A buy and sell agreement can be defined as a legitimately binding agreement that stipulates how a partner's share in the company might be reassigned if that partner dies or in any case leaves the business.
Most of the times, the buy and sell agreement stipulates that the accessible share be sold to the rest of the partners or to the association.
The buy and sell agreement is otherwise called a buy-sell agreement, a buyout agreement, a business will, or a business prenup.
Buy and sell agreements are ordinarily utilized by sole ownership, associations, as well as closed corporations in order to smooth changes in a proprietorship when each accomplice dies, chooses to retire, or makes up his mind to exit the company.
The buy and sell agreement necessitates that the business share be offered to the organization or the rest of the individuals from the business as per a predetermined formula.
On account of the passing of an accomplice, the estate must consent to sell.
There are two common types of agreements:
In a cross-buy agreement, the rest of the proprietors buy the portion of the business that is available to be purchased.
In a recovery agreement, the company buys the portion of the business.