Any corporation, limited liability company, or partnership has many stakeholders. A redemption agreement protects the ongoing ownership of the company, specifying the transfer of ownership and shares of stock in the event a shareholder dies or leaves.
If you are subject to a redemption agreement or are seeking options to protect the ownership of your business, consult with a Bloomington redemption agreements lawyer to learn about your legal options. With experience you can trust, a contract negotiations lawyer could give you the peace of mind to focus on doing what you do best: running your business.
What is a Redemption Agreement?
Redemption is a process by which a business may buy back shares in the event those shares are being sold to a third party. Minnesota has default rules for redemption by public corporations, which can be inflexible.
In contrast, a redemption agreement is a contract allowing a business owner to specify the terms of purchasing or transferring shares of their business well before any sale of shares is closed. This way, the ownership of a company will remain certain rather than leave the opportunity for conflict if a shareholder passes away. Unlike the default laws set forth by Minnesota regarding redemption, these agreements offer greater flexibility for each party to compromise on an agreement that is profitable to everyone.
Typical Provisions of a Redemption Agreement
Although the specifics of each redemption agreement are different, there are several terms that almost always appear.
Price and number of shares
Because the agreement concerns ownership shares, it goes without saying that the price and number of shares are accounted for. Typically, all shares the seller has must be bought outright. However, as stock shares fluctuate in value, determining the price at the time of sale may be difficult and the seller may try to put off sale until the price goes up. In this way, a mechanism for determining the price at the time of the sale is specified.
What Law Applies in International Redemption Agreements?
More and more, companies do business across state lines or internationally. As a result, should a dispute arise, there may be some confusion as to which law applies. Many redemption agreements, therefore, specify what body of law applies to the transaction. Thus, even if your company largely operates in Minnesota and New York, there will be no contest about which law applies.
Right of First Refusal
Often, companies do not know a shareholder is contemplating selling until a deal has been struck with a third party. A right of first refusal is a term that benefits the company by requiring a seller to come to the company first with the price another is willing to pay.
It is often difficult for the buying party to verify that the seller is not subject to another sale for the same stocks. Warranties are a common way for the buyer to ensure that the seller has the legal right and ability to sell the stocks and has not already sold the contemplated stock to a third party.
Hire a Bloomington Redemption Agreements Lawyer Today
Whether you are contemplating selling shares of a business or seek to enforce a redemption agreement, hiring a Bloomington redemption agreements lawyer could ensure that your interests are represented. With years of experience in drafting redemption agreements and litigating issues, an attorney could help you consolidate your stock when a shareholder wishes to sell. Schedule a consultation now to learn more about your business’ legal options.