The final issue that the parties are considering is whether the purchase price of the minority interest is influenced by faults committed by one of the parties. This will probably be the most difficult issue to resolve in the parties` negotiations and, for this reason, not all purchase-sale contracts include this type of provision. But if the parties do the hard work to address these issues, they can avoid a highly controversial legal battle and the thousands of dollars in legal fees that this type of prosecution entails. If the company and other shareholders do not want to buy the shares, the heirs of the deceased shareholder may continue to hold the shares. However, as a general rule, the heirs of the deceased owner cannot use the voting rights of the deceased shareholder to influence business activity. Instead, they would be limited to passive property rights, i.e. could only get their share of the company`s profits. Each of these mechanisms or variants has its drawbacks and shareholders should understand the impact before entering into a long-term agreement that will affect their investments. The pros and cons of different approaches are summarized in the table above. In order to prevent third-party spouses from having a say in management, all purchase-sale agreements should clearly give the outgoing owner the right to purchase interest from his former spouse.

If the outgoing spouse does not use this option, the business and other owners should have the right to purchase the interest. A sales contract is a legally binding agreement between a company [1] and its owners[2] that clearly defines the impact of a major event – such as the death, divorce or departure of a partner – on the management and control of the business. A well-developed agreement anticipates the intention and needs of the owners, as well as any conflicts that may arise between them if one or more of them wish to sell their shares in the company or are forced to have such interests, as may be the case in bankruptcy proceedings. Individuals investing in private companies should carefully consider future potential cash requirements. The “Buy/Sell” agreement is usually the document that provides for an escape mechanism. Although manufactured by well-meaning businessmen and their lawyers, buying/selling procedures can, in many cases, economically disadvantage the buyer, seller or both, and be counterproductive to achieve the desired objective.