The Smart Way to Do It
#1 Thoroughly Review Your Corporate By-Laws
The corporate by-laws are a great place to start equipping yourself with the information you'll need to approach the buyout process with confidence. By-laws will tell you about force-out provisions if they exist, as well as what are called dissolution and wind-down provisions. Look for any language that could be leveraged if a particular shareholder is unwilling to sell and how that scenario should be handled.
#2 Assess The Shareholders' Agreement
Most good shareholders agreements will be separate from the corporate by-laws, so it is important that you take the time to comb through the details of each document. Your shareholders' agreement will likely include buy-sell provisions (see #3) and offer scenarios when buyouts are appropriate. Sometimes these include major owner events such as:
- Bankruptcy of one of the shareholders
- Death of one of the shareholders
- Retirement of one of the shareholders
#3 Know The Buy-Sell Provisions
Buy-sell provisions are established to control how corporate shares can be bought and sold, buy whom, and under what conditions. Sometimes these provisions will spell out what the price will be for each shareholder's interest.
#4 Enlist The Services Of A Business Valuation Professional
Especially if the buy-sell provisions don't articulate a specific price, one of the most important pieces of information of the buyout process is the real value of your business and the shares you are attempting to purchase. A business valuation expert can certainly help frame in the value of the business for you. Sometimes the value of a particular business is tethered to partners who are helping to run the business. If this is the case, you need to have a strategy in place to restore that value.
#5 Schedule A Consultation With Your Business Attorney
Before you fully endeavor into this process, equip yourself with the power of legal counsel. Allowing your experienced and proficient shares and stockholder transaction attorney to review your company's documentation will give you the fullest confidence as you move through the process.
Contact Hall, Ricketts, Schuller & Gurbacki, P.C. online or call 716-652-0828 for experienced, ethical, understanding and responsive assistance with all your legal needs in the greater Buffalo, NY area.