BUY-SELL / BUSINESS SUCCESSION AGREEMENT
This template is for the Owners of a private corporation to agree, in advance, what happens to an Owner's Interest on death, disability, retirement, departure or deadlock — who must buy, who must sell, how the price is set, and how it is paid. It assumes the Corporation already exists and has issued Interests. It is not suitable for a public corporation, a partnership's succession planning (see partnership instead), or use in Quebec.
Drafting notes appear in italics and are to be deleted before execution. Square brackets mark information to be filled in. Delete any inapplicable optional clauses and renumber before execution.
⚠️ This template overlaps the shareholders template. Read that template, and this Agreement's README, before choosing how to use this one. A shareholders' agreement commonly contains its own transfer restrictions, right of first refusal, shotgun, tag/drag and mandatory-transfer-on-death provisions (sections 9–15 of the shareholders template). Section 2 below requires the drafter to state whether this Agreement is standalone or is intended to operate as a schedule to an existing Shareholders' Agreement. Do not adopt both this Agreement's buy-sell mechanics and equivalent provisions in a Shareholders' Agreement for the same Owners and Interests — two documents independently governing the same mandatory transfer produces conflicting obligations about who must buy, at what price, and on what timeline. See the README for the recommended approach.
⚠️ Valuation and funding are commercial and tax questions this template does not resolve. Section 12 offers three valuation mechanisms and section 13 offers two funding mechanisms as flagged alternatives. This template does not recommend one over another — the right choice depends on the Corporation's financial position, the Owners' ages and insurability, and tax structuring that requires an accountant's or tax advisor's input. This is why this template is delivery: lawyer-in-the-loop.
THIS AGREEMENT is made as of [Date].
BETWEEN:
[Corporation Legal Name] (the "Corporation")
— and —
[Owner 1 Legal Name], of [Owner 1 Address]
— and —
[Owner 2 Legal Name], of [Owner 2 Address]
(each an "Owner" and together the "Owners"; the Corporation and the Owners are together the "Parties")
This template assumes two Owners for readability. If there are more than two, replicate the parties block and the signature block for each additional Owner, and adjust Schedule A accordingly.
WHEREAS the Owners own all of the issued and outstanding Interests of the Corporation, and the Parties wish to record their agreement as to what happens to an Owner's Interest on that Owner's death, disability, retirement, departure, bankruptcy, or on a deadlock among the Owners;
NOW THEREFORE in consideration of the mutual covenants below, the Parties agree as follows:
Interpretation
In this Agreement:
"Corporation" means [Corporation Legal Name];
"Interests" means the issued and outstanding shares in the capital of the Corporation, of every class, held by an Owner;
"Fair Market Value" means the value of an Interest, determined under section 12;
"Purchase Price" means the price payable for an Interest under this Agreement, determined under section 12;
"Triggering Event" means an event described in section 4.1; and
"Shareholders' Agreement" means the shareholders' agreement, if any, identified in section 2.1.
The recitals and Schedules form part of this Agreement.
Purpose and Relationship to Other Agreements
[This Agreement is a standalone agreement, and the Owners do not have a separate shareholders' agreement / This Agreement supplements the Shareholders' Agreement dated [Date] between the same parties, which continues to govern matters this Agreement does not address / This Agreement is adopted as [Schedule [Number] to / incorporated by reference into] the Shareholders' Agreement dated [Date] between the same parties].
This Agreement applies to all Interests, as set out in Schedule A.
See the header warning. If the Owners have, or are also adopting, a shareholders' agreement, read that template's sections 9 (Restrictions on Transfer), 10 (Right of First Refusal), 11 (Shotgun), 12 (Tag-Along and Drag-Along), 13 (Mandatory Transfer on Death, Disability, Bankruptcy or Termination) and 14 (Valuation) before choosing an option here. If the Shareholders' Agreement will keep its own version of any of those provisions, delete the equivalent section of this Agreement (see the notes at sections 9, 10 and 11 below) rather than adopting both. This template does not recommend standalone versus schedule — that depends on how the Owners' governance documents are organized and is a drafting-architecture choice for counsel to make with the Owners.
