If you’re starting a new company with multiple stakeholders, you know the importance of choosing the right Oklahoma business organization type for your unique situation. However, in the early stages of your company’s lifecycle, you’re probably not thinking about what will happen when one of your partners wants to leave – or might be forced to leave. You can avoid costly litigation disputes by asking a business transactions lawyer a few questions about how “buy-sell agreements” work in Oklahoma.
What is a buy-sell agreement?
This type of agreement defines all company owners’ rights and responsibilities in the event that a member departs the organization, whether voluntarily or not. When these “trigger events” occur, the buy-sell agreement provides for the transfer and/or sale of ownership interests between and among the stakeholders. The contract is intended to facilitate a smooth transition and continuation of the business so that the company isn’t forced to close because the remaining owners can’t afford to buy out the departing member’s interests.
How can a buy-sell agreement protect stakeholders?
One of the primary terms of a buy-sell agreement is to designate the source of funds for buying out a member so that the other members don’t have to resort to other financial arrangements. The arrangement ensures that stakeholders aren’t required to apply personal assets, take out loans for the company, sell off assets, or forced into other tactics that would be detrimental to the business’ success.
What types of events trigger buy-sell provisions?
Most buy-sell agreements specifically identify the trigger events that lead to enforcement of the provisions regarding transfer of ownership. Common situations that would activate the terms on buying out the departing member and terminating his or her interest in the company include:
- Death
- Incapacitation
- Involuntary termination of employment, such as for wrongdoing
- Voluntary termination of employment, such as retirement
- Divorce
- Criminal conviction
- Personal bankruptcy
There are other circumstances specific to a company that may trigger the buy-sell agreement provisions. For instance, if a professional license is necessary to operate the business and the member loses their credentials, the transfer of ownership terms would apply.
We Are Here To Help
If you don’t have a buy-sell agreement in place, you could be facing costly disputes or litigation when one of your company’s stakeholders departs the organization. To avoid this unpleasant scenario, you should discuss your situation with an Oklahoma business transactions lawyer that can advise you on buy-sell agreements. For more information on these and other types of business agreements, please contact the Law Offices of Robert R. Robles at (405) 232-7980.
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