Business Agreements

BUSINESS AGREEMENTS

CONTINGENT LIABILITY AGREEMENT

A contingent liability agreement may be entered into between a shareholder and a company, where the shareholder has signed surety or provided security for the obligations of the company (e.g. where the shareholder has bonded his property). In terms of the agreement, the company will ensure the life of the shareholder, with the undertaking that upon his or her death, the proceeds of the policy will be used to extinguish the obligations and thereby releasing the surety and/or the assets that are bonded

BUY AND SELL AGREEMENT

A buy-and-sell agreement is an agreement entered into between the shareholders of a company, members of a close corporation or partners to a partnership (collectively herein referred to as “shareholders” and “company” and used as synonyms to refer to the different role players and corporate formats), to the effect that upon the death of one of them, the remaining shareholders will be obliged to purchase the shares from the deceased shareholder’s estate.

KEYPERSON

The purpose of key person insurance is to compensate the company for any losses it will sustain when a key employee (or similar key person such as a shareholder) was to die or become permanently disabled. The proceeds of the policy may be used to absorb any disruptions to the company, protect credit facilities, and provide funds for training of a replacement or to recruit a replacement. The company will be the owner of the policy, will pay the premiums and will be the beneficiary of the proceeds, with the employee being the insured life.