Buy Sell Agreements are crucial for business continuity planning, especially in companies, partnerships or other multi-owner businesses. They provide a structured plan for handling the buyout of an owner’s interest. This could be in the event of death, disability, or other specified occurrence, ensuring smooth transition and operational stability.  

Let’s delve into the key aspects of Buy Sell Agreements and their importance in business succession planning. 


why should you have one? 

Imagine the complexities and discomfort that could arise if your deceased business partner’s interest were to suddenly fall into the hands of their spouse, executor or family member who may lack the required expertise or shared vision. Without a Buy Sell Agreement, you could find yourself inadvertently co-managing your business with someone who may not share your business acumen, work ethic, or strategic plans.  

This agreement safeguards your business continuity and control, preventing an unvetted, incompatible individual from gaining undue influence through a deceased partner’s stake. Essentially, it’s about protecting not just the business’s present operations, but also securing its future trajectory according to the vision you and your original co-partners had. 

Equally, imagine if something happened to you, and your spouse or family weren’t able to easily liquidate your interest in the business, but instead were left to negotiate with your surviving business partners around the sale of your interest in the business. In those circumstances, the Buy Sell Agreement protects your family, ensuring that they can extract the value of your interest easily to enable them to move forward with their lives. 


key things to consider for Buy Sell Agreements 


1. events triggering a buyout

Typically, these agreements are activated by the death or total and permanent disablement [TPD] of a business owner. However, Buy Sell Agreements can also include provisions for other significant health events that may incapacitate an owner for a prolonged period.


2. rights and obligations

Moreover, it is critical to decide whether the buyout option for the remaining owners should be mandatory or optional. This determines if the remaining owners are obligated to buy the exiting owner’s interest in certain scenarios.


3. pro rata purchase rights

The agreement can stipulate whether the buyout should be proportionate to the existing ownership percentages. This ensures fairness in the distribution of the exiting owner’s interest among the continuing owners.


4. valuation method

The agreement should clearly define the process of valuing the exiting owner’s interest. Considerations include the valuation method, the qualifications and independence of any valuer, and the involvement of the owners in selecting the valuer.


5. funding the buyout

Buy Sell Agreements often use insurance policies to fund the buyout. This ensures that funds are readily available to purchase the exiting owner’s interest without financial strain on the remaining owners.


6. insurance considerations

The amount of insurance coverage, the policyholder, and the types of events covered are essential factors. These need to be aligned with the business’s succession objectives and discussed with an advisor.


7. impact of ownership structure

The manner in which the insurance is owned [self-owned, company-owned, or trust-owned] has distinct tax and duty implications. The choice of structure should be made carefully, with professional advice.


8. policy portability

In scenarios where a business owner exits, the ability to retain or transfer the insurance policy without significant hurdles is an important consideration.


a Buy Sell Agreement is a proactive step to maintain control and safeguard the future  

A Buy Sell Agreement is crucial in avoiding the complexities and potential disruptions that come with a business partner’s unexpected passing or disablement. It sidesteps the complications of dealing with estate issues and family members who may be unfamiliar with the business. It also ensures the family members are provided for in a timely manner and without needing to negotiate the exit with the continuing business owners.

The agreement secures that the business remains stable and continues to operate as intended – free from the entanglements of personal estate matters. Essentially, it’s a proactive step to maintain control and safeguard the future of your business and of the family of the exiting owner. 


we’re here to help 

If you’re looking for guidance around a Buy Sell Agreement and what you should be considering,  contact our legal team at or give us a buzz on 1300BDEPOT to discuss further. 


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General advice disclaimer 
The information provided in this article is a brief overview of the subject matter and does not constitute any type of advice. We endeavour to ensure that the information provided is accurate however, information may become outdated as legislation, policies, regulations and other considerations constantly change. Individuals must not rely on this information to make a financial, investment or legal decision and should consult an appropriate professional before making any decision.