Buy & Sell agreements: the quiet risk inside every partnership
If your co-shareholder passed away tomorrow, do you know who'd be sitting across the boardroom table? For most SME owners, the answer is uncomfortable.
Buy and Sell agreements are one of the most underused, and most misunderstood, instruments in South African SME planning. The principle is simple: if a shareholder dies or becomes permanently disabled, the remaining shareholders use a pre-funded policy to buy out the deceased's interest from their estate - at a value everyone agreed to, in advance.
When it works, it's invisible: the family receives liquidity instead of an illiquid stake in a business they don't run, and the surviving owners keep control. When it doesn't work - usually because the policy ownership is wrong, the valuation hasn't been updated in years, or there's no agreement at all - it becomes the single biggest cause of family-vs-business conflict we see.
Three questions every business owner should answer this quarter: (1) When was your shareholders' agreement last reviewed? (2) Does the policy structure match the agreement? (3) Has the business value been independently calculated in the last 12 months?
We help business owners structure these agreements end-to-end - legal, tax, policy and valuation in one integrated review.