Cross-Purchase Agreement
Categories: Company Management, Board of Directors
Companies large and small need to have a succession plan in place, in case one of the owners kicks the bucket, retires, or becomes incapacitated. Hopefully, a cross-purchase agreement has already been drawn up and signed by all the partners in the business.
This agreement should spell out how the business will be divided or purchased by the remaining partners. Owners can also take out individual life insurance policies naming one or more partners as beneficiary, so he or she will have the funds to buy out the deceased partner’s share.
A good cross-purchase agreement will also define how the business will be valued, perhaps using an independent appraiser.