When a ND pharmacy is owned by at least two people, the partners/stockholders should have a Buy-Sell Agreement. This agreement is a written document that will outline and govern the procedures for the future sale of the pharmacy business.
Pharmacy buy-sell Agreements are documents that protect the interest of the parties who own the pharmacy and direct the actions triggered by a stockholder leaving due to death, divorce, dissolution, retirement, or disability. The document will govern how and when the
Buy-sell agreements are important documents because the differing elements of a future sell are predetermined and will not need to be negotiated during a heated dispute or grieving period. They provide both the stockholder and the family some reassurance that when the inevitable time comes for an exit strategy, the process will have been thoroughly thought out in advance.
One of the disadvantages to not having a buy-sell agreement between North Dakota pharmacy owners is that a disability leaves one partner working more than another who is not adding to the productivity. Should a partner die before an agreement is established, the remaining partner may be left with a non-productive heir or a new partner who has personality conflicts with the surviving partner may be inserted. An incompatible partner could be devastating for the pharmacy business.
Buy-Sell agreements come in many other forms: Entity Buy-Sell Agreement, Cross-Purchase Buy-Sell Agreement, Wait and See Buy-Sell Agreement, Disability Buy-Sell Agreement. Buy-sell agreements are also known as a Business Will or a Buyout Agreement.
Potential elements of a North Dakota Buy-Sell Agreement:
1. Stockholders names and the number of shares and voting rights of each.
2. Guidance for the certified North Dakota pharmacy valuation and purchase of a stockholder’s shares.
3. Mutual covenants and considerations.
4. Restrictions on transferring, purchasing or encumbering the company’s stock.
5. Protocol in the event of a shareholder’s divorce or termination of a shareholders employment.
6. Obligation to buy/sell shares from an estate.
7. Purchase of insurance to ensure ability to meet obligations.
8. Purchase of stock paid in lump sum or by installments.
9. Remedies for breach of the agreement or default of payment.
10. Until transfer is complete the right to inspect books and records.
11. Amendments and notices for offers or legal matters.
12. Enforceability of the agreement, the binding effects, and arbitration procedures for disputes.
13. Process for dissolution, or liquidation, of the corporation.
14. Maintaining the premises during a transition.
15. Preserving representations and warranties.
16. The terms of transfer.
17. Bill of Sale.
To ensure that the money required is available, buy-sell agreements are often funded with a life insurance policy. Should the death of one of North Dakota pharmacy owners occur, the life insurance settlement will provide the funds for the remaining pharmacy owner in ND to buyout the partners shares from the estate.
Life insurance coverage for each partner needs to be in place, because without a way to accomplish the purchase of the pharmacy shares the buy-sell agreement will not be functional. As the business grows and develops the amount of insurance need to be adjusted to provide an adequate coverage. Without the insurance the surviving stockholder may not have enough cash to satisfy the amount required to buy out the estate - leaving the survivor with an unwanted partner.
To have the adequate insurance coverage and to determine the specifics of the buy-out terms, a certified North Dakota pharmacy business valuation is needed. There are a large number of companies that provide business valuations. Due to the dynamics and current market conditions of the pharmacy industry a valuation firm should have extensive pharmacy experience in ND. Simple accounting formulas and multipliers will not provide an adequate, or realistic, valuation for a pharmacy business.
Pharmacy buy-sell agreements are extremely important documents that need to be completed with seriousness and care. Even with a long standing partnership, it is only too late to create a buy-sell agreement when an event has already occurred....that would require the document.
Tips:
1. Buy-Sell Agreements are critical documents that should not be taken lightly. Consult a licensed professional.
2. Documents must address the proper laws and regulations which vary from state to state. Seek the proper guidance.
3. Premiums for insurance that will fund the buy-sell agreement might be deductible.
4. Ensure that the North Dakota pharmacy valuation is performed by an established ND pharmacy industry expert.