Term
This Agreement continues until the earlier of: (a) the Owners unanimously agree in writing to terminate it; (b) only one Owner remains a holder of Interests; or (c) the Corporation is dissolved, wound up, or amalgamates with another corporation, other than an amalgamation where the resulting corporation's owners enter into a new agreement on substantially the same terms.
Triggering Events
Each of the following is a "Triggering Event" in respect of an Owner:
the Owner's death;
the Owner's permanent disability, meaning [define, e.g., an inability, due to physical or mental incapacity, to perform the Owner's material duties for the Corporation for a continuous period of [Number] months, as confirmed by a qualified medical practitioner];
the Owner's retirement, on or after [age or condition, if any];
the Owner's voluntary resignation or withdrawal from the Corporation, other than retirement under paragraph (c);
— for an Owner who is also employed by, or provides services to, the Corporation — the involuntary termination of that Owner's employment or engagement by the Corporation;
the Owner's bankruptcy, insolvency, or an assignment for the benefit of creditors; and
include if section 11 (Deadlock) applies: a deadlock described in section 11.1 that is not resolved within the period set out there.
List (a)–(g) is a starting point. Confirm with the Owners which events should trigger a mandatory purchase and sale, and which (if any) — commonly retirement or voluntary withdrawal — should instead give the Corporation or the other Owners an option rather than an obligation to purchase. Reflect that choice in sections 6 and 7 below.
Mandatory Purchase and Sale on Death, Disability or Bankruptcy
On a Triggering Event under section 4.1(a), (b) or (f) in respect of an Owner, that Owner — or their estate, committee, trustee, or the Owner, as applicable — will sell, and the Corporation or the other Owners (as they agree, or as set out in Schedule A) will purchase, all of that Owner's Interests, at the Purchase Price determined under section 12.
The closing of a purchase and sale under section 5.1 will take place in accordance with section 14.
Retirement or Voluntary Withdrawal
On a Triggering Event under section 4.1(c) or (d) in respect of an Owner, [that Owner will sell, and the Corporation or the other Owners (as they agree, or as set out in Schedule A) will purchase, all of that Owner's Interests, at the Purchase Price determined under section 12 / the Corporation and the other Owners have the option, but not the obligation, to purchase that Owner's Interests, at the Purchase Price determined under section 12, exercisable by written notice within [Number] days of the Triggering Event].
Whether retirement and voluntary withdrawal should be mandatory (like death) or optional (an option the remaining Owners can decline) is a significant choice — a mandatory buy-out on voluntary withdrawal can strain the Corporation's cash flow precisely when an Owner chooses to leave. Confirm which the Owners intend.
Involuntary Termination ("Bad Leaver")
On a Triggering Event under section 4.1(e), that Owner will sell, and the Corporation or the other Owners (as they agree, or as set out in Schedule A) will purchase, all of that Owner's Interests.
Include if a "bad leaver" discount applies: If the Owner's employment or engagement is terminated for cause — meaning [define] — the Purchase Price is the Fair Market Value determined under section 12, less a discount of [Number]%, as set out in Schedule B.
Include this section only where an Owner is also employed by, or engaged by, the Corporation. Delete if not applicable.
A bad-leaver discount is a significant departure from Fair Market Value and is more likely to be scrutinized by a court, particularly if the definition of "cause" or the size of the discount is one-sided. This template does not take a position on whether any particular discount is enforceable — confirm with counsel before relying on it.
Restrictions on Transfer
An Owner may not sell, assign, transfer, pledge, encumber or otherwise dispose of any Interest, or any interest in it, except: (a) as required by this Agreement; (b) to a Permitted Transferee, being [that Owner's spouse, child, or a trust for their benefit / a corporation Controlled by that Owner], provided the Permitted Transferee first agrees in writing to be bound by this Agreement; or (c) with the prior written consent of the other Owners.
Any purported transfer in violation of this Agreement is void, and the Corporation will not register it.
If the Owners have a Shareholders' Agreement with its own transfer restrictions covering the same Interests, delete section 8 here and rely on that Agreement — see the header warning. Keeping both risks two documents stating different rules for the same transfer.
Right of First Refusal on Voluntary Transfer
An Owner who wishes to transfer Interests to a third party, other than to a Permitted Transferee under section 8.1(b), must first give the other Owners written notice setting out the number of Interests, the price, and the material terms of the proposed transfer (the "Offer Notice").
