When the parties decide to settle a family business dispute through a buy-out, corporate counsel may expel a sigh of relief. No need to engage in stressful litigation. Just draw up some documents and close. If the business is a corporation, the bare minimum necessary to effect a redemption of the seller’s shares is the seller’s delivery of his stock certificate, either endorsed for transfer or accompanied by an executed stock power, in exchange for cash, a note or both. A formal resolution of the board of directors is also a good idea.

More often than not, the corporation and the selling shareholder also execute a redemption agreement. Among other things, the redemption agreement describes the shares and the price to be paid; details the length of any deferred pay-out, the interest rate, and any security for any deferred payment; and perhaps includes restrictions on the seller’s competition with the business. In negotiating the basic transaction or the redemption agreement, if one is used, the seller’s main interest is: How much will they pay to get me to go? The remaining shareholders’ primary concern usually is: How much is it going to cost us to get rid of this person? Those questions may be the foci of the parties, but counsel for seller and buyer should consider other questions, including these three: Can we do this deal as a matter of corporate law? What is my seller client selling? What is my buyer client paying for?

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