Buy-Sell Agreement” is a contract between the co-owners of a company, which outlines how and at what price an owner can sell its ownership interest in the company should it wish to sell its ownership interest or leave the company for any reason (e.g., due to death, divorce or disability).

A Buy-Sell Agreement typically includes a Right of First Refusal provision that requires that an owner first offer to sell its ownership interest back to the other co-owners before being able to transfer it or offer it for sale to a third party.

Another key provision of a Buy-Sell Agreement is how to value the company and the corresponding ownership interest to be sold. Alternative valuation methods include a pre-determined formula (e.g., # times of sales or # times EBITDA) or an independent, third-party valuation.