buy/sell agreements for closely held companies, part 1

Recording available after original program date, 6/20/2023

There is rarely a liquid market for the sale or exchange of ownership interests in closely-held companies.  Buy/sell agreements fix that problem by creating a market among the owners of a company, providing a mechanism for owners to liquidate their interests in a reliable manner. The owners may agree to buy and sell interests among themselves on the occurrence of certain events and using certain valuation metrics, or they may agree that the company itself will redeem an owner’s interest. Without these agreements, there is often no alternative for an owner to cash out, short of liquidating the company. This program will provide you with a practical guide to the different types of buy/sell agreements, drafting the essential provisions of each, and common negotiating and drafting tips.

Day 1:

•    Types of buy/sell agreements – cross-purchase among owners, entity redemption, and hybrid approaches
•    Most highly negotiated provisions of buy/sell agreements
•    Triggering events – voluntary sale, retirement, death, bankruptcy of shareholder or member
•    Valuation of interests – appraisals, formula clauses,comps, and dispute resolution
•    Rights of first offer v. rights of first refusal, and sales to third parties

Day 2:

•    Funding buy/sell arrangements  – payouts/earnouts over time, commercial borrowing, key-man insurance, other funding sources
•    Special issues involving S Corps and unincorporated entities
•    Drag-along and tag-along rights in buy/sell agreements
•    Major tax issues in buy/sell agreements for buyer, seller and the entity

Note: This material qualifies for self-study credit only. Pursuant to Regulation 15.04.5, a lawyer may receive up to six hours of self-study credit in a reporting year. Self-study programs do not qualify for ethics, elimination of bias or Kansas credit.