Buy Sell Agreement To Protected Your Business Interests?

If you are a partner in a business or a major shareholder in Canada, you should draw up a buy sell agreement.

This type of agreement sets out provisions for what will happen to the partnership or company in the event of the death or disability of a partner or major shareholder.

For example, you may want to set up an agreement requiring the surviving partners to buy out the shares or interests of the deceased/disabled partner. In this case, the estate of the deceased/disabled partner would be obliged to sell to the surviving partners.

A life insurance policy is a fundamental part of a buy sell agreement because the policy can provide immediate funds to the surviving partners to buy out the deceased partner‘s equity.

Other advantages of a buy sell agreement

Funded by a life insurance policy include:

• Heirs obtain a definitive value for the deceased partner’s interest.
• Surviving partners obtain total and unrestricted ownership of the business.
• The longer the policy is in force, the greater the cash surrender value, which can be used to take advantage of other business opportunities.

How is a Buy Sell Agreement set up in Canada?

There are many ways to set up a buy sell agreement and many important issues to consider. A business in Canada would draw on the expertise of an accountant to value the company, both currently and projected future growth, and a lawyer to draft the actual binding buy sell agreement (also called a Universal Shareholders Agreement or USA). The funding for this agreement, should death of a partner or shareholder occur, could be easily provided by a life  insurance policy.

A life insurance policy will provide the business the lowest cost alternative to buy-out a partner or shareholder’s estate interest in the ongoing firm.

At Life Guard Insurance, we can assemble a team of the appropriate professionals to take your business through this process. At the end of the process you will know your interests in the business are protected no matter what may happen to you or your business partners through life, and your family will see the financial rewards for your hard work.

Please contact us for more information about a buy sell agreement.