Business succession agreements (including shareholders agreements and partnership agreements) are commonly used by family businesses so as to transition control from one generation to the next. This can be documented by deeds of arrangement or shareholders agreements and also commonly integrates family trust deeds and the wills of the family heads or business proprietors.
Other non-family businesses also commonly use such agreements so as to document the procedure for both the running of the business on a day to day basis as well as to outline the processes expected if one proprietor of a business wishes to exit the business in a voluntary way, such as by retirement or change of career path.
A well documented agreement in this case can detail the process for sale of the various business interests, share purchase options for the continuing business owners and the method in which to be used to value the business interests.
A business succession agreement can also be used to set performance expectations for stakeholders in the business which in some cases can “trigger” options for a buy out where a proprietor is not performing to expected standards or is otherwise disqualified from the business for agreed reasons.
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