Losing a business partner will make the remaining owners liable for any debts, leases and ongoing contracts. Would you or could you go back to the bank and ask for “more time or money”?
Debt repayment policies provide the funds to settle up outstanding overdrafts, bank loans, pay out leases and service ongoing contracts without affecting the profitability or solvency of the business. These can be triggered by a major event such, death, disablement or major diagnosis. A business under duress will always attract a lower sale price than if it is in a strong trading position.
In reality if you lose your business partner without a buy/sell agreement and the mechanism to fund it in place you are now in business with their family!
On the death or disablement of a shareholder the buy/sell agreement is triggered along with the insurance policy. It allows the uncomplicated transfer of value to the deceased/disabled estate without causing the remaining owner/s to have to borrow or use personal funds. It also prevents costly legal battles to determine who should get how much?