Canada Shareholder Buy-Sell Agreement (Hybrid Method)
The Canada Shareholder Buy-Sell Agreement (Hybrid Method) is an option that Canadians can consider to put a succession plan in place for the continuity of their small business.
- This type of buy-sell agreement is known as a 'hybrid' buy-sell.
- Under this Agreement, the corporation holds life insurance policies on each of the shareholders.
- Upon a shareholder's death, the corporation will collect the insurance proceeds, and use the proceeds to fund the purchase of the deceased shareholder's shares by any of the surviving shareholders who are interested, on a pro rata basis (proportional to their existing shareholdings).
- Any unpurchased shares will be redeemed by the corporation.
- The corporation will make an election for a deemed dividend to be paid from the capital dividend account if possible.
- The Agreement is governed by Canadian income tax laws.
The Canada Shareholder Buy-Sell Agreement (Hybrid Method) is available in MS word format and is fully editable.