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Ask a Lawyer -- Corporations
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Brought to you by MedLawPlus.com®-- Corporate Bylaws and initial board of directors resolution Price: $14.99 (free trial) |
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Question: My partner in an S-Corp is buying my 50% interest in the company on a payment plan. What sort of buy-sell agreement and/or other contracts may be necessary? Response: A buy-sell agreement is something that sets forth in advance the terms of sale should one shareholder wish to sell his or her shares. Thus, there is no need for a buy-sell in your case as the two shareholders are already at the point of sale. Normally, there would be a stock purchase agreement entered into between the parties. Included within that document, or in a separate document, would be an installment loan agreement that provides for payment of the sales price in installments over time. The final issue would be whether the buyer is going to give the seller any sort of security interest in buyer's assets to secure the installment loan agreement. If so, there would be a separate document called a security agreement that lists the assets of seller in which buyer is to receive a security interest. Normally, in this sort of transaction, the seller at a minimum would receive a security interest in the shares to be conveyed to buyer under the transaction. The format and filing of a security agreement under the uniform commercial code is fairly stringent so it is recommend that one retain an attorney for this. If the seller was employed by the corporation and had contact with the corporation's customers, the parties may wish to consider a non-compete agreement as an additional element of the stock sale. Submitted: 8-12-2005; Jeff, California Response: 8-12-2005; JJR Add A Comment |
Ask a Lawyer, Corporations Archives
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