The other Owners may elect, within [Number] days of the Offer Notice, to purchase the offered Interests, in proportion to their existing holdings or as they otherwise agree, on the terms in the Offer Notice. If they do not elect to purchase all of the offered Interests within that period, the selling Owner may transfer the remaining Interests to the third party named in the Offer Notice, on terms no more favourable to that third party, within [Number] days after that period expires.
Include this section if the Owners want a right of first refusal on a transfer to a third party (as opposed to a Triggering Event under section 4). Delete if the Shareholders' Agreement already covers this — see the header warning — or if not wanted.
Deadlock
A "deadlock" occurs if the Owners are unable to agree, for [Number] days after either side gives written notice of the disagreement, on a matter that under the Corporation's articles or any Shareholders' Agreement requires the Owners' unanimous or majority approval.
On a deadlock, the Owners will refer the matter to [mediation under section 20 / a shotgun mechanism, under which either Owner may give the other written notice offering to buy all of the other's Interests at a specified price per Interest; the recipient must, within [Number] days, elect either to sell at that price or to buy the offeror's Interests at the same price / an independent chairperson with a casting vote, appointed by [named appointing body]].
Include this section if section 4.1(g) applies. Delete if the Shareholders' Agreement already has a deadlock mechanism — see the header warning — or if not wanted.
A shotgun mechanism can produce an unfair result where the Owners have unequal ability to finance a purchase. Confirm the Owners understand this risk before including it here.
Purchase Price and Method of Payment — Overview
The "Purchase Price" for an Interest is the Fair Market Value determined under section 12, subject to any bad-leaver discount under section 7.2.
The Purchase Price will be paid using the funding method set out in section 13 and Schedule C.
Valuation
Fair Market Value of an Interest is determined by [the formula set out in Schedule B, Part 1 / an independent business valuator agreed on by the Owners or, failing agreement, appointed by [named appointing body], applying the process set out in Schedule B, Part 2 / the value agreed in writing by all Owners and re-confirmed at least once every [12] months, as set out in Schedule B, Part 3, failing which Fair Market Value is determined by an independent business valuator as described above].
Option 1 — Fixed formula. A formula (for example, a multiple of trailing average earnings, book value, or net asset value) is cheap to apply and predictable, but can become unfair to one side as the Corporation's business changes, and requires the Owners to anticipate the right formula in advance.
Option 2 — Independent appraisal. An independent valuator's determination is more likely to reflect current Fair Market Value and is harder to dispute, but is the most expensive and slowest option to invoke, particularly on a death or disability where liquidity is often needed quickly.
Option 3 — Agreed value, updated periodically. Cheapest and fastest if kept current, but only as reliable as the Owners' discipline in actually updating it — an agreed value left stale for years can diverge sharply from actual Fair Market Value. The fallback to independent appraisal addresses the case where the Owners have not updated it or cannot agree at the relevant time.
The valuator's determination under Schedule B, Part 2 (if applicable) is final and binding on the Owners, absent manifest error.
Use one of the following three valuation mechanisms. This template does not recommend one over another — the right choice depends on the Corporation's financial complexity, the Owners' relationship, and cost tolerance. Set out the chosen mechanism in full in Schedule B and delete the other two options here and in Schedule B.
Funding the Purchase Price
The Purchase Price will be funded by [the proceeds of life and/or disability insurance maintained under section 14, to the extent proceeds are available, with any shortfall paid as set out below / instalments over [Number] months, with interest at [Rate]% per annum on the unpaid balance, secured by [describe any security] / a combination of insurance proceeds and instalments, as set out in Schedule C].
The tax consequences of a purchase and sale under this Agreement — including the tax treatment of any insurance proceeds, the adjusted cost base of the purchased Interests, and whether the Corporation or the other Owners should be the purchaser — depend on the Owners' and the Corporation's circumstances and should be confirmed with the Corporation's accountant or tax advisor before this Agreement, and any insurance funding it, is finalized.
Use one or a combination of the following. This template does not recommend one over another — the right choice depends on the Corporation's cash position, the Owners' ages and insurability, and tax structuring. Set out the chosen method in Schedule C.
Confirm any stated interest rate complies with the disclosure requirements for annual interest rates under federal law before use.
