Buy Sell Agreements (Cross Purchase and Stock Redemption)






The insured buy-sell agreement is a good solution to the problem of close corporation management continuity. No other plan carries with it the same degree of assurance that the purposes of the plan will be achieved.


The plan is simplicity itself. Under it, the stockholders enter into a binding buy-sell agreement among themselves. They contract to purchase the interest of any stockholder who dies; each stockholder agrees and contracts for the sale of his or her interest at death (a so-called Cross Purchase Agreement -- see graphic above). Alternatively, the agreement may be between the stockholders and the corporation, obligating the corporation to purchase the shares of a deceased stockholder and either hold the shares as treasury stock or retire them (a so-called Stock Redemption Agreement -- see graphic below). The factors to be considered in choosing between these two types of agreements must be carefully considered.


The agreement is automatically effective at death. The surviving stockholders, in a Cross Purchase Agreement (or the corporation in a Stock Redemption Agreement) are assured the right to buy the stock and thus keep management control in the survivors. The estate and the heirs do not enter the business, either as active or inactive stockholders. They are bought out automatically under the agreement.


A price, or method of establishing the price, is set out in the agreement. There is no post-death haggling over price or terms. The amount to be paid for the deceased's stock is set out in the contract, and the terms of payment are agreed upon in advance.


The plan involves a definite agreement for the surviving stockholders (or corporation) to buy and for the estate to sell. The obligations are binding on both sides, therefore neither side can take advantage of the other.







Recent Posts

See All

Common Legal Terms Relating To Wills And Intestacy

ABATEMENT Cutting back certain gifts under a will when it's necessary to meet expenses, pay taxes, satisfy debts or take care of other bequests that are given priority under law or under the will. ADE

Proceeds of Life Insurance - I.R.C. §2042

Internal Revenue Code section §2042 deals with the inclusion in the gross estate, of the proceeds of life insurance policies, payable by reason of the death of the insured. In general, the insurance

ADLER & ADLER,PLLC

Wills, Trusts & Estates 

30 years of

1180 6th Avenue

8th Floor

New York, New York 10036

Call For Consultation:

212-843-4059 or 646-946-8327

EXPERIENCE

WE SERVE CLIENTS THROUGHOUT

NEW YORK STATE

Adler & Adler celebrating 30 years of succesful law practice
Top attorney Robert Adler gets highest rating from Avvo.

Serving New York State: New York City including Manhattan (New York County); Brooklyn (Kings County); Bronx; Queens; Staten Island (Richmond County); Long Island (Nassau County and Suffolk County); Westchester County, Rockland County, Erie County, Schenectady County,

Monroe County, Onandaga County, Orange County, Albany County, Dutchess County, Broome County, Sullivan County, and Ulster County.

​​​​ © 2019 Adler & Adler, PLLC - Attorney Advertising.  The content on this site does not constitute legal advice. There is no attorney-client relationship created through the presentation of this website or your sending us any information about your activities or needs. The commencement of an attorney-client relationship requires  our mutual written agreement on terms of engagement.