Business Succession and Buy-Sell Agreements
A buy-sell agreement sets out what happens to an owner's share of the business if they die, become disabled or leave, and how the remaining owners pay for it.
- Buy-sell deeds for companies, unit trusts and partnerships
- Death, total and permanent disability and trauma as trigger events
- Funding through insurance, with the valuation method agreed in advance
- Prepared alongside your shareholders agreement and constitution
Planning for change
Why Business Owners Use Buy-Sell Agreements
Without an agreement, an owner's share usually passes to their estate when they die. The remaining owners can find themselves in business with an executor or a family member, with no agreed way to buy them out.
A buy-sell agreement, sometimes called a business succession agreement, sets the rules in advance. It identifies the events that allow the share to change hands, how the share is valued, and how the purchase is paid for. The departing owner or their estate receives a fair price, and the remaining owners keep control of the business.
Most buy-sell agreements are funded by life, total and permanent disability and trauma insurance held over each owner, so the money to buy the share is available when it is needed. The agreement is commonly structured as put and call options, which either side can exercise after a trigger event.
How the insurance is owned, whether by each owner, by the other owners, by the company or through a trust, affects how the proceeds are taxed. That question sits with your accountant and financial adviser, and the agreement is drafted to match the structure they recommend.
What it covers
What the Agreement Covers
Each agreement is prepared for the ownership structure and the insurance arrangements already in place or being put in place.
Trigger Events
The events that allow the share to be bought, usually death, total and permanent disability and trauma, as defined in the policies.
Valuation
How the share is valued: an agreed value updated regularly, a formula, or an independent valuation at the time.
Funding and Insurance
How insurance proceeds are applied to the purchase price, and what happens if a policy does not pay.
Put and Call Options
The options that let either the remaining owners or the departing owner's estate require the sale to proceed.
Payment of the Balance
How any shortfall between the insurance and the value is paid, and over what period.
Voluntary Exit
Retirement or resignation, which is usually dealt with in the shareholders agreement and cross-referenced here.
Fixed fees for this work are published on our pricing page.
Get a Fixed-Fee QuoteHow it works
How It Works
Tell us about the business
The owners, the entities they hold through, and what documents already exist.
We confirm the fee
You receive a fixed fee in writing before any work starts.
We align with your advisers
We confirm the insurance amounts and policy ownership with your financial adviser and accountant.
We prepare and finalise
The deed is prepared, reviewed with you and signed by all owners.
Before you start
What to Have Ready
A buy-sell agreement depends on the ownership structure and the insurance, so those details shape the document.
The ownership structure: Who holds each share or unit, including any family trust or company holding on an owner's behalf.
Existing documents: The constitution, any shareholders or partnership agreement, and relevant trust deeds.
Insurance details: The policies held or proposed, who owns them, and the sums insured for each owner.
Valuation approach: Whether the owners prefer an agreed value, a formula or an independent valuer.
Common Mistakes
Insurance without an agreement: Without a buy-sell agreement, a policy can pay out with no obligation on anyone to transfer the share.
An agreed value never updated: A value agreed years ago and never revisited can be far from what the business is now worth.
Policy ownership out of step: If the policies are owned in a way the agreement does not expect, the funding may not work as intended.
Documents that conflict: The buy-sell agreement, shareholders agreement and constitution should say the same thing about transfers.
Points Worth Knowing
Shareholders agreement
A shareholders agreement usually covers voluntary exit. A buy-sell agreement covers death, disability and similar events.
Unequal owners
Owners with different shareholdings, or different insurability, can still be covered with tailored terms.
Trusts as owners
Where shares are held by a trust, the trustee and the person insured must both be dealt with correctly.
Review regularly
Review the agreement and the sums insured whenever the business value or ownership changes.
Wills and estates
Each owner's will should be consistent with the agreement, and owners should raise it with their own adviser.
Tax advice
Tax outcomes depend on policy ownership and structure, so involve your accountant early.
We prepare buy-sell agreements and related company documents. We do not act in disputes between business owners.
Talk to Us About Your MatterBuy-sell agreements are usually prepared alongside the documents that govern how the company or trust is owned and run.
Buy-Sell Agreement FAQs
What is a buy-sell agreement?
Is it the same as a shareholders agreement?
How is the business valued?
How is a buy-sell agreement funded?
Who should own the insurance policies?
What does a buy-sell agreement cost?
How often should it be reviewed?
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