Life and Disability Insurance
The Corporation will maintain the life and/or disability insurance policies described in Schedule C on each Owner who is an individual, in the amounts set out there, and will pay the premiums when due.
The Corporation is the owner and beneficiary of each policy under section 14.1, unless Schedule C states otherwise.
On the earlier of this Agreement terminating or an Owner ceasing to be bound by it (other than by reason of a Triggering Event under section 4.1(a)), the Owners will agree on the disposition of any policy insuring that Owner's life, including whether that Owner may elect to acquire the policy on paying its cash surrender value.
If insurance proceeds received on a Triggering Event exceed the Purchase Price, [describe how the excess is treated — for example, retained by the Corporation, or distributed to the Owners in proportion to their Interests].
Include this section if section 13.1 uses insurance funding. Delete if not applicable.
Whether excess proceeds should be retained by the Corporation or distributed raises its own tax questions — including the Corporation's capital dividend account — that should be confirmed with a tax advisor. This template does not state how those questions resolve.
Closing
The purchase and sale of Interests under this Agreement will close on a date not later than [Number] days after the Purchase Price is finally determined under section 12, at the Corporation's registered office or as the Parties otherwise agree.
At closing, the selling Owner (or their estate, committee or trustee) will deliver share certificates or other evidence of the Interests, duly endorsed for transfer, together with any release and resignation as director or officer of the Corporation the Parties reasonably require, against payment of the Purchase Price in accordance with section 13 and Schedule C.
Non-Competition and Non-Solicitation on Exit
For [Number] months after a Triggering Event, the departing Owner will not [carry on, engage in, or hold a financial interest in, any business that competes with the Corporation's business, within [Geographic Area] / solicit any client, customer, supplier or employee of the Corporation with whom that Owner had material contact].
Include this section if the Owners want a restriction on a departing Owner competing with, or soliciting from, the Corporation after a Triggering Event. Keep the scope and duration narrow — an unreasonably wide restriction risks being unenforceable as a restraint of trade. Delete if the Shareholders' Agreement already covers this.
This is a restrictive covenant on a departing owner, not an employee non-compete — the Employment Standards Act prohibition on employee non-competition agreements does not apply to it. It remains subject to the common-law restraint-of-trade doctrine, and a court may decline to enforce a restriction broader than reasonably necessary. This template does not take a position on whether any particular scope is enforceable.
Representations and Warranties
Each Owner represents and warrants that they own their Interests free and clear of any encumbrance not disclosed in Schedule A, and has the authority to enter into and perform this Agreement.
Confidentiality
Each Party will keep confidential all non-public information relating to this Agreement and to any valuation, insurance or purchase price determination made under it, and will not disclose it to a third party except with the consent of the other Parties, as required to give effect to this Agreement (including to an insurer, valuator, accountant or lawyer engaged under it), or as required by law.
Insurable Interest and Consent
Each Owner consents to the Corporation obtaining, owning and being the beneficiary of a policy of insurance on that Owner's life or health under section 14, and acknowledges that such consent is necessary for the Corporation to have an insurable interest sufficient to obtain the policy.
Include this section if section 14 applies.
Dispute Resolution
The Parties will attempt in good faith to resolve any dispute arising out of this Agreement, other than a dispute over Fair Market Value governed by section 12, by negotiation, within [Number] days of written notice of the dispute.
If negotiation does not resolve the dispute, the Parties will refer it to mediation in [City, Province] before a single mediator agreed between them.
Include for binding arbitration instead of the courts: Any dispute not resolved under sections 20.1 and 20.2 will be finally resolved by arbitration before a single arbitrator seated in [City, Province], under [Arbitration Rules]. The award is final and binding.
Include this section if a staged process is wanted, in addition to the valuator process in section 12. Otherwise delete and rely on clause 21.1.
Arbitration is governed by provincial arbitration legislation. Confirm the applicable statute and any mandatory requirements for the chosen seat before including clause 20.3.
General
This Agreement is governed by the laws of the Province of [Province] and the federal laws of Canada applicable in that province. The Parties attorn to the exclusive jurisdiction of the courts of that province.
Insert one of the common-law provinces or territories. This template is not drafted for Quebec.
The Corporation is incorporated under [the Canada Business Corporations Act / the Business Corporations Act of [Province]].
