Select Page

Arbitration proceedings with a legal fee clause are introduced regularly into the agreement, so that costly court proceedings are totally avoided. See our article on the acid test clause. Accountants who advise on valuation provisions under a buyback contract must be sufficiently qualified to act on valuation. The opinion of True`s tax jurisdiction stated that, although the contractor deliberated with his family`s long-time accountant and financial advisor on the valuation arrangements under the purchase-sale agreements, the accountant “did not have a detailed understanding of the valuation methods, as he had no academic or practical experience in the field of valuation” and “any idea that [the family accountant] was qualified for the appropriateness of the use of the tax formula in the Family purchase contracts. The opinion also states that “the objectivity of the accountant is questionable [and] more importantly, he has not had any technical training or practical experience in evaluating closely managed companies.” Finally, the court found that the owner`s “interviews with [the family accountant] were not sufficient to ensure the appropriateness of using a price of the tax accounting formula for … The business buy-sell agreement. In practice, a buy-back contract serves several purposes. It provides for an orderly business succession mechanism if an owner decides to transfer his interests following a voluntary event, such as retirement. B, or an involuntary event such as death, disability, madness or bankruptcy. Such an event is called a trigger event as part of a purchase-sale contract. It also gives co-owners or the business entity the opportunity to maintain the option or obligation to purchase interest from an existing owner in order to prevent unwanted third parties or business partners from becoming owners. This is often a useful provision for family businesses. It can be considered a kind of pre-marriage agreement between counterparties/shareholders or can sometimes be described as a “business will”. An insured buy-back agreement (the buy-out is funded by the life insurance of participating homeowners) is often recommended by business estate specialists and financial planners to ensure that the buyback agreement is well funded and to ensure that there is money when the Buy-Sell event is triggered.