O'Reilly logo

Private Capital Markets: Valuation, Capitalization, and Transfer of Private Business Interests + Website, 2nd Edition by Robert T. Slee

Stay ahead with the world's most comprehensive technology and business learning platform.

With Safari, you learn the way you learn best. Get unlimited access to videos, live online training, learning paths, books, tutorials, and more.

Start Free Trial

No credit card required

CHAPTER 31

Co-Owner Transfers

At times, it becomes necessary to buy out a partner's interest. The methods available for purchasing other shareholder's interests are known as co-owner transfers. This discussion covers acquiring both equal and unequal partner interests. In the absence of a written ownership agreement, a minority interest holder is at the mercy of the controlling shareholder. Further, 50/50 partners without a buy/sell agreement will not have the tools to settle serious disputes. This chapter discusses buy/sell agreements, first refusal rights, and other techniques available to transfer shareholder interests to partners.

BUY/SELL AGREEMENTS

A buy/sell agreement among the owners of a business fixes the owners’ rights with respect to each other and the business. A buy/sell agreement is important to the owners of a private business because it can serve the dual purposes of restricting the transfer of stock to undesirable parties and providing a ready market for the stock sale. If the agreement provides a practical framework for owners, it can resolve a number of issues that might otherwise lead to later conflict. The primary purposes of buy/sell agreements are to:

  • Transition business ownership while continuing the operation of the business.
  • Create liquidity and a market to sell a business interest.
  • Determine the triggering events that will activate the buy/sell.
  • Set a price, or formula for determining price, for the business interest.
  • Protect against unwanted new partners. ...

With Safari, you learn the way you learn best. Get unlimited access to videos, live online training, learning paths, books, interactive tutorials, and more.

Start Free Trial

No credit card required