If you have a Buy/Sell Agreement and it has not been reviewed and updated within the past five years, then it is probably out of date with potentially serious flaws. As an owner or a potential owner of a professional service company, your ownership rights and interests must be protected. A well-designed Buy/Sell will provide flexibility…presenting owners with options, but also incorporating self-executing features for critical redemption obligations. A well-executed Buy/Sell Agreement will provide a fair balance between providing for existing owners and attracting new owners.
A good Buy/Sell Agreement will:
- Provide for the continued success of the firm.
- Attract talent and interest in ownership.
- Establish a means of determining ownership value.
- Create a market where ownership can be issued and redeemed.
- Achieve a balance between retiring owners getting an attractive redemption value, and cash flow constraints that are typical of new owners.
A/E Consulting Services assists architectural, engineering and related firms in reviewing existing agreements and documents, and with making recommendations on what should be amended to make a better document. We also assist firms in drafting initial Buy/Sell agreements. A/E Consulting Services assists clients to address the critical issues for a fair and equitable agreement that properly covers:
- Non-competition and non-stealing of employees.
- Bank guarantees and subordination agreements.
- Reasonable look-back arrangements for subsequent third party sales.
- How a fair stock sales and redemption price will be determined.
- Detailing rights and responsibilities of shareholders.
- How to determine who will receive offers to purchase stock.
The actual development of a Buy-Sell Agreement is usually one of the final steps in developing a viable ownership transition plan.