The importance of clear language can be summed up by an example drawn from the authors` professional experience: a sales contract between the owners of a holding company had a clause that summarizes: “The expert will determine fair value and the parties will act on the basis of that value. However, if such a party does not agree with fair value and the transaction has not been completed within 90 days of the date of the expert`s report, the transaction price is fair value added. In this case, “fair value” had some meaning and “fair market value” had a totally different meaning. The difference between the value calculated on the basis of fair value and the “fair market value” basis was millions of euros. Ensuring that the terms of the purchase-sale contract are written down and that owners agree to these conditions before a triggering event occurs helps eliminate potential conflicts in the future. At the time of the purchase-sale contract, no owner knows who is being purchased, when or why. In addition, relations between owners are probably good at this stage, so they should be able to reach a consensus on the conditions. If a trigger event occurs, relationships may be compromised. Failure to secure a strong buy-sell agreement can lead to conflicts, arbitrations or litigation, all of which can become extremely costly, both emotionally and financially. A well-written sales contract can help your business get into the right hands if you or one of your partners retires, decides to leave the company, be hobbled or die.
From time to time, the agreement combines the types of commitments. A buy-back agreement is a written agreement between the owners of a business in which each owner agrees that, in the event of a triggering event, such as the . B of a death or separation of the business, its shares are sold to the surviving owner at an agreed price. The three types of buy-back sales agreements include: In order to avoid internal conflicts and smooth transition in situations where one or all owners want to leave the business, a good buy-sell contract may have one of the following additional provisions: Valuation The most important term in a buy-back sale contract is the share price. The assessment of the action can be determined in one of four ways. First, the remaining company or shareholders may pay the book value of the shares at the time of death or at the end of the company`s next settlement period. Second, a price can be set in the purchase-sale contract itself. This method requires frequent reassessment and reassessment to ensure that the price remains fair.