Partnership Buy-Sell Agreement
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For easy understanding and in layman term, it’s refer to as “Business Will Writing”. However, in a proper format, it is actually refer to Business Value Protection Trust
A well-constructed plan is essential to protect the value of the business in the event there is a major disruption in the business due to a co-owner’s death, disability, retirement or serious major illness or any other event that jeopardizes the continuity of the business.
- If a co-owner dies today, can you work with his family to run the business?
- Will the co-owner’s family members know how to run the business with you
- Can they work well with you?
- Would your beneficiaries be able to get a fair price?
- Do you have the funds to buy out the co-owner’s shares/interests from the family members when there is no pre-agreed price in a written agreement?
- Can the shares/interests you are purchasing be transferred quickly to you?
Problems Without Business Protection Plan
Often these are:
- A new partnership is created due to the inheritance of the shares/interest by inexperienced heirs. Chances are this new partnership may fail;
- There is no pre-agreed price for any sale to take place when the heirs decide to sell to the other co-owners. As a result, it may take years to settle a transaction price.
- Some of the unqualified heirs may insist to be directors of the company and be active in running the business. This may lead to serious disruptions and disputes within management.
- It is possible that the co-owners may decide to abandon the business and start their own due to disputes with the heirs. However, starting a fresh new business may take a lot of time and money.
- Loss of profits and uncertainty about the business future success.
After all your hard work in building your business, how can you protect against such problems?
The Solution – Business Value Protection Trust
Our Business Trust is the solution to ensure that there is a smooth transition of the business to the other co-owner(s) and the value of your share of the business is protected upon the happening of an unfortunate event such as:
- Ill health
- Loss of professional license
- Deadlock between co-owners
Our Business Value Protection Trust consists of:
- Buy-Sell or Cross Option Agreement: covering the terms of the sale and purchase including the agreed value or formula, events triggering a sale, funding and mode of payment.
- Power of Attorney: authorizing us, Rockwills Trustee, to transfer the shares/interests to the other co-owner(s) upon the occurrence of the agreed events that trigger a sale.
- Trust Deed by the co-owners: instructions to Rockwills Trustee regarding the periodical distribution of the sale proceeds to prevent these being misspent by the beneficiaries.
- Life insurance policy: as the main funding mechanism to purchase the shares/interest of the outgoing co-owner.
|No. of Business Owners||Fee|
|a) BVPT using Buy-Sell Agreement||b) BVPT using Cross Option Agreement|