Sales agreements are a crucial part of every business. These legally-binding contracts ensure that buyers purchase products or services and that sellers provide these services. Sales agreements are used in a wide variety of industries and come in various forms. Two of the most common forms of sales agreements are sales of shares and buy and sell agreements.
A sale of shares agreement is used when a shareholder sells there shares in a company. However, there are several types of sale of shares agreements. Firstly, a sale of shares agreement can be issued to an existing shareholder when one shareholder sells their shares of a company to said existing shareholder. However, a sale of shares agreement can also be issued to an outside third party, meaning that the purchaser of the shares is not an existing shareholder.
A buy and sell agreement, sometimes called a buyout agreement, is a form of sale agreement used to protect co-owners in a business. This agreement protects co-owners should another co-owner die. When a co-owner in a business dies, both the deceased owner’s estate and the business’ remaining owners are left vulnerable. When it comes to the deceased owner’s estate, the remaining business owners may not have the funds to purchase their shares in the company and the spouse may lack the necessary skills or interest necessary to take their place. If this is the case, the business could be at the mercy of the spouse, who may attempt to sell the shares to an unknown or inexperienced third party.
A buy and sell agreement protects remaining co-owners from any of these situations by providing them with the funds to purchase the deceased owner’s interest, which allows them to regain control of the business. These funds come from the life cover on the co-owners’ life, which is included in a buy and sell agreement.