Sections 12 (to the extent a valuation is in progress), 13, 14 and 18 survive an Owner ceasing to hold Interests for any reason, and survive termination of this Agreement.
This Agreement, together with its Schedules, is the entire agreement between the Parties in respect of its subject matter and, to the extent stated in section 2.1, supplements or forms part of the Shareholders' Agreement, if any.
No amendment is effective unless in writing and signed by [all Owners / Owners holding at least [Number]% of the Interests] and the Corporation.
An Owner may not assign any right under this Agreement except in connection with a transfer of Interests permitted by this Agreement, and any transferee must first agree in writing to be bound by this Agreement.
Notices under this Agreement must be in writing and sent to the address set out above, or to any other address a Party notifies in writing. Notice is deemed received on delivery if delivered personally, on the next business day if sent by email before 5:00 p.m. local time in the recipient's jurisdiction, and [Number] business days after mailing if sent by prepaid mail.
A failure or delay in exercising a right is not a waiver of that right.
If any provision is held unenforceable, it is severed and the remainder continues in force.
This Agreement may be executed in counterparts and delivered electronically, each of which is an original and all of which together form one agreement.
Insert the applicable citation: federal — Canada Business Corporations Act, R.S.C. 1985, c. C-44; Ontario — Business Corporations Act, R.S.O. 1990, c. B.16; British Columbia — Business Corporations Act, S.B.C. 2002, c. 57; Alberta — Business Corporations Act, R.S.A. 2000, c. B-9. Confirm the current citation and confirm whether the Corporation is federally or provincially incorporated before use.
Check the surviving-section list against the final numbering after optional clauses are deleted.
IN WITNESS WHEREOF the Parties have executed this Agreement as of the date first written above.
[Corporation Legal Name] | |
Per: ______________________ | |
Name: [Name] | |
Title: [Title] | |
I have authority to bind the Corporation. |
[Owner 1 Legal Name] | [Owner 2 Legal Name] |
Per: ______________________ | Per: ______________________ |
Name: [Name] | Name: [Name] |
Schedule A — Owners and Interests
Owner | Class and Number of Interests | Percentage of Issued Interests | Purchaser on Triggering Event |
[Owner 1 Legal Name] | [Class] – [Number] | [Number]% | [Corporation / other Owners, pro rata / describe] |
[Owner 2 Legal Name] | [Class] – [Number] | [Number]% | [Corporation / other Owners, pro rata / describe] |
Schedule B — Valuation Mechanism
Complete only the Part matching the option chosen in section 12.1. Delete the other two Parts.
Part 1 — Fixed formula
[Set out the agreed formula in full — for example, a stated multiple of trailing average earnings, book value, or fair market value of the Corporation's assets less liabilities, allocated by Interest held.]
A fixed formula can become unfair as the Corporation's business changes. Consider a periodic review date on which the Owners revisit whether the formula still reflects how they want Fair Market Value determined.
Part 2 — Independent appraisal
Appointing process: [describe — for example, the Owners will agree on a single independent business valuator within [Number] days of a Triggering Event, failing which [named appointing body] will appoint one].
Cost of the appraisal is borne by: [the Corporation / shared equally by the buying and selling parties / describe].
Part 3 — Agreed value, updated periodically
The Owners will agree in writing on the Fair Market Value of the Corporation at least once every [12] months, on [date or trigger]. The most recently agreed value applies to a Triggering Event, unless it is more than [Number] months old at the time of the Triggering Event, in which case Fair Market Value is instead determined under Part 2.
Schedule C — Funding
Complete the parts that apply, consistent with the choice made in section 13.1. Delete any part that does not apply.
Part 1 — Insurance
Owner insured | Insurer | Policy number | Type (life / disability) | Face amount | Policy owner | Beneficiary |
[Owner 1] | [Insurer] | [Number] | [Type] | [Amount] | [Corporation] | [Corporation] |
[Owner 2] | [Insurer] | [Number] | [Type] | [Amount] | [Corporation] | [Corporation] |
Part 2 — Instalment terms (if applicable)
Number of instalments: [Number]. Interest rate: [Rate]% per annum. Security (if any): [describe].
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Canada note
This version is drafted for Canada. Provinces differ on employment standards and Quebec applies civil law rather than common law. Tell GitLaw which province applies and it adjusts the draft.
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