A buy and sell agreement is a binding agreement between co-owners of a business that governs what happens if a co-owner dies or is otherwise forced to leave the business, or chooses to leave the business. It may be thought of as a sort of premarital agreement between business partners/shareholders or is sometimes called a “business will”. An insured buy and sell agreement, (triggered buyout is funded with life insurance on the participating owner’s lives) is recommended to ensure the buy-sell arrangement is well-funded and to guarantee there will be money when the buy and sell event is triggered.


A buy and sell agreement consists of several legally binding clauses in a business partnership or operating agreement or a separate, freestanding agreement, and controls the following business decisions:

• Who can buy a departing partner’s or shareholder’s share of the business (this may include outsiders or be limited to other partners/shareholders
• What events will trigger a buyout, (the most common events that trigger a buyout are: death, disability, retirement, or an owner leaving the company) and;
• What price will be paid for a partner’s or shareholder’s interest in the partnership and so on.

If an owner dies in a situation where there are multiple partners (or even as few as two) who own the company, the shareholder’s agreement likely has provisions for the deceased owner’s shares to be bought by the other owners.


Depending on how the shares are valued and depending on how large the company is, the other owners probably don’t have the liquidity to buy out the deceased’s shares at the drop of a hat.

The way around this is to purchase Life Insurance on the lives of each of the owners/shareholders. The beneficiaries are the surviving company owners. That way if someone dies, a life insurance policy on his/her life will give the other owners the cash to purchase the share of the company. The company remains solvent, and the deceased owners estate (family) receives the money from their share of the business.

• Provides a smooth transition and continuity of management and ownership to the remaining business owners.
• Creates an instant market for a business interest that may not otherwise be saleable
• Provides the liquidity to the retiring owner or to his estate in the event of death.
• Peace of mind and security for the business, the business owner’s and their families.

• Stipulates that if an owner plans to dispose of their business interest that they must first offer it for sale to remaining owners or the business itself.
• The purchase price of a business owner’s interest is based upon a pre-determined formula to be used at the time of death or disability. This allows a definitive price to be set for the ownership interest.
• Identifies the seller and mandates that he must sell his interest and also identifies the buyer and mandates that she must buy the interest when made available.
• The agreement is based on a current business valuation which establishes the fair market value of the company and is the basis of the price and terms of sale when applicable.
• Funding mechanisms such as life insurance and disability income insurance are noted
• Specific instructions for handling the dissolution of the business.
• Valid reasons for termination of the agreement.

A systematic process to update business valuations and adjust insurance coverage should be outlined.

• Business Owners
• Shareholders
• Property Owners
• High Net Worth Individuals

There are a myriad of reasons to establish Corporate and Trust structures. The major reasons being; to achieve Asset Protection and to optimise Estate, Succession, Tax Planning and Corporate Structuring. We very briefly set out below a number of salient points on the major reasons to establish the necessary structures for you to consider implementing.

Our goal is to get all of our clients to have a personal worth of ZERO, accordingly an individual who owns nothing has nothing to lose. The objective is to legally mitigate an individual’s risk by ensuring that all businesses, properties, investments and or assets are owned in the appropriate Trust and Corporate structures. A Trust is the only legal entity in our country, which can offer an individual total asset protection, this is achieved by virtue of the fact that a trust is not owned by any one individual. A Trust is quite distinct from any individual thus affording maximum asset protection. This is analogous to insuring your motor vehicle; if something goes wrong you are covered!

In planning an individual’s estate, the objective is as stated above, to get the individual to own NOTHING. This position is attained by establishing the correct Corporate and Trust structures that will own all the assets, investments, properties, commercial properties and businesses that an individual would have owned. Once this status is obtained an individual will eliminate all taxes, costs and duties which would ordinarily be triggered on the death of the individual, namely Capital Gains Taxes, at an effective rate of 10%, Estate Duties at 20% of the value of the net estate and Executors Fees of the 3.5% of the GROSS value of the deceased estate together with administration costs of 6% of any income administered by the Executor. In following our advices the taxes, duties and costs are eliminated and approximately 30% of the value of the estate will be saved on the event of the death of an individual. In order to complete an estate planning exercise for an individual their Last Will and Testament must be finalised. The Will must dovetail with the Trust.

Many owners trade as sole proprietors, in a partnership or directly own the shares in a Company . This state of affairs will not guarantee that the benefits accruing from their business interests will flow to the persons they intended. The correct Corporate Structures owned by Trusts coupled with the necessary agreements must be implemented and executed to ensure continuity of the flow of benefits and the elimination of any costs, taxes and duties on the event of the death of an individual. The above applies equally to an individuals investments, properties and commercial property interests. It is critical that income producing assets or appreciating assets are correctly structured to ensure that a legacy is created and that the assets are not sold, very often way below market value to meet creditors claims, or to cover taxes, costs and duties which arise on the death of an individual. Structuring will ensure that the legacy survives an individual’s death.

Many business owners and professionals carry on and conduct their businesses in a tax inefficient manner. A number of factors will determine the ideal corporate structure to conduct the business through. It is of paramount importance that the business be optimally structured, failing which millions of Rands may be unwittingly paid instead of the potential savings that could be achieved in utilising the appropriate structures. The Trust Structures we establish do not generally trade and are therefore usually receptacles of after tax funds, in certain instances using a Trust Structure could be the most efficient and appropriate structure even though a Trust has the highest tax rate. It can all be a little confusing, which is why we are here to unravel the how and the why.