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Business Succession

Australia wide Application :

Contact: Alex Tees, Solicitor , Senior Estate Planning Adviser,

Phone: 02 9016 7923 & 9281 3230 After Hours (02) 9387 4836
Mobile: 0409813622
Bus Email :

Buy/Sell Agreements – Business Succession Agreement(s) & Issues


The Benefits of Business Succession Agreement(s) / "Buy/ Sell Agreements - (“BSA”)


The primary function of Business Succession Agreements is to work out what happens when one principal or participant in a business dies, becomes incapacitated or retires/withdraws from the business voluntarily or is forced to withdraw


Business Succession Agreements (BSA), protect remaining participants in a business from having to deal with the prospect of the deceased’s beneficiaries, who may know little about the business, can help prevent costly court proceedings over valuation of the business or parts of it in relation to an ill, incapacitated or bankrupt/insolvent partner and also help ensure succession in an orderly manner with a minimum disruption to normal day to day business operations.

How Business Succession Agreement(s) can work by way of example


Ø      Business Principals and their related equity-owning entities (“proprietors”) grant buy and sell options to each other in respect of each other’s equity in the business (which may include interests in associated business entities). These options arise on the happening of certain “option events”, namely death, total and permanent disability or critical illness, and must be exercised within certain time periods (note that if there are no insurance policies in place, the meanings of permanent disability or critical illness need to be agreed in writing by the Principals).

Ø      The Purchase Price for each Principal is the value of the Principal’s (or its related proprietor’s) proportion of equity in the business. (there is a mechanism to determine the value within the agreement – parties agreeing within a certain time by notice, expert opinion, or Arbitration)

Ø      If Applicable Each Principal is obliged to maintain their own insurance policy (if any). The policies are to be reviewed each year.(generally self owned policies are preferred)

Ø      In the event of an option event occurring in relation to a Principal:

·      the remaining Principals have the option to buy the outgoing Principal’s business interest (and the outgoing Principal or their estate has the option to sell their business interest to the remaining Principals);

·      the Purchase Price for the outgoing Principal’s business interest may be funded wholly or partly by any insurance policy obtained in respect of that Principal for that purpose; (insurance to adequately take into account Capital Gains Tax, Stamp Duty, legal fees, personal debts, business debts and key person related amounts(revenue and capital)

·      if the insurance proceeds are insufficient, then depending on the circumstances the shortfall is payable by quarterly or other specified instalments over a period of 1 or 2 years.(or other set period)

Ø      The agreement does not address events that involve a voluntary exit of a Principal from the business unless clients instruct specifically that it should.

Ø      There are serious tax related issues to be taken into account in framing BSA’s ;Life Policy proceeds are exempt under section 118-300 Income tax Assessment Act(ITAA 1997),provided principals are the original owners of the policy. TPD and trauma proceeds may not be protected by ss 118-300 ITAA and must be received by the injured party or relative.


NB: In situations described above where Business Principals (have their own Life Policies) have no will or an inadequate will (poor personal estate planning) the results can be disastrous! –delays in payment of claims and many other complications. This aspect always needs checking.


Costs involved


Who pays the Insurance Premiums ?


-Can be paid by the Principal,shared equally with other Principals or by the Company of the partnership.(premiums may only be  deductable if paid through Superannuation)

We offer fixed fee agreements so that legal fees do not spiral out of control. The client will know at the first meeting what the fee will be should the client wish to proceed. Our experience is that our clients and their advisers are very comfortable with this approach.

Personal relationship point

While www.trustdeedregister services has offices throughout Australia, initial contact should be with Senior Estate Planning Adviser Mr Alex Tees, Tel 02 9016 7923 & 9281 3230 Mobile 0409813622 Facsimile 02 8088 7172 Email