Buy & Sell Agreement 
- Business continuation at a difficult time
- Providing certainty for a stricken business partner ( or family )
- Reassurance and confidence for business bankers and creditors
- Control by continuing business owners
In New Zealand we are inundated with small to medium businesses with two to five directors. Issues constantly arise when one party dies or becomes permanently disabled and the remaining business owners are faced with the reality that they now need to buy this individual’s shares in the business. This causes tremendous financial problems for the business and in some instances can result in the ultimate failure of that business.
There are many complex issues surrounding the preparation of Buy/Sell Agreements and many advisors lack the skill set required to complete a detailed agreement and advise on an appropriate Business Succession Plan.
We have therefore developed a process which will allow businesses to continue even after the death or permanent disability of a Director/Shareholder. This is via an appropriately structured document, commonly known as a Buy/Sell Agreement.
This is a concept that is certainly not new but one rarely constructed in a correct manner. Often most Buy/Sell Agreements are poorly drafted and almost never reviewed. Generally this is due to the person who is drafting the Agreement having little understanding or knowledge about insurances, and the effect it has on these Agreements.
Many Agreements once executed are not subject to a review process and as the Company grows in value the insurances in place could well be inadequate. Like all Agreements they must be subject to an annual review.
The Buy/Sell Agreement is where the parties involved in the business that hold shares (including Trustees of Family/Business Trusts) agree on a process involved on the occurrence of certain predetermined events. As this Agreement is funded by insurances, the placement of this insurance should be implemented by a qualified Insurance Advisor.
The buying and selling of shares in this
agreement is usually in respect of the following four situations:
- Death
- Suffering TPD
- Suffering Critical Illness
- Diagnosed with a Terminal Illness
Buy/Sell Agreement Notes
New Zealand Trustee Services (Stakeholder) Limited is a company specially formed to hold stakeholder appointments primarily where a Buy/Sell Agreement is in place. It is the sister company of New Zealand Trustee Services Limited which is a Professional Independent Trustee and acts in a large number of Trustee Appointments throughout New Zealand.
Why Use New Zealand Trustee Services (Stakeholder) Limited as a Professional Stakeholder?
- We have NO vested interest in funds held
- We provide security for the proceeds of the insurance claim until the funds can be distributed
- We are removed from the pressures affecting your business
- We provide Protection for all parties until the agreement can be signed
What You Get For Your Money?
- Use of a Professional Independent Stakeholder
- Completion of a Declaration of Trust from when the policy is issued until when the Agreement is signed
- Plain Language Proposal Document detailing all key factors of the proposed agreement
- Fully comprehensive agreement between all Shareholders and the Stakeholder
- Annual Review of the Agreement
The Process
- Application for Insurance made & approved
- A detailed questionnaire for the Buy/Sell Agreement to be completed
- Declaration of Trust made when policy issued
- Plain Language Proposal Document issued with draft Buy/Sell Agreement
- Buy/Sell Agreement signed and reviewed annually along with associated Insurances