Buy-sell agreements for family businesses

When family-owned or other closely held companies experience a major shareholder event, such as death, divorce, or retirement of a shareholder, it can jeopardize the future and stability of the enterprise. When these triggering events occur, it’s important to have protective strategies in place to support a seamless transition of ownership.

Developing or revisiting a family buy-sell agreement is one way to manage unexpected developments, preserve relationships, and align with equity holder objectives under these circumstances. Buy-sell agreements—which Rick Springer, managing director, Deloitte Transactions and Business Analytics LLP, and Laura Hinson, managing director, Deloitte Tax LLP will be discussing in an upcoming Dbriefs webinar—can be vital safeguards to help guide a business through a period of shareholder change.

At their core, buy-sell agreements create an obligation or option for a business and/or its shareholders to buy all or part of a selling shareholder’s equity in the case of a triggering event, such as the death of a closely held business owner. An agreement can protect the company from potential personal shareholder conflicts, facilitate a process for business interest transfers, and may include governance provisions to promote continuity of business operations.